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Public Private Partnerships

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

Clive Harris's picture

Public-Private Partnerships (PPP): How can PPPs help deliver better services? New, free massive open online course (MOOC) course provides an understanding of the key principles of PPPs and the role of PPPs in the delivery of infrastructure services, particularly in emerging markets.

Public-Private Partnerships MOOCThe 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. 
 

Structured dialogue, value chain and competitiveness: A journey through implementation, from Copenhagen to Kabul

Steve Utterwulghe's picture



Afghanistan. Photo by Steve Utterwulghe.

This latest blog post should start with a mea culpa. Indeed, my 2015 work plan for public-private dialogue (PPD) did start in Dushanbe, Tajikistan, not Copenhagen. However, who can swear that he never tweaked a title a tiny bit to make it catchier?
 
While Dushanbe hosted the very productive First Regional PPD Forum in the “stans,” the 8th Global PPD Workshop took place in March in the Danish capital. There, “more than 300 representatives from governments, private enterprises, PPD coordination units, investors’ councils, competitiveness partnerships, civil society, business organizations, and various development partners participated in the event. They represented 54 countries and a total of 40 PPD initiatives who joined the event to share their experiences and discuss lessons learned.”
 
High-powered individuals kick-started the Copenhagen event, including HRH Crown Princess Mary of Denmark, who reiterated that, to make a difference in the world, “it will take partnerships across countries, governments, and between public and private sectors.”
 
Once the keynote speeches had been delivered, the real work began among the delegates and with the PPD experts. I jumped from impromptu coffee break to coffee break and strategized with the Côte d’Ivoire delegation on how to prepare for the National Day of Partnership/Dialogue in Abidjan; discussed ways to better involve the private sector in Morocco; debriefed with the Guinea Minister of Industry, SMEs and Private Sector Promotion on how the PPD structure that we helped put in place is strengthening the local value chain for extractive industries (see below); and moderated an engaging session on public-private dialogue in fragile states and conflict-affected countries (FCS), which provided great insights as I prepared to fly out on PPD missions to Somalia and Afghanistan.
 
Aside from the buzz of international gatherings, what really matters for the delegates, from both governments and the private sector, is to get inspired and bring back home ideas that can be adapted locally and successfully implemented. Public-private dialogue is an art defined by some fundamental core principles that can be adjusted according to specific needs and environments.
 
As a reminder, PPD refers to the structured interaction between the public and private sectors to promote the right conditions for private sector development. Its ultimate function is to contribute to a prosperous economy by expanding market opportunities and enabling private initiative. This is also very much the mission of the new World Bank Group Global Practice on Trade & Competitiveness (T&C). Its Senior Director, Anabel Gonzales, wrote in one of her blog posts on Trade and Development in Africa that fostering competitiveness and strengthening supply chains is a key to development and an integral part of T&C’s offering.
 
As I reflected on the links between structured multi-stakeholder dialogue, competitiveness and supply chains, I remembered a Harvard Business Review article written by Michael Porter and Mark Kramer, entitled Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility.
 
What particularly caught my attention at the time was the theory on interdependence between companies and society that the Harvard professors put forward. They argued that this interdependence takes two forms: the social impact that a company’s activities has on society, or “inside-out linkages,” and the social influences on the company’s competitiveness, or “outside-in linkages.”
 

Welcome to the PPP Realities Blog

Laurence Carter's picture
We’re excited to launch this new dedicated blog platform around public-private partnerships (PPP). We envision it as a space for sharing experiences, disseminating knowledge and generating discussion. We hope that this space will be enriched by perspectives from PPP practitioners in governments, from investors, financiers, advisors, associations and so forth. 
 
Why? There is a danger that public-private partnerships are being oversold.  
 
