Editor's Note: This article originally appeared in Project Finance International. A version is reprinted here with their permission.
“How can we as government make the best use of our external advisers?” This is a question we often hear as regular advisers to host governments, or from multilateral or other agencies supporting governments, on the procurement of much needed energy and infrastructure—especially in emerging markets.
Thankfully, this question now comes up more often at the earlier end of the project procurement, rather than near the end.
Public Sector and Governance
Photo Credit: Flickr user n8agrin
Seven years ago I began working in the infrastructure field, and it has been truly remarkable to witness so much knowledge and so many incredible bright minds dedicated to the cause of providing sustainable and inclusive infrastructures globally, really!
During this time, I have realized how crucial project preparation is even though in the scheme of things it seems like a minute phase of a very long infrastructure life cycle. In fact, I compare the project preparation phase to the “cornerstone concept,” defined as the first stone set in the construction of a masonry foundation, important since all other stones will be set in reference to this stone, thus determining the position of the entire structure.
In other words, if a project is well-prepared, well designed, well-thought of, it is more likely to flow better across the infrastructure life cycle and provide the desired services to the population, and vice versa.
Photo Credit: Axel Drainville via Flickr Creative Commons
Our research at the Stanford Global Projects Center aims to improve the way institutional capital is invested in critical public infrastructure. On one side, we research how institutional investor capital that has a commercial objective can be pooled most efficiently for infrastructure. On the other side we research government policies and practices to procure infrastructure assets through Public-Private Partnerships (PPPs) and other methods most effectively. In this blog we highlight a few specific initiatives that have been set up to achieve these two objectives holistically, a few of which we touched upon in our first blog.
In 2014, the Brisbane G20 Leaders’ Summit tasked its newly announced Global Infrastructure Hub with ensuring there is a “comprehensive, open-source project pipeline database, connected to national and multilateral development bank databases, to help match potential investors with projects.”
The G20, based on advice from the B20 (a private sector forum) had recognized a key issue for the private sector: the lack of clear and consistent early stage information on government infrastructure projects across the globe.
Private investors armed with billions of dollars were being hamstrung by a lack of useful and informative data to guide their planning for investments.
In my previous blogs I have argued that to realize the potential of Public-Private Partnerships (PPPs), the public sector needs to develop Public to Public Partnerships (P2P Partnerships). The more the public sector can work as P2P Partnerships, the more it can change the economic and social value achievable by PPPs above what the public sector can achieve alone.
As P2P Partnerships develop to create an increased scale and scope of PPP opportunities, so too will the need for the private sector to evolve to enable it to respond to those opportunities. This may be in the form of diversified organizations or consortia of private sector organizations through Private to Private Partnerships (Pr2Pr Partnerships).
A key test of organizations seeking to achieve “joint working” (working collaboratively or in partnership together) whether for PPPs, P2P Partnerships, or Pr2Pr Partnerships, is whether they have PALS. PALS is an acronym for the key activities in joint working that stand for Prioritize, Aggregate, Learn and Share.
When seeking to engage private partners, one thinks of large, high-cost national infrastructure projects. But subnational governments are also effectively partnering with the private sector by leveraging assets, rethinking “infrastructure,” and establishing mechanisms to give long-term security.
Some Latin American governments are capitalizing on legislative frameworks for Public-Private Partnerships (PPPs)—in some cases tailoring laws for subnational use, and using experience gained from large-scale national projects.
While not always technically PPPs, this private sector capacity can be harnessed to deliver innovative smaller projects, from using drones to deliver medicines to health centers in rural communities in the Dominican Republic to building market stalls in a new Honduran bus terminal to spur the development of small businesses.
Here are three ways cities and municipalities can mobilize capital and innovation in infrastructure.
The Stade Vélodrome in Marseille, France. Photo Credit: Ben Sutherland via Flickr Creative Commons
In June 2016, nearly 2.5 million enthusiastic spectators gathered in France to attend the Euro 2016 soccer tournament.
Those participating in matches in Lille, Bordeaux, Marseille or Nice would have noticed the brand new facilities and bold architectural design, but most probably didn’t realize these stadiums had been either constructed or modernized with financing through the relatively new “Contrat de partenariat” public-private partnership (PPP) scheme.
Sri Lanka has, over the past decade, relied primarily on public funds for most of its infrastructure needs that have come by way of borrowing on concessional and non-concessional terms with limited attempts being made to develop infrastructure with the use of private funds. However, the infrastructure gap continues to widen with the growing limitations in borrowing capacity, and the government is under pressure to deliver infrastructure adhering to practices of good governance and transparency.
The recent budget shed light on several areas where the government could engage the private sector through public-private partnerships (PPPs). Could this bring about accelerated development in infrastructure that the limited amount of public finance alone would not be able to handle?
On a recent trip to the Caribbean, I was in a meeting at the Ministry of Finance of one of the region’s largest economies. The topic under discussion was all too familiar: the difficulty of attracting overseas investment into the country’s public infrastructure projects.
To enliven things, I began thinking aloud about an idea I’d been musing on for a while and was asked to outline my idea. Let me first set the context.
PPPs are designed to achieve improved access to assets, infrastructure and services over a significant number of years. They should have clearly identified objectives, specified outcomes, clear programs of investment over time, and relationships and performance targets to bring to life the Social and Economic Value Equations that underpin them.
As stated in my previous blogs, the Social and Economic Value Equation is: