Photo Credit: Thomas Hawk via Flickr Creative Commons
In September, a whirlwind of meetings took place with agencies and development banks in Washington, D.C., and Europe that were focused on the current and future implementation of public-private partnerships (PPPs) across the global market. The healthy debate on the topic exposed the participants to interesting insights provided by proponents and naysayers of PPPs.
Many PPP experts that I met shared ideas on the changing context of PPPs and how these changes will impact the implementation of PPPs across regions and sectors in the near and far future. All agreed that the long-term consequences of future political, economic and societal changes are particularly difficult to predict.
Public Private Partnerships
As stakeholders from around the world gather at Habitat III in Quito, Ecuador, to agree on a New Urban Agenda, one of the important questions that remains unanswered is why we continue to see housing projects that target the rich but ignore the inadequately sheltered poor.
This question has dogged me for years as I try to understand affordable housing crises gripping cities from Washington, D.C., to Nairobi. At one point, I believed the issue stemmed from a lack of financial liquidity lubricating developers’ and homebuyers’ actions. But alleviating that issue often contributes to increasing prices and building projects in the wrong places.
Photo Credit: United Nations
Public-private partnerships fit well into many sectors and industries, most obviously infrastructure and social services. But I never connected PPPs to the life insurance sector until I read a recent online interview with Andreas Gruber, the Chief Investment Officer of Allianz, a German insurance and asset management company. In the interview, Gruber gives a lucid assessment of PPPs and why they are important to Allianz.
Photo Credit: hans-johnson via Flickr Creative Commons
A recent report by PwC on the outlook for global infrastructure spending predicts that by 2020, annual global infrastructure spending will reach $5.3 trillion, up from an estimated $4.3 trillion in 2015. This represents a global spending growth of 5% per annum doubling the low rates of growth of just 2% expected this year.
There is no doubt a significant financing gap exists for investments in infrastructure in emerging markets and developing economies, a gap that stands in the way of funding projects crucial to providing basic services to transform living conditions across the globe. We at the Global Infrastructure Facility (GIF) recognize that addressing the infrastructure gap can get us closer to eliminating poverty and boosting shared prosperity.
After attending a discussion with a prestigious panel of finance ministers and senior financiers at the event “Making Infrastructure Rewarding,”—hosted by the GIF on the eve of the IMF-World Bank Group’s 2016 annual meetings in Washington, D.C, I feel there is a lot to be optimistic about in the way infrastructure is viewed and financed using the right instruments to fill the gap.
Given the standing-room-only attendance at the event—which was also live-streamed—and the number of comments and tweets that came in using #investininfra, there is clearly enormous interest in how we get from point A to B.
Of the 56 poorest countries, over half had no private investment in infrastructure in the past five years. And in 2015, only 14 energy, transport and water projects involving private investment were concluded in that whole group of 56 countries—with all of them occurring in just eight of the countries. In the past five years, only one country – Bangladesh – has seen private investment in infrastructure each year. Given that well-structured private infrastructure projects can bring a useful infusion of management (and sometimes money) to help provide better quality and access to infrastructure services, this seems like a missed opportunity. Here are five suggestions for actions that governments can take immediately to improve their chances of attracting good quality private management and financing for some infrastructure services.
Photo Credit: Nick Page via Flickr Creative Commons
We all face uncertainties.
What if the train’s late? What if it rains? What if traffic is bad? What if there’s a shift in government before the project starts?
Every day we’re hit by all the “what ifs” especially in our line of work at theWorld Bank Group, whether in the field or within our organization. But how do we best cope with this? Embracing uncertainties may be the answer.
The World Bank Group has been at the forefront of mainstreaming new methods to deal with uncertainties. In fact, you may not know this, but the World Bank is one of the founding members of the Society for Decision Making Under Deep Uncertainty.
It’s widely acknowledged that how well governments prepare, procure and implement public-private partnership (PPP) projects is important both in bringing in private finance and/or expertise and ensuring these projects deliver value-for-money.
However, up until now there has been no systematic data to measure those capabilities in governments. This has changed with the release of the World Bank Group’s Benchmarking PPP Procurement 2017, which collects and presents comparable and actionable data on PPP procurement on a large scale by providing an assessment of the regulatory frameworks that govern PPP procurement across 82 economies. It presents an analysis of practices in four areas: preparation, procurement, contract management of PPPs, and management of unsolicited proposals (USPs). Using a highway transport project as a case study to ensure cross-comparability, it analyzes the national regulatory frameworks and presents a picture of the procurement landscape at the end of March 2016 by scoring each of the four areas.
One night, not too long ago, I was sitting at a bar with a friend of mine. He complained he had just finished a contentious two-week night and day negotiation of a power purchase agreement for a power public-private partnership (PPP). So, as a sensitive and caring friend, I said, “Quit your whining! Power generation PPPs must be the easiest PPP around. You’ve got a tried and tested kit, clear demand, a commercially and socially valued product, a sophisticated sector with strong sponsors and keen financiers, an accepted standard model for PPPs, not too much land. As long as you can get fuel and connect to the grid, all is OK. In fact, the offtaker often takes fuel and grid risk. Easy, right?”