Public-private partnerships
can help secure investments,
expertise and other resources
for infrastructure that delivers
essential services like
clean water.
A “disappointment gap” currently exists between high expectations and the sober reality of successfully concluded partnerships. Too much attention is often paid to financing, and not enough to the less glamorous hard work of preparation. There isn’t enough information being collected about performance. And there are different interpretations about what PPP means, exactly.
 
Right now, the PPP discussion is rhetoric-rich and data-poor. It is expectation-heavy, and cold-light-of-day reality is tougher. That’s a shame, because, when prepared carefully, with full assessment of the different options, and the fiscal/economic/environmental/social implications, PPPs can be a useful tool to help governments improve the quality and reach of their physical and social infrastructure services. 
 
We’re working alongside the world’s other multilateral development banks to prepare a joint website for PPPs, which will be called the PPP Lab. That upcoming website – launching in June – will contain quantitative and qualitative information about PPPs and private infrastructure, including the Private Participation in Infrastructure Database, the Public-Private Partnerships in Infrastructure Resource Center, Infrascope reports, and the PPP Reference Guide.

In addition, our new online course on PPPs will introduce real-world cases to an audience that doesn’t attend PPP conferences or read development banks’ annual reports.
 
There are plentiful examples that illustrate the realities, challenges and opportunities that PPPs offer. With your help, we intend to share and explore many of them on this blog. We invite you to read, share and engage with us on these topics and follow us on Twitter at @WBG_PPP.

Institutional Investment in Infrastructure (“In3”): A view from the bridge of a development agency

Jordan Z. Schwartz's picture


Note: The first advisory council meeting of the new Global Infrastructure Facility was recently convened at the World Bank Group headquarters in Washington, D.C.

Suddenly, it seems impossible to walk through London, Washington, New Delhi or Nairobi without bumping into a conference on institutional investors in infrastructure. The G20 has discovered the link along with their business counterparts at the B20. So too has the World Economic Forum, the OECD, the United Nations and the international financial institutions. Match the long-term liabilities of pensions and insurance plans with long-term assets, the mantra goes, and the infamous infrastructure gap will close.  Win-win.

If only life were so easy. 

We are reminded of the old expression, “If your grandmother had a beard, she’d be your grandfather.” In this case: If infrastructure were perceived by investors as a truly stable, risk-adjusted investment, it would already be able to attract the financing it needed. There would be no gap.

In truth, some institutional investors found their way into infrastructure assets as far back as the 1990s and have been cautiously growing their investments, attracted by the long-term demand, steady growth and regulated returns. A few of the Canadian pensions and Australian super-annuation funds invest 10 to 12 percent of their assets in infrastructure, while equity funds that focus on infrastructure and related businesses in emerging markets, such as IFC’s Asset Management Company, are growing on the tide of this burgeoning market.

To date, the pensions are mostly exposed in equity investments in the regulated utilities of Europe, North America and Australia, while the funds are focusing on higher-risk, higher-return investments around the edges of infrastructure — in gas platforms and mobile licenses, in telecom towers, in container terminal operators or in the occasional power plant.

The real test of patience and stability will come when debt and debt-like products from the broader range of institutional investors begin flowing into large-scale, basic service infrastructure — transport, power, water and sanitation and the backbone of telecom services. And since infrastructure is highly leveraged — typically 70 to 80 percent debt in the capital structure — the broader infrastructure financing gap will not be closed until this happens.

A few questions surround these ambitions: 
 
  • Why would a development institution care so much about "In3"?
  • What are the hindrances to this happening?
  • What are we doing about it?

Newest private participation in infrastructure update shows growth and challenges

Clive Harris's picture



In 2013, investment commitments to infrastructure projects with private participation declined by 24 percent from the previous year.  It should be welcome news that the first half of 2014 (H1) data – just released from the World Bank Group’s Private Participation in Infrastructure (PPI) database, covering energy, water and sanitation and transport – shows a 23 percent increase compared to the first half of 2013, with total investments reaching US$51.2 billion.

closer look shows, however, that this growth is largely due to commitments in Latin America and the Caribbean, and more specifically in Brazil. In fact, without Brazil, total private infrastructure investment falls to $21.9 billion – 32 percent lower than the first half of 2013. During H1, Brazil dominated the investment landscape, commanding $29.2 billion, or 57 percent of the global total.

