Tricky transnational infrastructure PPPs: Some suggestions

Transnational PPP projects are not easy and are riskier than others, but with increasing globalization they are becoming more relevant. However, there is no need for transnational projects to be difficult. There should be no quandary; just a common sense and purpose that is grounded in reality and avoids political dominance or rivalry.

In recent discussions with other PPP practitioners, we agreed there is a need to find ways to expedite and find sustainable and feasible approaches to transnational projects, especially in the transportation and energy sectors. These are of particular interest to land-locked countries, especially in Africa and Central Asia, which should not be held hostage to issues that could easily be negotiated between equal government partners who are interested in regional development efforts that include the creation of transnational transportation corridors.

As long as institutional and political barriers abound, regional development will be hamstrung and projects that have great merit will be delayed.

Unfortunately, many countries that grapple with these projects are captive to the geopolitical contexts, often decades in the making. Additionally, straightforward geographic constraints on transportation corridors become unmitigable because they remain subject to political, cultural, ideological, technological, and perception barriers that transcend natural constraints in unpredictable ways. As a result, the best and shortest route for transportation and power infrastructure is often not an option. This results in costly detours and lost opportunities.

What can we do to mitigate “man-made” project risks that result in important regional PPP projects becoming unfeasible? 

Here are some suggestions:

Choosing projects:

• Clearly and collaboratively identify projects of common strategic interest that are economically feasible and are not subject to regional rivalries.
• Align partnering countries’ Sustainable Development Goals so that only sustainable and resilient projects are considered.
• Depoliticize projects and only allow projects that have a sound economic rationale.

Setting the stage:

• Find ways to harmonize PPP enabling environments that provide a common legal framework for PPPs.
• Take no shortcuts in feasibility studies (especially when it comes to environmental impact studies).
• Establish compatible technology and infrastructure standards that prevent design and construction problems.

Working together

• Find ways to balance collaborating states’ competing strategic interests in PPP projects so that all state partners are comfortable with trans-state agreements on a wide variety of issues including proportional debt, risk assumption, and international mediation, for example.
• In the case of utility projects, form a transnational regulatory body that is impartial and primarily focused on the revenue needs of the project.

Managing risk

• Form a joint commission that manages and monitors the project in a neutral manner.
• Find ways to ensure that private sector partners are assured that potential political differences and risk will not derail projects (it might be necessary to get Multilateral Investment Guarantee Agency insurance).
• Identify impartial mediators who could step in should a disagreement arise.

For transnational projects to be successful and sustainable, regional rivalries need to be bridged, with the intention of seeking common good.  This also should include the principle of “people-first PPPs” that transcend national rivalries. 

It’s important that all parties are willing and that clearly identified common objectives drive the project, not just the needs of one partner. If agreement cannot be reached on the suggestions listed above, my suggestion is simple: don’t launch a transnational PPP project.

The original version of this blog appeared on David Baxter's LinkedIn page.
 

Disclaimer: The content of this blog does not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, staff or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.
 

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