Before diving into a new year, I like to take some time for reflection. This past year, I’ve seen a real shift in how public-private partnerships (PPPs) are perceived and understood—both their benefits and risks. Many governments are considering PPPs to help them deliver infrastructure and services their citizens need. They also better understand the complexity of PPPs as a procurement method and are more strategic in when to use them.
If so, what must be done to ensure they’re sustainable and deliver on public sector goals? Thinking back on 2018, I saw these developments:
Using Islamic finance for infrastructure development attracted more attention recently in the quest to maximize finance for development.
At the recent World Bank-IMF Annual Meetings in Bali, the World Bank and the Islamic Development Bank (IsDB) co-hosted a symposium on Islamic infrastructure finance, building on the institutions’ strategic partnership. As we note in Mobilizing Islamic Finance for Infrastructure Public-Private Partnerships, the asset-backed, ring-fenced, and project-specific nature of Islamic finance structures and their emphasis on sharing risks make them a natural fit for infrastructure public-private partnerships (PPPs).
It takes a lot to do a first Public-Private Partnership (PPP) well. In the past 12 months, we witnessed the successful financial close of two landmark PPPs: the Tibar Bay Port PPP—a first for Timor-Leste, one of the youngest countries in the world—and the Kigali Bulk Water project in Rwanda, considered the first water build-operate-transfer project in Sub-Saharan Africa.
To make these projects happen, deal teams, sponsors, and financiers did outstanding work in difficult environments. The Public-Private Infrastructure Advisory Facility (PPIAF) also earned some bragging rights and a share of the battle scars along with these actors.
With support from the World Bank Group, Singapore invested heavily in infrastructure during the early stages of our growth. This included 14 World Bank loans between 1963 and 1975, which financed the development of the deep sea terminal at the Port of Singapore, the doubling of the country’s energy capacity, and the construction of water pipelines to Malaysia—all of which remain a part of our core infrastructure today.
There is hardly a government today that does not consider some sort of public-private partnership (PPP) to be relevant and integral to its development strategy.
Everywhere you go now, there are individuals and institutions dealing with PPP policy and all the complex aspects of tendering, implementing, and supervising PPP projects. A specialization has arisen, which has become a career for many people and an industry for many institutions, public and private.
Tomas Castelazo | Wikimedia Commons
La revista colombiana Dinero, una de las publicaciones económicas más reconocidas de América Latina, recientemente publicó un estudio del Banco Mundial en el que clasificaba a Colombia como el segundo país más competitivo del mundo—detrás de un empate entre Gran Bretaña y Australia—para financiar obras de infraestructura bajo el modelo de Alianzas Público-Privadas (conocidas como APP). De igual manera, este puntaje (de 83 puntos sobre 100) fue también compartido por las naciones de Paraguay y Filipinas.
A primera vista, este es un virtuoso reconocimiento—por lo menos en papel. En la práctica diaria en la región latinoamericana, así como en la mayoría de las economías emergentes, la complejidad administrativa de los órganos gubernamentales aún representa uno de los más altos retos que demanda de atención inmediata para que las APPs puedan alcanzar su potencial máximo. Hacer esto correctamente integraría realmente el modelo de PPP en el motor de desarrollo económico y social requerido para competir en una economía globalizada.
Tomas Castelazo | Wikimedia Commons
The Colombian magazine Dinero, one of the most respected economic publications in Latin America, recently published a story about a World Bank study that placed Colombia as the second most competitive country in the world—behind a tie between Great Britain and Australia—to finance infrastructure projects under the public-private partnership model (known as PPPs). This score (83 points out of 100) was also shared by Paraguay and the Philippines.
At first glance, this is a virtuous recognition—at least on paper. However, in daily practice in the Latin American region, like most emerging economies, the administrative complexity of government bodies still presents enormous challenges that demand immediate attention if PPPs are to reach their full potential. Getting this right would truly integrate the PPP model into the economic and social development engine required to compete in a globalized economy.
Like winter and summer solstices of investment cycles, every six months we take stock of how much private participation in infrastructure has come to financial close across emerging markets. From Mozambique to Moldova, Chile to China—in power, water, transport, and the backbone of telecom services—the World Bank Group tracks every new public-private partnership (PPP), privatization, auction, concession, lease, and management contract through our PPI Database.
Con disculpas a Charles Dickens
Recently, I published a book about infrastructure public-private partnerships (PPPs) in the most challenging developing countries—a private sector perspective on what is required to bring investment and expertise to partner with governments in providing vital infrastructure services.
There is already a substantial body of work on the potential of PPPs and how to design, finance, and implement them—even in countries where there are limited legal and regulatory frameworks on which to build. What compelled me to write my book is the urge to share, as a practitioner over two decades in some of the most challenging markets, common pitfalls I’ve seen and what appear to be the critical elements of success in creating successful and replicable PPPs.