Four out of six regions reported declining investment levels: East Asia and the Pacific, South Asia, Africa, and the Middle East. Fewer projects precipitated the decrease in many cases. Specifically, India has experienced rapidly falling investment, with only $3.6 billion in H1, compared to a peak of $23.8 billion in H1 of 2012. That amount was still enough to keep India in the top five countries for private infrastructure investment. In order of significance, those countries are:  Brazil, Turkey, Mexico, India, and China.

Sector investments were paced by transport and energy, which together accounted for nearly all private infrastructure projects that were collected in this update. The energy sector captured high investment levels primarily due to renewable energy projects, which totaled 59 percent of overall energy investments, and it is poised to continue growth due to its increasing role in global energy generation.

The energy sector also had the biggest number of new projects (70), followed by transport (28), then water and sewerage (12). However, transport claimed the greatest overall investment, at $36 billion, or 71 percent of the global total.

While we need to see what the data for the second half of 2014 show, what we have to date suggests that infrastructure gaps may continue to grow as the private sector contributes less. It also suggests that, in many emerging-market economies, there is much work to be done to bring projects to the market that will attract private investment and represent a good deal for the governments concerned. 
 

PPPAmericas 2015: Taking public-private partnerships to the next level

David Bloomgarden's picture

The Latin America and the Caribbean region is crying out for infrastructure improvements. An investment estimated at 5 percent of the region’s GDP — or US$250 billion per year — is required to develop projects that are fundamental for economic development. This includes not only improving highways, ports and bridges, but also building hospitals and creating better transport, public transit and other mobility solutions for smarter cities. Rising demand for infrastructure also is prompting countries to redouble efforts to attract greater private investment

At the Multilateral Investment Fund (MIF), as at the World Bank Group, we believe that public-private partnerships (PPPs) can help governments fill this infrastructure gap. However, the projects must be implemented effectively and efficiently to achieve social and economic objectives.

Governments in the Latin America and the Caribbean region not only lack financing to address the infrastructure gap, but also face challenges in selecting the appropriate large infrastructure projects, planning the projects, managing and maintaining infrastructure assets — and gaining public support for private investment in public infrastructure. 

However, PPPs are gaining ground in Latin America and the Caribbean. Beyond the larger economies of Brazil, Colombia and Mexico, assistance from the MIF and the Inter-American Development Bank (IDB) has enabled countries such as Paraguay to develop laws that pave the way for PPP projects. Just this week, Paraguay announced its first such project, which involves an investment of US$350 million to improve and build more than 150 kilometers of roads. 

PPPs have been moving beyond classic interventions in public infrastructure, which have typically included roads, railways, power generation, and water- and waste-treatment facilities. The next wave of PPPs increasingly involves and provides social infrastructure: schools, hospitals and health services. In Brazil, IFC, the private sector arm of the World Bank Group, helped create the Hospital do Subúrbio, the country’s first PPP in health, which has dramatically improved emergency hospital services for one million people in the capital of the state of Bahia.

Beyond sovereign guarantees: The case for sub-national finance

Joshua Gallo's picture

In many countries, central governments have devolved the responsibility of infrastructure service provision to the sub-national level, which is essential for economic growth. Along with this devolution of provision responsibility comes the requirement to raise revenues, enhance efficiencies, improve commercial viability, and reduce a dependence on external financial support — including central government guarantees.
 
However, central governments are increasingly unwilling or unable (due to limitations of fiscal space) to guarantee sub-national borrowings. This new paradigm is testing the sub-nationals’ ability to raise financing to fulfill newfound responsibilities in infrastructure service provision.
 
