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public-private partnerships

Obrigado, Brasil!

Clive Harris's picture
Paving a highway in Brazil. In 2014, Brazil's
 infrastructure investment commitments
​drove an overall global increase.
In March we released the update from the Private Participation in Infrastructure (PPI) Database for the first six months of 2014, covering investment activity in energy, transport, and water and sanitation. The good news of a rebound of investment commitment from a decline in 2013 was noteworthy, alongside the heavy concentration of activity in Brazil.
 
The PPI Database’s 2014 full year update for these sectors has just been released, and it confirms the trends we began tracking for the first six months. Total investment in infrastructure commitments for projects with private participation in the energy, transport, and water and sanitation sectors increased six percent to $107.5 billion in 2014 from levels in the previous year. The total for 2014 is 91 percent of the five-year average for the period 2009-13, which is the fourth-highest level of investment commitment recorded – exceeded only by levels seen from 2010 through 2012. 
 
This increase over 2013 was driven largely by activity in Brazil. Without Brazil, total investment commitments would have fallen by 18 percent, from $77.2 billion in 2013 to $63.4 billion in 2014.  Although this is lower than H1 2014 (57%), Brazil’s large stake is a continuation of a recent trend.
 
The Latin America and the Caribbean (LAC) region saw $69 billion of investment commitments, or nearly 70 percent of the total for 2014. Three of the top five countries by investment commitments in 2014 were from LAC.  The top five, in order, were Brazil, Turkey, Peru, Colombia, and India. 

Sharing PPP stories from around the world: our 2015 PPP Short Stories Competition winners

Lauren Wilson's picture
A still from "Clinic on the Move: A PPP that Expands Access to Primary Health Care in Namibia,"
which won the competition's video category.
We are pleased to announce the winners of the Public-Private Partnerships (PPP) Short Stories Competition. The competition, which was sponsored by the Public-Private Infrastructure Advisory Facility (PPIAF), received 153 submissions from more than 50 countries around the world.

The submissions included examples of innovative PPPs in emerging markets across a broad range of sectors, such as transport, water, energy, and health. Submissions were judged by an independent panel on 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 overall winner is Anna Roy for her submission on the India Infrastructure Finance Company’s use of innovative financing to facilitate private investment in infrastructure projects. The India Infrastructure Finance Company was created in 2006 by the Government of India to help raise long-term funds for PPPs. The company, which is fully owned by the government, has approved investments in more 300 infrastructure projects since its inception.

Helping governments act upon the advice they seek

Jyoti Bisbey's picture
Path along the Ishim River in Astana,
Kazakhstan. Photo: Jyoti Bisbey
“What is different now?” This question echoed through my head during my recent morning runs along the beautiful Ishim River in Astana, Kazakhstan.

I was in Astana on mission to launch the new technical assistance program for Kazakhstan’s PPP policy reform, which addresses bottlenecks that constrain project structuring. This reform is especially important if the country’s Almaty Ring Road PPP is to be effective. Almaty Ring Road has been a thought-provoking transaction because previous attempts to solidify the partnership have not panned out, and grasping the history is important to resolving this successfully. Moazzam Mekam, IFC’s Regional Manager for Central Asia, and I spent many hours brainstorming on scenarios that would allow us to bring all of the stakeholders into agreement.  Most of the time, it felt like we were trying to pull a rabbit out of a hat.
 
The Almaty Ring Road is Kazakhstan’s only PPP in preparation right now, and it’s in the spotlight during its prequalification stage. The advisory services are provided by IFC; three years of project preparation have been devoted to ensuring that this is the right project to take to market as a PPP.  As the World Bank Group continues to support Kazakhstan on bringing private sector participation into the delivery of public infrastructure services, the reality is that since the 2006 Concession Law, not one PPP project has transpired.  Before the Concession Law, there were three PPP projects, but all of them have had issues. 
 
As I resumed one of my sunrise runs in this very flat, picturesque, futuristic city, I recalled a recent conversation with Moazzam. He made the point that even when there is a high level of political support for PPPs in the country, institutional and regulatory frameworks are sometimes not ready for PPPs. Capacity and willingness to undertake PPPs at the line ministry/agency level is limited. In instances like this, or when conditions exist in a similar context, we must ask ourselves how to respond, and how to move forward.

​A PPP Manifesto: Getting where we need to go

Jeff Delmon's picture
Some PPPs succeed. Some don’t. And many of these partnerships stake their ground somewhere in-between: they are effective but still fall short of a result or two; they deliver but with less efficiency than intentioned; they innovate but not at the scale envisioned.  In other words, PPPs’ potential is being fulfilled, but certain changes need to be made – urgently, and at the highest levels – so these partnerships can achieve their true potential. 

How?

I’m glad you asked. Many decades of PPP experience and many conversations over cocktails with colleagues on the public and the private side of these deals has prompted this call to create partnerships that can do an even better job serving people around the world. Here are four areas that must be addressed:

Preparation
A well-prepared project is a successful one; yet, we need more. More funding to prepare projects and to prepare governments for the demands of PPP from start to finish. More time to get things right, especially identifying the right partner and agreeing on how the partnership will work. More technical support for governments, since PPP is a huge leap from their usual business of public service and they therefore need extra help and advice.

There are some technical assistance funds available, but too few, too far between, and providing too little capacity. One interesting approach is to provide funding to existing entities with capacity, with a financial interest in the relevant project. This links the project preparation funding with a clear incentive to bring the project to fruition, and for this reason has achieved some important success in helping to prepare projects.

​Five secrets of success of Sub-Saharan Africa’s first road PPP

Laurence Carter's picture
A view of the Dakar-Diamniadio toll road.

Why is Senegal’s Dakar-Diamniadio toll road, which opened on time and on budget in August 2013, so successful? The road has dramatically improved urban mobility around Dakar, reducing commute times between the city and its suburbs from two hours to less than 30 minutes.  
 
Building on this positive experience, in 2014 the Government of Senegal awarded a further concession to extend the motorway to connect it to Dakar’s new Blaise Diagne International Airport. Excluding South Africa, this is the first greenfield road PPP in sub-Saharan Africa. What lessons can we draw? 
  1. Political commitment. The Government of Senegal set the project as a priority. The first driver on the road was the President – who paid the toll. But commitment alone isn’t enough; it needs to be turned into action by government agencies. An intra-agency coordinating committee was set up. The National Agency for the Promotion of Investments (APIX) oversaw the preparation of the concession. The Public Private Infrastructure Advisory Facility (PPIAF) supported APIX with technical assistance, including the design of a framework for the oversight of the project.
  2. Toll plaza along the road
    Consensus-building and stakeholder engagement.  Part of PPIAF’s US$250,000 grant to the Government of Senegal helped to pay for seminars with stakeholder groups to discuss structuring options for the road and socio-economic drivers of the willingness to pay. The final structure chosen involved a relatively low toll, with an upfront contribution by the government to the cost, with the concessionaire taking full construction, operating and traffic risk. The combination of careful outreach to stakeholders, a fairly low toll, significant time savings and a well-maintained road meant that the first toll road in the country was accepted by the population. In addition, the fact that there is a free alternative road helped the Government and other stakeholders point out that motorists could always choose to use the other route.
  3. Experienced concessionaire with strong commitment to Senegal. The concessionaire, the Eiffage Group is one of Europe’s leading construction and toll road operating companies, with a long history of involvement in, and commitment to, Senegal. Eiffage, through the special purpose company set up to construct and operate for 30 years the road, SENAC S.A., ensured that the road was constructed and is being operated to a high standard, on time and within budget.  

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:

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