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Your summer PPP beach reading

Geoffrey Keele's picture

As you prepare to take off for summer travels to parts unknown, leave your paperbacks behind and take that stack of must-read magazines to the recycling bin, because I’ve compiled a selection of recent articles related to PPPs that will engage, educate and inspire. It’s also intended to answer some common questions – because many people are not fully aware of the complexities of PPPs and how risks are shared between the public and private sectors.

For those in search of a broader perspective on how PPPs contribute to global development, their challenges and their potential, these articles will give you something to think about before, during and after your vacation.
 
Transparency is always an important issue, whether we are talking public procurement or PPPs, and there has been a push recently for all government contracts to be made public. The argument is that transparency not only inhibits corruption and builds trust in governments, but can help improve the contracts themselves. For example, in Slovakia, the publication of contracts led to a 50 percent increase in the average number of bids on government tenders. In Buenos Aires, Argentina, it reduced variation and lowered average prices for hospital supplies.

In this editorial, the authors make their case. But what does this mean for PPPs, where openness and commercial confidentiality must find a balance? Can the two be reconciled?

Forging a partnership with the Global Infrastructure Hub

Mark Moseley's picture
During the Spring Meetings in mid-April, the World Bank Group committed to addressing the world’s data gaps for infrastructure investments, which will help lower barriers to those investments and help provide services to more people across the globe.

Our team signed an agreement with the recently established Global Infrastructure Hub (GIH) – an initiative of the world’s G20 leading economies – that paves the way for future cooperation.

The GIH came into existence last December, as a result of decisions taken at the November 2014 G20 Leaders’ Summit in Brisbane, Australia. Based in Sydney, the GIH is designed to drive progress on the infrastructure agenda of the G20 and, in particular, to encourage additional private sector involvement with infrastructure development.

It will be a knowledge-sharing network, which will aggregate and disseminate information on infrastructure projects and financing opportunities. The GIH is also designed to assist governments with capacity-building in regard to infrastructure development, by sharing best practice approaches.

The agreement signed by both parties details collaboration on new knowledge products and the mutual support of conferences and learning opportunities, such as the forthcoming Public-Private Partnerships (PPP) Days event in London on June 16-17, 2015.

Establish a national PPP Unit to support bottom-up infrastructure investment

Robert Puentes's picture
Photo: flickr/cmh2315fl
By any measure, the United States is a laggard in terms of public-private partnership (PPP) projects. Between 1985 and 2011, there were 377 transportation PPP infrastructure projects funded in the U.S. Those projects comprised just nine percent of the total nominal costs of infrastructure PPPs around the world. Europe leads the infrastructure PPP market, concentrating more than 45 percent of the nominal value of all PPPs.

There appear to be several discrete, but related, reasons why the U.S. has been slow to pursue PPPs in comparison with European and Asian countries:
  • In some cases, there is a lack of consensus, institutional capacity, and expertise to properly promote the benefits and costs of PPP deals. In Pittsburgh, for example, an arrangement to lease the city’s parking operations to a private entity collapsed when the city council voted against the transaction.
  • Deals are getting more complex, politically heated, and cumbersome as some stretch across jurisdictions and even international borders, as is the case with the New International Trade Crossing intended to connect Detroit to Windsor, Ontario.
  • With state and municipal finances under strain, the public sector is trying to transfer greater responsibility to the private sector, including in the arena of project financing.
In this regard, the U.S. Government Accountability Office recently noted that while the U.S. has done much to promote the benefits of PPPs, it needs to do more to assist states and metro areas in thinking through potential costs and trade-offs, as well as assessing national interests.

Learning Public-Private Partnerships

David Lawrence's picture

 
Long ago, when I was stationed abroad with IFC, I joined a visiting colleague in a meeting with a senior government official to talk about public-private partnerships (PPPs). A few junior officials were also there, busy scribbling down everything my colleague said. He talked about the benefits of private sector participation in infrastructure, health and education; he described the various forms PPPs could take; he explained how IFC could provide transaction advice. The official, a man nearing retirement with grey hair and professorial glasses, nodded silently as he listened.
 
“Are you following everything?” asked my colleague. “If not I’ll be glad to explain anything that isn’t clear.”
 
“I understand,” he said. “Please continue.”
 
But I could tell from his body language that he didn’t understand anything at all. And I knew he would never admit a lack of knowledge in front of his subordinates. But there was another reason I suspected the official wasn’t being entirely forthright: I could barely follow the discussion myself.
 
After the meeting I googled “public-private partnerships” to give myself a crash course. There were literally millions of information sources, but most were difficult to follow. I ground through a few articles and slowly began to understand. But what of the official? At his level of English, it would be nearly impossible for him to educate himself about PPPs.
 
Why was this a problem? Because the country in question very desperately needed to rebuild its crumbling infrastructure, inject new life into its healthcare system, and bring educational institutions to a higher level. Through PPPs, private sector could potentially contribute financing, managerial expertise and technical know-how to help government address these challenges. But since so few policymakers understood how PPPs worked, it would be hard to tap into these resources.

What if we disclosed everything?

Marcos Siqueira's picture
One day in 2012, when I was the head of a Public-Private Partnership (PPP) Unit in a subnational government in Brazil, I woke up at 7:00 am to my phone ringing. I was surprised to see that it was the State Governor calling me – not his assistant but him, personally. He was not happy and had a very direct question: Why are today’s newspapers saying that one of our most successful PPP projects is failing to meet quality standards?
 
Image: www.e-builder.net

The day before I received the Governor’s phone call, I had ordered disclosure of full performance reports for all PPP projects on our website. This was the first time that any government had done that in Brazil. The particular project that the Governor had mentioned was a toll road that scored 83 percent in the previous trimester[1]. This was a fantastic score from a technical perspective. Besides, the performance indicators that we used were created to maintain incentives for improvement over the life of the contract. It was never meant for the private party to score 100 percent. Unfortunately, the news reporter did not understand this and didn’t invest time to ask – so I received the governor’s call. At that moment I knew I had a very strong case to make.

From my experience of more than eight years managing transactions and capacity building programs in Latin America and Africa, a radical approach to transparency is the key to enable PPPs to deliver more and better infrastructure services. In other words, I am fully convinced that opacity is the shortest route PPP projects can take towards the expensive failures mentioned by Laurence in his inaugural blog post.

The crude truth is that opaque PPP policies serve a lot of interests, but almost none of them benefit service users or taxpayers.  Here are some of the key points on transparency in PPPs, from my perspective:

Look who's talking about PPPs

Alison Buckholtz's picture
Long-term infrastructure planning. Service delivery even beyond the “end of the line.” E-government outreach that includes everyone. As these and other benefits of public-private partnerships (PPPs) reach more people, a deeper understanding of PPP strategies is entering the mainstream. 

Examples of this organic knowledge-sharing, born of individuals’ first-hand positive experiences with PPPs, can be found among thought leaders across a range of fields. Editors of Handshake, the World Bank Group’s PPP journal, have interviewed many of these experts about their experience with PPPs and have compiled some of their perspectives here.
 
Edward Glaeser, urban economist and Professor of Economics, Harvard University (Cities issue, p. 30, “Triumph of the PPP”), on the need for oversight of PPPs: “There is a lot to be gained in the marriage of public and private, but there are also enormous risks. There are cases where either the government has mistreated the private partner, or companies have figured out a way to mistreat the government. PPPs always require firm oversight. They are enormously valuable as a way to solve a financing problem, and the people who are fighting to solve this problem are doing one of the most important jobs in the world.”

Francesco Bandarin, UNESCO’s Assistant Director-General for Culture (Tourism issue, p. 26), on PPPs as a solution for World Heritage Sites: “Over the past 10 years we’ve had an increased level of attention to World Heritage Sites, and there’s been a subsequent expansion in the number of sites as a result. When you have an expansion of your core business the first question you ask yourself is 'How do I keep delivering the same quality of services?' For us, this includes monitoring services, support to member states, tracking and responding to trends, and trying to use tourism as a resources instead of just a force of destruction. We want to deal with tourism in a way that’s constructive. PPPs can help us do that.”

​Stories from the field: World Bank-IFC collaboration on new PPP legislation in Albania

Christina Paul's picture
There is a wide range of issues to address when initiating and implementing a country’s national program for public-private partnerships (PPPs). One of the first priorities is providing an adequate legal and institutional framework to help create and/or develop a market for PPPs. In the recent case of Albania, this involved an assessment of the country’s current PPP legislation, especially in terms of its ability to attract private sector investment and generally move its PPP agenda forward.
 
IFC advised on Albania's Ashta
hydropower plant. Photo: © Energji Ashta

Particularly over the last decade, Albania has seen a number of PPP projects being implemented, most of them in the energy sector; for example, the Ashta hydropower plant on whose development the International Finance Corporation (IFC) advised. Given, however, that the country’s overall capacity and readiness to carry out PPPs has been assessed as only slightly above average (Source: Infrascope for Central and Eastern Europe 2012, The Economist Intelligence Unit), there is an apparent need to further build up and strengthen its institutional and implementation ability vis-à-vis PPPs. To this end, the Government of Albania is now focused on the further streamlining of its legal and regulatory PPP framework as one area of reform.