Perhaps this is a blessing in disguise. Historically, easy access to sovereign guarantees has created perverse incentives for not pursuing more sustainable financing solutions. This dependence has also tainted the way that sub-nationals are perceived by the markets, by making them seem like reactive agents of development. This in turn has limited their access to finance and therefore their ability to develop. This approach must evolve, because whether the focus is climate change, massive migratory movements, or basic infrastructure needs, the struggle to advance the global fight against poverty and unsustainable development may be won or lost primarily at the local level in developing countries.

Wanted: Your innovative thinking around Public-Private Partnerships – essay competition

Laurence Carter's picture

Do you know of innovative Public-Private Partnerships (PPPs) in emerging markets that are delivering better services for people? We’re trying to find out about more of these examples through a Public-Private Partnerships (PPP) Short Stories Competition.

Experience shows that well-designed PPPs can be an important development tool, and can enhance delivery of basic infrastructure services to those who need it most. By allocating risks between public and private parties, introducing new technology and improving operational efficiencies, PPPs can help governments maximize the effectiveness of scarce public funding.

We also know that some PPPs haven’t met expectations. And we know that PPPs are not a panacea for solving all gaps in services. They need to be used selectively. So we’re trying to identify and share lessons from successful PPPs around the world, so that governments, civil society, consumers, investors and the environment can all benefit.  

We’re sure that there are many good stories out there that not enough people know about. We’re hoping to hear from students, practitioners, policymakers and anyone interested in PPPs. From these submissions, we hope to identify practical solutions that can be applied by governments.

Here’s the competition website to submit your case studies, essays, and video submissions on innovative solutions for PPPs. Please forward this to your networks. We welcome submissions in English, French and Spanish. Submissions will be judged by an independent panel using several criteria, including the identification of actionable ideas, replication potential, and relevance to the World Bank Group’s twin goals: ending extreme poverty by 2030 and boosting shared prosperity (measured as the income of the bottom 40 percent in any given country).

The winner(s) will be invited to offer a presentation at a major PPP event in London in mid-June, and there is a cash prize as well.

The deadline for submissions is March 31, 2015. I invite you to follow us on twitter @WBG_PPP to keep up with our work and PPP-relevant news.

The competition is sponsored by the Public Private Infrastructure Advisory Facility (PPIAF).   

'It’s the Trust, Stupid!' The Influence of Non-Quantifiable Factors on Policymaking

Steve Utterwulghe's picture



Should trust be something that policymakers need to worry about? I started reflecting on this question after I came across the 2015 Edelman Trust Barometer. It suggests that 80% of the people surveyed in 27 markets distrust governments, business or both (see figure 1).

A staggering number, to say the least. The year 2014 did not spare us from economic, geopolitical and environment turmoil. Nonetheless, the trend over the last few years has been a growing distrust in our leadership, despite the fact that progress has been made in the three main pillars of trust: integrity, transparency and engagement. More needs to be done, it seems.

Figure1. Trust in business and government, 2015



As Ralph Waldo Emerson, the American essayist and poet, wrote: “Our distrust is very expensive.” The lack of trust in our government affects policies and reforms, and thus damages the overall economic environment. Investors will lack confidence and shy away. Growth will stagnate, sustainable jobs won’t be created, and trust in government will erode even further. A vicious circle is being created.

Professor Dennis A. Rondinelli, lately of Duke University, argues: “What are called 'market failures' are really policy failures. The problems result from either the unwillingness or inability of governments to enact and implement policies that foster and support effective market systems.” Distrust thus influences policymakers in multiple ways: They will either adopt bad policies, or overregulate. A study published in The Quarterly Journal of Economics shows that “government regulation is strongly negatively correlated with measures of trust.”  “Distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust. . . . Individuals in low-trust countries want more government intervention even though they know the government is corrupt” (see figure 2).

