Helping governments act upon the advice they seek
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Kazakhstan. Photo: Jyoti Bisbey
I was in Astana on mission to launch the new technical assistance program for Kazakhstan’s PPP policy reform, which addresses bottlenecks that constrain project structuring. This reform is especially important if the country’s Almaty Ring Road PPP is to be effective. Almaty Ring Road has been a thought-provoking transaction because previous attempts to solidify the partnership have not panned out, and grasping the history is important to resolving this successfully. Moazzam Mekam, IFC’s Regional Manager for Central Asia, and I spent many hours brainstorming on scenarios that would allow us to bring all of the stakeholders into agreement. Most of the time, it felt like we were trying to pull a rabbit out of a hat.
The Almaty Ring Road is Kazakhstan’s only PPP in preparation right now, and it’s in the spotlight during its prequalification stage. The advisory services are provided by IFC; three years of project preparation have been devoted to ensuring that this is the right project to take to market as a PPP. As the World Bank Group continues to support Kazakhstan on bringing private sector participation into the delivery of public infrastructure services, the reality is that since the 2006 Concession Law, not one PPP project has transpired. Before the Concession Law, there were three PPP projects, but all of them have had issues.
As I resumed one of my sunrise runs in this very flat, picturesque, futuristic city, I recalled a recent conversation with Moazzam. He made the point that even when there is a high level of political support for PPPs in the country, institutional and regulatory frameworks are sometimes not ready for PPPs. Capacity and willingness to undertake PPPs at the line ministry/agency level is limited. In instances like this, or when conditions exist in a similar context, we must ask ourselves how to respond, and how to move forward.
Photo: mariusz kluzniak/flickr
Of course there is neither a panacea, nor a perfect formula to get it right. Every government, sub-national or national, has its own forces at play. Our job is to understand those forces well enough to evaluate the appropriateness of a PPP, and then, if it’s decided that the environment is right for this sort of partnership, to structure an effective PPP.
I’ve learned over time that each PPP is different, and solutions must be tailored to very specific conditions. The waste sector in Brazil can’t use the same PPP that worked for the waste sector in Colombia; a light rail PPP that transformed one city in India would fall apart in another Indian city.
As a starting point, we believe that it make a difference if all IFIs join hands together on the main actions needed to reform Kazakhstan’s PPP agenda. That’s why I am working with Moazzam’s team to provide technical assistance on screening and preparation of projects.
Our emphasis is on convening all the stakeholders in the PPP space – such as the European Bank for Reconstruction and Development, the Asian Development Bank, and the United Nations Economic Commission for Europe – making it possible to reach a common understanding. Then we will be equipped to work with the government to present a unified voice on what needs to be done. Our plan is to identify two to three key ‘deal breakers’ which absolutely have to be addressed in order to move the projects forward. This will send a strong signal to the market that Kazakhstan is open for business.
In Kazakhstan – and around the globe – our challenge is not to do one PPP transaction every four or five years, but to do a portfolio of properly vetted PPP transactions every year. This requires a greater level of understanding and commitment around PPPs than currently exists in many of the countries we serve. As we join forces internally to reach this goal, we envision a different way of helping governments succeed in delivering infrastructure services in the long term, with more rapid progress between the time that advice is offered and when a project comes to fruition.
How can we better incentivize governments to act upon the advice they seek? This is, of course, a challenge we all share. We’re open to hearing your suggestions on how we can collaborate even more effectively, ultimately helping to shift policies that will affect positive change on the ground.
Special thanks to Moazzam Mekan for his contributions to this piece
I strongly share your thought on solutions to be sought to very specific condition. A case in point is the Niger Delta region of Nigeria. Here a contract for road had to be reviewed often because of terrain and weather condition.
This article is incisive and educative.
I believe the best way to ensure that government adhere to the advise they are being given is to engage the media in the process right from the inception. This will ensure more transparency and will make known to the public the faulty party in the case of non implementation or failure. And with this, everyone will want to protect his integrity by implementing ideas that would foster development.
Thank you all for your detailed points. You’ve given me a lot to think about, especially related to the issues of transparency and stakeholder engagement. I agree wholeheartedly that it’s important to include endusers in the PPP decision-making process. These users benefit from seeing the value added of the project, and experiencing the process of sifting through all of the alternatives. Thank you again for taking the time to read and reflect on this post.
Inspiring piece, thanks Jyoti!
Thank you for this thoughtful article. First, I think it is very important that you ask these questions as an affiliate of the World Bank Group. As a business representative in the PPP world, I feel that many international development institutions are trying to impose a "one model fits all approach" to all countries, but this is impossible. PPPs are not only models and partnerships, these are joint efforts between the government sector, the private sector and the end beneficiaries (people!). Second, I believe that very often a creative approach is needed. I believe that any PPP should go through a process of public consultations starting from a feasibility stage when people can also see where their involvement is expected (e.g. if it is a parking, people will be paying for it; if it is a highway, people will also pay tolls). Third, more consultations need to be organized with local businesses, start-ups and small and medium enterprises because they sometimes have the most creative ideas and solutions, including PPP related initiatives. Finally, I believe that PPPs in emerging markets became a so-called joint initiative of IFC/WB/UN and their capacity building activities. While I believe that this is a very good start, I also believe that involvement of the private business and local consultants should not be left for last stages of processes. These professionals have to be involved from the beginning. Otherwise, there is a risk of apathy and indifference, and then nobody will benefit.
What is clear is that the full potential of the PPP benefits is only obtained through a programmatic approach. And a programmatic approach can only succeed with a proper PPP framework. There may be political willingness by the government in turn, but if there is not a broad consensus and a "national commitment" a PPP program will not happen or the risk of discontinuity is huge.
The most clear sign of political commitment is the development of a framework built on the basis of political and public consensus or acceptance(laws and policies and a program).The Framework may be more or less sophisticated, and likely in immature PPP markets better simple than nothing.
With a programatic approach I don't mean that is necessary a full / detailed list of project candidates, but some program that set the basis to work during a full legislature and beyond.
Yes, they need capacity building and legal+policy advice to build up a PPP framework (or adapt the current framework for a 1st generation of PPPs in the country), but as you suggest, this has to be done with a clear idea of identifying and building a preliminar PPP program immediately, including a first project to be structured and delivered.
Another strong idea of your post that I like is the need for more coordination and joint efforts by IFIs. Here comes the idea of homogenization (rather than standarization). There is a need for building up a common ground of main concepts and messages about managing PPPs programs and projects, and in this point the Global PPP Certification project under development may play a big role.
First of all you touched the important issue - if we have political well but the institutions, regulations and capacity might be the next challenge. I also agree with you that different project/location requires different modality. I think, underdeveloped countries may need a pronged strategy to cope the challenges. However, I see a vast opportunity for PPP in underdeveloped countries as they are catching up with infrastructure gap but much of them are done through traditional procurement or simple transfer and lack real efficiency gain.
Dear Jyoti,
What do you think about the PPP-scheme of LRT-project in Astana, which is going to be implemented by China Railway International Group Limited и Beijing State-Owned Assets Management Co., Ltd and parking projects, which are going to be funded by the EBRD?
Best Regards,
Daniyar Serikov