In February, a joint team from the World Bank and the IFC therefore participated in a review of the country’s current PPP legislation as well as the changes proposed to it, and organized a workshop for the Government of Albania. The latter focused on the institutional and legal/regulatory context essential for carrying out PPPs. Two colleagues and I represented the World Bank’s PPP group during our visit.

Making PPPs work in fragile situations

Andrew Jones's picture
I have been working in both Afghanistan and the Palestinian Territories for several years now, supporting both upstream enabling activities and working on specific public-private partnership (PPP) transactions. I recently traveled back to both places for our Public-Private Infrastructure Advisory Facility (PPIAF) to help design new interventions that will help develop private sector participation in infrastructure.
 
 
Kabul, Afghanistan
Supporting the development of private sector participation in infrastructure in fragile and conflict affected states is a strategic priority for PPIAF, where immediate and overwhelming infrastructure needs are apparent.
 
In that realm, PPIAF has long been supporting Afghanistan and the Palestinian Territories, among many other conflict impacted economies, and has achieved significant impact, particularly in the telecommunications sector in Afghanistan, and the solid waste sector in the West Bank. Increased access to infrastructure is crucial in fragile and conflict-affected states, and resulting services create opportunity and drive economic growth, thereby reducing the risk of resurgent conflict.
 
While both places face unique challenges, my experiences demonstrate some commonalities that could be applied to other economies with similar situations. Both Afghanistan and the Palestinian Territories have recently undergone political transition, and both have outlined plans to pursue private sector participation to accelerate access to infrastructure and drive economic growth. This comes in the context of growing fiscal constraints and reduced future donor budgetary support.  
 
Let’s look at the specific economic and political context of both Afghanistan and the Palestinian Territories to put things in perspective:

Helping communicate the potential of PPPs through a new, free online course

Clive Harris's picture
The World Bank Group’s twin goals of ending extreme poverty by 2030 and promoting shared prosperity can’t be achieved unless we see a huge boost in the quality and quantity of infrastructure services. Boost infrastructure and do it right and you can generate jobs and boost economic growth. Improving sanitation and access to clean water is essential to improve health outcomes. 
 
According to World Bank President Jim Yong Kim, “Today, the developing world spends about $1 trillion on infrastructure, and only a small share of those projects involves private actors. Overall, private investments and public-private partnerships in developing countries totaled $150 billion in 2013, down from $186 billion in 2012. So it will take the commitment of all of us to help low- and middle-income countries bridge the massive infrastructure divide.”
 
Public-private partnerships (PPPs) can be an important way for governments to help supplement the role of the public sector in meeting the infrastructure deficit.  But PPPs are controversial – there have been some high profile, expensive failures, and some stakeholders feel the private sector should not be involved in providing basic infrastructure services like water. 
 
On the flip side, many have over optimistic expectations for PPPs. PPPs are often not easy to do or to get right and governments need to make sure they are choosing projects suitable for the PPP approach. Through a variety of initiatives and collaboration with partners – including the world’s main multilateral lending institutions – we are helping clients better understand both the potential and limitations of PPPs, including helping them assess when a PPP is the right option and when it is not, and how to procure and manage these projects effectively.

Our free massive open online course (MOOC) – “How can PPPs help deliver better services?” – will help participants gain an understanding of when, how and why to implement PPPs, based on real examples of what has made for successful PPPs and what has led to failures. Students will gain insights into the PPP life cycle and its challenges, from project selection to implementation. Whether you are a PPP practitioner, policy maker or completely new to the subject of PPPs there is something here for you.

Highlighting a free resource for PPP project development

Mark Moseley's picture
Public-private partnership (PPPs) transactions tend to be complex. Both the legal frameworks that enable sustainable PPPs projects, and the contractual arrangements underlying those projects, are different from those used in traditional government transactions.
 
Recognizing this complexity and uniqueness, almost a decade ago, the World Bank Group developed a unique platform – the PPP in Infrastructure Resource Center (PPPIRC) – as a knowledge product for use by governments and other parties interested in PPP transactions in developing economies.
 
Since 2006, PPPIRC has been providing practical guidance on legal, regulatory and contractual issues for infrastructure projects involving PPPs. PPPIRC receives financial and other support from the World Bank Group, the African Legal Support Facility of the African Development Bank, the Multilateral Investment Fund of the Inter-American Development Bank, the Public-Private Infrastructure Advisory Facility trust fund, and other donors.

Access to this helpful data is at your fingertips. The PPPIRC website (www.worldbank.org/pppirc) provides practical guidance and examples of good practice, in the form of sample project agreements, laws, regulatory instruments, checklists, risk matrices and consultant terms of reference. The materials on the site are collected by PPPIRC’s core team of lawyers and infrastructure specialists, with a focus on developed and developing economies. Documentation is provided in a number of languages, including French, Mandarin, Portuguese and Spanish.

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