Figure 2. Distrust and regulation of entry. Regulation is measured by the (ln)-number of procedures to open a firm.
Sources: World Values Survey and Djankov et al. (2002).




The evaporation of trust in government institutions requires that governments and development agencies rebuild trusted institutions. However, it also behooves all of “society’s stakeholders” to rebuild trust among themselves and “engage.”

Integrity and transparency are two of the pillars of trust that have received a lot of attention during the past decade. Indeed, tackling corruption and ensuring transparency have been at the top of the institutional and corporate development agenda. The third pillar, engagement, has been more rhetorical or grossly underestimated.

A prerequisite for inclusive and responsive policymaking is that citizens use their voice and engage constructively with government institutions. As we have seen, increasing social and political trust helps market economies function more effectively. In turn, sound economic policies foster social and political trust. In recent years, the practice of structured public-private dialogue (PPD) has helped the private sector and other stakeholders engage in an inclusive and transparent way with governments. PPD mechanisms have resulted in better identification, design and implementation of good regulations and policy reforms intended to create an improved investment climate and increase economic growth. As a result, this process has built mutual trust between institutions and business.

Confidence-building has been most critical in post-conflict and conflict-affected states where deep mistrust among stakeholders is prevalent. That topic will be discussed in greater depth at our 2015 Fragility Forum’s session on public-private and multi-stakeholder dialogue, coming up on February 13. Foreshadowing the Fragility Forum, a panel discussion in Preston Auditorium on Monday, February 2 – featuring, among others, Sarah Chayes of the Carnegie Endowment for International Peace, who is the author of  “Thieves of State: Why Corruption Threatens Global Security” – will focus on "Corruption: A Driver of Conflict."
 
In an age of distrust, this type of policy reform – through multi-stakeholder engagement – is not an obvious exercise. The economist Albert Hirschman claims that “moving from public to private involvements is very easy because any single individual can do it alone. Moving from private to public involvements is far harder because we first have to mobilize a lot of people to construct the public sphere.” But the increase of PPD platforms across the world  the WBG Trade & Competitiveness’ Global PPD Team currently supports 47 PPD projects worldwide  suggests that there is an appetite for engagement among citizens, business and governments alike.

Trust can be slowly restored by, among other things, designing adequate interventions such as PPD mechanisms. By their inherent iterative process of discovery, collaborative identification of issues and joint problem-solving, PPDs can activate favorable mental models of stakeholders. According to the 2015 World Development Report on "Mind, Society and Behavior," these “mental models can make people better off.” I would argue that these mental models drawn from their societies and shared histories can help build trust as well.
 
Trust matters for policymakers. Ultimately, it matters for all citizens. Designing interventions and offering a safe space where stakeholders can engage with governments in an inclusive and transparent fashion will go a long way toward restoring that valuable trust.
 

Azerbaijan's broadband at a crossroads

Natalija Gelvanovska's picture
View of Baku, Azerbaijan. Photo: David Davidson/flickr

Geographically and historically, Azerbaijan has often been at the crossroads: of trade routes, cultures, and influences. From a telecom policymaking standpoint, the country is currently at another important crossroad - this time having to choose from available regulatory approaches designed to pave the way for the high-speed broadband roll-out across the country.
 
Which regulatory framework is best to follow? Which country experience is closest to the needs of the Azerbaijani population and could provide for not only rapid but, more importantly, self-sustaining broadband market development?

Over the last year I had a chance to analyze the Azerbaijani broadband market, with my objective being the formulation of advice on the best way to stimulate the broadband market growth. In this blog I would like to briefly outline two relevant models of fixed broadband market development, either of which, from a quick glance, could be considered appealing for Azerbaijan because of a positive market growth trajectory and low consumer prices (the full analysis will be published soon). The models I am referring to are competition-led and government-led market development approaches, in the analysis they are represented by experiences of two oil-exporting economies, similar to Azerbaijan - Norway and Qatar.
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