While discussion about Maximizing Finance for Development (MFD) is ramping up with governments and the international development community to seek innovative approaches to mobilize more private sector investment in developing countries, there is a group of countries with an additional layer of complex challenges.
It brings me no pleasure to say this, but a fair number of countries have economic and financial conditions, business environments, and rule of law that are almost always weak. Clearly, these conditions significantly increase the risks of investing in infrastructure for the private sector; consequently, the markets for public-private partnerships (PPPs) tend to be less developed.
The World Region
What do Bangladesh, Honduras, and Senegal have in common?
They all have per capita Gross Net Income below $1,165, allowing them to borrow from the World Bank’s International Development Association (IDA) that provides concessional financing to the world’s poorest countries. There are 72 other such IDA-eligible countries.
IDA countries face many complex challenges in the new global economy, including underdeveloped infrastructure, inadequate access to basic services, and a lack of affordable financing. IDA support simply is not enough to resolve the myriad of complexities in these countries, and governments need to seek alliances with the private sector—especially when it comes to building infrastructure sustainably.
In a previous blog, I used the metaphor of marriage to explore the dynamic of public-private partnerships (PPPs) as relationships created between two parties with often very different expectations and methods of communication.
Today, we explore PPP cancellations, the what and why— further stretching the marriage metaphor.
The worst reconciliation is better than the best divorce – Miguel De Cervantes Saavedra
Photo: Tony Salas | Flickr Creative Commons
In my home state of California in the United States, major drought-fueled wildfires tore across the state in the latter half of 2017 setting records for both the state’s deadliest fire, as well as the largest fire. Wildfire season is back in 2018 with the most destructive year ever—currently more than 13,000 firefighters are battling 9 large blazes that have damaged or destroyed over 2,000 homes or buildings and scorched over 730,000 acres of land.
The Mendocino Complex fire in Northern California recently broke the state’s previous record for largest fire, spreading furiously due to heat, wind, and years of drought.
California’s Governor Jerry Brown said this is becoming the new normal…where fires threaten people’s lives, property, neighborhoods and, of course, billions and billions of dollars. Many point to climate change as the driver for weather conditions fueling most of the wildfires. July was the hottest on record for the state, and extreme weather is causing larger and more destructive fires across the whole western United States.
Photo: shplendid | Flickr Creative Commons
Talk of trade tariffs and heightened geopolitical tensions are dominating news headlines recently. As developed economies consider escalating protectionist policies, it’s easy to forget about the situation many emerging markets face.
As outlined in the World Bank’s Global Economic Prospects report released in June this year, protectionist policies would affect emerging market and developing economies (EMDEs) more severely than advanced economies. And this is at a time where increased investment and spending in EMDEs, including in infrastructure, is sorely needed.
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Juan Salamanca | Pexels
It’s hard to believe summer is already half over. I am sure many of you, like me, have been stuck at your desks for most of July, but here’s hoping we all get out in the sun in August. But before you go, make note of these really interesting articles that have come out over the last few months that might just make the perfect porch reading for those looking to tune out, but still stay engaged.
The Globe & Mail
Highway BR-163 cuts a rough path through Brazil’s conflicting ambitions: to transform itself into an economic powerhouse and to preserve the Amazon as a bulwark against climate change. This beautifully presented story takes you along the 2,000-kilometer BR-163 corridor in Brazil’s Amazon region to look at the competing needs of those living along this important national artery. It’s not just about a road, but about development itself, and why balancing the economic and social needs of a nation and its people is no simple task.
THPStock | Shutterstock
Ao longo das últimas décadas, as Parcerias Público Privadas (PPP) têm sido utilizadas para criar transporte, energia, telecomunicação e diversas outras infraestructuras em todo o mundo. Cadeias de valor foram estabelecidas para fomentar o crescimento nesses sectores e criar experiências significativas. Um sector amplamente ignorado para fins de investimentos em PPP é o sector do turismo.
Em 2016, viagens e turismo movimentaram USD 7,6 biliões (10,2% do produto interno bruto global) e geraram cerca de 292 milhões de empregos em todo o mundo. O sector do turismo é também aquele que mais contribui para financiar áreas protegidas, como por exemplo os parques nacionais.
THPStock | Shutterstock
Over the last few decades, Public-Private-Partnerships (PPPs) have been used to build transportation, energy, telecommunications, and other infrastructure throughout the world. Value chains were established to foster growth in these sectors and significant experiences gained. A sector largely overlooked for PPP investments is the tourism sector.
In 2016, travel and tourism generated $7.6 trillion (10.2 percent of global gross domestic product) and an estimated 292 million jobs globally. The tourism sector is also the largest market-based contributor to finance protected areas such as national parks. In some countries, tourism depends almost exclusively on natural systems, often with wildlife as the primary attraction.
Photo: rawpixel.com | Pexels
If the potential of public-private partnerships (PPPs) is to be realized, joint working within the public sector and between the public and private sectors needs to be improved.
Experience across the world has consistently identified that organizations find it difficult to effectively work together both within and across sectors. Issues of organizational objectives and priorities, individual and organizational sovereignty, status, power, resources, and culture act as barriers. This too often means that the potential outputs and outcomes from PPPs are not maximized.
Recent estimates place global annual non-revenue water (NRW), i.e. water produced but not billed because of commercial or physical losses, at 126 billion cubic meters. This translates to nearly $40 billion in annual losses on waste and foregone revenues—a sum, that even if a fraction could be recovered, would underpin a compelling market opportunity for private service companies and a boost to public water utilities’ sustainability.
A new joint initiative is aiming to drive declines in NRW faster, cheaper, and more sustainably by assisting water utilities to engage private companies in performance-based contracts (PBCs). The World Bank’s Public-Private Infrastructure Advisory Facility (PPIAF) and the Bank’s Water Global Practice, in partnership with the International Water Association, analyzed 43 projects and determined that NRW initiatives supported by PBCs are 68 percent more effective compared to those undertaken by utilities alone, (see for example, Using Performance Based Contracts to Reduce NRW) and are systematically faster at reducing the rate of loss.