Syndicate content

Trends that will drive global PPPs in 2019

David Baxter's picture



In 2018, I participated in public-private partnership (PPP) initiatives across the globe: in Albania, Switzerland, Turkey, Saudi Arabia, the United Arab Emirates, Sri Lanka, and the United States. I also engaged with PPP thought leaders from the public and private sectors about trends they saw evolving that would impact the practice of PPPs in the next year or two.
 
These are trends from that feedback that I believe will shape the implementation of PPPs in 2019 and beyond.
 
A focus on "people-first" PPPs: There is growing consensus that PPPs need to become more about people. As a consequence, proponents of PPPs and governments are increasingly subscribing to strategies to incorporate the Sustainable Development Goals (SDGs) into their policy and planning documents. This people-first approach will increasingly underlie the conditions for financing PPP initiatives by multilateral development banks (MDBs) and development agencies. I think this will translate into an increased focus on social service PPPs for healthcare, housing, and education as countries seek to achieve their SDG objectives.
 
Growing interest in sustainable, resilient, and regenerative PPPs: In a 2019 world faced with the limited financial resources caused by a possible global recession, PPPs need to factor in sustainability and resilience to be considered bankable and viable. This renewed awareness is also driven by concerns about building projects in environments prone to increasingly acute risk because of extreme weather from climate change. Governments, investors, and insurers are more concerned about risk and demanding that projects take steps to mitigate it. It is also important that elements of regeneration be built into project recovery strategies so PPPs can recover quickly from weather events.
 
A surplus of maturing PPP projects: Many countries face the reality that projects initiated in the enthusiastic first wave of PPPs launched in the 1990s are maturing. Thirty years ago, few governments focused on the date when project contracts would expire and projects would be handed back to government owners for operations and maintenance. Many governments lack the resources to manage these projects and are concerned about being inundated by a wave of projects they really don’t want to manage, or are incapable of managing. This offers great opportunities for PPP investors.
 
PPP legal revisions and reforms focusing on better governance: Many countries are undergoing reforms or adopting legal frameworks to establish or improve enabling environments for PPPs. These reforms are encouraging as they will help mitigate legal constraints that have caused developers and investors to avoid PPPs in certain markets.
 
E-procurement and demands for competitive, transparent procurements: One of the biggest concerns of potential developers of and investors in PPPs in emerging markets has been rigged procurements and corruption. Governments are increasingly adopting measures to create an environment of transparent and competitive procurement. One approach has been to adopt e-procurement platforms—often sponsored by MDBs and development agencies—that ensure the playing field is leveled and that cash-strapped governments are not being milked by unscrupulous public and private sector players focused on profiteering instead of building feasible and sustainable infrastructure that benefit all. 
 
Growing concern about the ability to deliver successful PPPs: Against growing scrutiny by governments and investors about PPP success rates there is increased focus on improving the abilities of governments to deliver projects. This is resulting in more efforts to develop and improve the procurement and management capabilities of public sector officials. This will result in a greater mastery of PPPs by the public sector and will avoid the exploitation of PPP initiatives by malfeasant actors. In many countries, newly constituted PPP units are also being formed that will provide technical support to novice PPP project proponents.
 
Increasing need to consider national budget strategies, pipelines, and priorities: In times of financial stress, governments focus on developing budget strategies that identify economically feasible and affordable PPPs to match national development goals. This is leading to governments requiring line ministries and sub-national agencies to coordinate their project pipelines with national pipelines (often controlled by national treasuries and ministries of finance) to prioritize projects meaningfully. This is resulting in greater scrutiny to ensure governments are not committing themselves to debt that cannot be repaid.
 
Domestic banks’ understanding of PPPs is increasing in emerging economies: Many governments in emerging economies are making concerted efforts to “educate” domestic banks about the opportunities of investing in PPPs. This trend will increase domestic liquidity and help governments find alternative financing for smaller PPPs that are not attractive to international investment banks.
 
Increasing government awareness to market opportunities to attract FDI for PPPs: Governments are more aware they need to market themselves if they wish to compete successfully for foreign direct investment. The reality is that investors aren’t sentimental and it’s increasingly important that governments tell good stories about opportunities, meaningful (bankable) projects, and risk mitigation if PPP investors are to be lured. Many governments are now ensuring that comprehensive feasibility studies are mandated as a mechanism to create an attractive procurement environment and opportunity for well-intentioned developers and investors. 
 
Decreasing appetite for unsolicited PPPs: As governments become increasingly aware of private sector concerns about nepotism and corruption, there is a growing awareness of the dangers of unsolicited PPP proposals. Consequently, there are steps underway in many countries to better regulate unsolicited proposals to ensure that only bankable projects that are economically and commercially viable are considered. It’s important the private sector becomes aware of the new regulatory expectations concerning unsolicited proposals that require greater scrutiny and competitive bidding.
 
The emergence of new PPP institutions championing PPPs: Many new international institutions are championing PPPs. These include the Geneva-based UNECE PPP Center of Excellence’s affiliated regional centers of excellence that include the New Orleans Resilience and Sustainability Center and the Frankfurt Healthcare PPP Center. Other institutions to watch include the newly formed Afghan PPP Hub, and the World Association of PPP Practitioners.
 
I also see a trend in the growth of Islamic finance as more and more PPPs are being developed in Islamic countries. See more on this here.
 
With all the change happening in the world of PPPs I believe 2019 will be promising. PPPs under the guidance of best practitioners are constantly evolving to accommodate change. I believe this will continue in 2019.
 
Please share any other trends in PPPs you see forming below.
 
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.

 
 

Related Posts

PPP reflections for a new year

 
Regenerative PPPs (R+PPP): Designing PPPs that keep delivering

 
Ready to launch: The World Association of PPP Units & PPP Professionals

 
2018: Are we ready to commit to building resilient infrastructure?

 
Scaling the use of Islamic finance for infrastructure: MDBs can help

 
Unsolicited proposals in infrastructure: a balancing act between incentives vs. competition


David Baxter - 10 Candid Career Questions with Infrastructure & PPP professionals

Comments

Submitted by FEMI OMOINENE OBIOMAH on

Very true. PPPs in the year 2019 will only be boosted by level of sincerity shown by host governments and institutions. Gone are the days when PPPs are initiated to provide necessary amenities for the populace while host governments are squandering money frivolous activities

Submitted by M.Rabiul Alam on

We can step forward several projects here in Bangladesh. We need complete assurance about financial assistance by the world and Islamic bank. Please notify us than we will submit project proposal to concerned authorities.
Regards
M.Rabiul Alam
R&R Consulting Ltd.

Submitted by Zahid Hossain Khan on

Dear Colleagues,
Greetings from Grameen Development Society (GDS) in Bangladesh.

We have the honor to you that Grameen Development Society (GDS) is a non Government Voluntary human development Organization. This Organization has been conducting various socio-economic development activities such as Water Supply & sanitation, Environment & Climate Change, Education, Health, awareness, legal aid, and protection to the persecuted women and children are worth mentioning.

As such if we get enlistment enrollment from you we will be able to speed up and extend and development our effort.

Under the circumstances we pray and hope that you would be kind enough to enlist enrollment our organization as member and oblige thereby.

Thanks & Regards,
Mr.Zahid Hossain Khan
Executive Director
GDS - Grameen Development Society
"Khan Villa" West Kawnia, Jail Bagan
Barisal- 8200, BANGLADESH

Add new comment