Photo: Artit Wongpradu / Shutterstock.com
Islamic finance has been growing rapidly across the globe. According to a recent report by the Islamic Financial Services Board, the Islamic finance market currently stands around $1.9 trillion. With this growth, its application has been extended into many areas — trade, real estate, manufacturing, banking, infrastructure, and more.
However, Islamic finance is still a relatively untapped market for public-private partnership (PPP) financing, which makes the recent publication Mobilizing Islamic Finance for Infrastructure Public-Private Partnerships such an important resource, especially for governments and practitioners.
شهد التمويل الإسلامي نموا سريعا في جميع أنحاء العالم. ووفقا لتقرير صدر مؤخرا عن مجلس الخدمات المالية الإسلامية، فإن سوق التمويل الإسلامي يبلغ حجمها حاليا حوالي 1.9 تريليون دولار. مع هذا النمو، تم توسيع تطبيقه في العديد من المجالات -التجارة والعقارات والتصنيع والخدمات المصرفية والبنية التحتية، وغير ذلك كثير.
ومع ذلك، لا يزال التمويل الإسلامي سوقا غير مستغل نسبيا لتمويل الشراكة بين القطاعين العام والخاص، مما يجعل التقرير الصادر حديثا بعنوان تعبئة التمويل الإسلامي لشراكات البنية التحتية بين القطاعين العام والخاص مصدرا مهما، وخاصة للحكومات والممارسين.
Photo: Ashim D'silva | Unsplash
From “Billions to Trillions”, to the Hamburg Principles and Ambitions, to Maximizing Finance for Development (MFD), Realizing that constrained public and multilateral development bank (MDB) funding cannot fully address the critical challenges that developing nations face, the World Bank Group is pursuing private sector solutions whenever they can help achieve development goals, in order to reserve scarce public finance for when it’s needed most. This is especially true in the delivery of infrastructure.
Public-private partnership (PPP) practitioners are sometimes guilty of thinking that signing the deal is the end of the story. You can’t blame them, really. Making a PPP work is a long-term process with a lot of players involved, each with his or her own priorities. Detailed technical, economic, and environmental and social reviews must be conducted to make sure the project is feasible and bankable. Often, sector reforms are required. Stakeholders – including the public – must be kept fully informed. The competitive bid, critical to any PPP, must be fully transparent so nobody will doubt the legitimacy of the outcome. It’s a long, hard slog to the end, and I can’t blame PPP practitioners from wearily planting the flag, declaring victory, and moving on.
But the signing is not the end; it is the beginning. And you can’t really declare success until the PPP is delivering real results for people. Sometimes, a follow-up PPP adds a new phase to a project, and sometimes new players are brought in. In any case, it’s worth going back and examining the results of PPP projects to see what happened and extract valuable lessons.
Recently I was invited to speak at Public Investment Management (PIM): Best Practices Workshop hosted in Amman, Jordan by the World Bank Group’s regional Governance team, led by Emmanuel Cuvillier. My job there was to show the linkages between public investment planning (PIP) and PPPs. As I prepped for my speaking engagement, I realized how little progress we, the global PPP community, have made in developing an integrated approach for undertaking investment projects.
One obvious reason for this is that PIMs are not fully integrated in the planning functions by most governments. And PPP projects that follow privatization programs have adopted many of the habits of the privatization programs — for example, only work on a list of selected entities, and establish an ad-hoc commission/committee tasked to undertake evaluation and tendering — with the ultimate aim of obtaining private investment.
But there’s an important difference in the case of PPPs. We are not selling assets, we are creating assets. The project does not end when the public and private parties sign the contract, as is the case in privatization; in fact; the project begins at that point, and has to be monitored over many years for performance and delivery. Typically, the project reverts back to the public sector at the end of the PPP agreement term. And finally, unlike the case with privatization, the public sector almost always commits to various kinds of fiscal commitments (real or contingent) in PPPs.