Kiichiro Fukasaku

1
Public Private Partnership in Infrastructure
Development

• Kiichiro Fukasaku
• Development Centre
• 
  

Japan-OECD-Vietnam Public Private Partnership
Forum Hanoi ? 3rd March 2008
2
(No Transcript)
3
Introduction

• Financing fails to meet infrastructure needs
• people lack access to infrastructure worldwide
• 1 billion people without access to roads
• 1.2 billion without safe drinking water,
• 2.3 billion without reliable energy
• 2.4 billion without sanitation
• 4 billion without modern communication

(Source Promoting Pro-Poor Growth, OECD 2007)
4
Outlook Annual World Infrastructure
Expenditure Estimated averages in US billion and

(Source Infrastructure to 2030, OECD 2007)
5
Challenges

• Globalisation and impact on infrastructure
• Urbanisation
• Growing interdependence between infrastructure
  systems
• Meeting future financial needs
• Infrastructure vital for growth and vice versa

6
(No Transcript)
7
Infrastructure

• Efficiency vs. equity
• High up-front costs, late returns on investment
• High multi-faceted risks and uncertainty
• Political dimension
• Public good character
• Limited access to financial markets
• How to raise incentives for private sector
  involvement?

8
Investment Commitments 1990 2006 PPP in
Infrastructure in Developing Countries
(Source World Bank PPI Project Database)
9
Investment Commitments by Sector
2006 US billions
Total Telecoms Transport Energy Water
(Source World Bank PPI Project Database)
10
Investment Commitments by Region
2006 US billions
(Source World Bank PPI Project Database)
11
(No Transcript)
12
Global Competitiveness Report World Economic
Forum, 2007-2008
(based on World Economic Forum, The Global
Competitiveness Report 2007-2008)
13
Asia the Private Sector Re-engaging in
Infrastructure Development
2006 US billions
(Source World Bank PPI Project Database)
14

• Private sector investment in infrastructure
• Estimated infrastructure needs

(Source ADBs Infrastructure Operations, ADB
2007)
15
Asia Regional Imbalance
2006 US billions
(Source World Bank PPI Project Database)
16
Asia Regional Imbalance
(Based on Nataraj, Infrastructure Challenges in
South Asia, ADB Institute 2007)
17
Vietnam
Status of infrastructure development - ranking
among 131 countries
1st (best) 131th
(based on World Economic Forum, The Global
Competitiveness Report 2007-2008)
18
Vietnam

• Vietnam serves as an excellent example of how
  infrastructure can foster a sharing of the
  benefits of growth Economic development has
  been remarkably pro-poor, lifting around 20
  million people out of poverty.
• Connecting East Asia, 2005

19
(No Transcript)
20
Challenges Ahead

• Balance public and private engagement
• Double imperative profitability ? social ends
• Dichotomy of public and private interests
• Limited institutional capacity
• Specificity of infrastructure market
• Commercial risks in developing countries
• Political dimension

21
Connecting East AsiaA New Framework for
Infrastructure ADB, JBIC, World Bank 2005

• Rapid growth yet marked by 1997 crisis
• Urbanisation vs. rural development
• Regional infrastructure linkages
• Environmental protection
• Policy, agency stakeholder coordination
• Funding challenge

22
Connecting East Asia
New framework Inclusive Development
Infrastructure helps connect growth to the
sharing of benefits
(adapted from ADB/JBIC/World Bank, Connecting
East Asia, 2005)
23
India

• Meeting infrastructure investment needs
• Government investment in infrastructure

(Sources OECD Economic Surveys India, 2007 IMF
World Economic Outlook, 2007 DEA/MoF/ADB,
Facilitating Public-Private Partnership, 2006
Rastogi, India Infrastructure Report, 2006)
24
India

• Viability Gap Fundingfunds up to 20 of cost
  for state projects implemented by private sector
  developer (competitive bidding)
• India Infrastructure Finance Company Ltd.
• wholly government-owned company to provide
  long-term finance to infrastructure projects
  priority for PPP
• strong government commitment
• to PPP in infrastructure

(Sources OECD Economic Surveys India, 2007
DEA/MoF/ADB, Facilitating Public-Private
Partnership, 2006 Rastogi, India Infrastructure
Report, 2006)
25
India Lessons learnt

• Government commitment
• Transparency and communication
• Innovative financing schemes
• Capacity building
• Proper risk allocation (efficiency, capacity)
• Consideration of alternatives to PPP
• Continuous private sector consultation

26
(No Transcript)
27
OECD Contributions

• Monitoring OECD country policies in
  infrastructure development
• Infrastructure to 2030
• Economic Surveys
• International Investment Perspectives
• Support to public policy-making
• OECD Principles for Private Sector Participation
  in Infrastructure
• Support to donors
• Promoting Pro-Poor Growth Four Guiding
  Principles for Meeting Infrastructure Challenges

28
Infrastructure to 2030

• Average annual infrastructure investment
  requirements to 2030 3.5 of World GDP
• Government budgets tied to social spending in the
  future
• New business models and innovative financial
  solutions needed
• ? Analysis by sector

29
Policy Guidance for Governments

• OECD Principles
• for Private Sector Participation in
  Infrastructure
• practical implementation tool of 24 principles
• aimed at governments and private sector actors
• illustrates how to
• Design and manage PPP projects in infrastructure
• Improve the institutional environment
• Encourage responsible business conduct

30
OECD Policy Guidance for Donors

• Four Guiding Principles
• for Meeting Infrastructure Challenges
• Use partner country-led framework for coordinated
  donor support
• Enhance infrastructures impact on poor people
• Improved management of infrastructure investment
  for sustainable outcomes
• Increased and efficient infrastructure financing

(Source Promoting Pro-Poor Growth Policy
Guidance for Donors, OECD 2007)
31
Thank you!

• Kiichiro Fukasaku
• Development Centre
•