New Dimensions of the PublicPrivate Partnership: Private Equity Options in Developing Countries - PowerPoint PPT Presentation

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New Dimensions of the PublicPrivate Partnership: Private Equity Options in Developing Countries

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Skadden, Arps, Slate, Meagher & Flom LLP. Istanbul. November 8, 2006. Investigating New Dimensions ... High-profile financial investor/ major corporation ... – PowerPoint PPT presentation

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Title: New Dimensions of the PublicPrivate Partnership: Private Equity Options in Developing Countries


1
New Dimensions of thePublic-Private
PartnershipPrivate Equity Options in Developing
Countries
  • Alan G. Straus
  • Skadden, Arps, Slate, Meagher Flom LLP
  • Istanbul
  • November 8, 2006

2
Investigating New Dimensions
  • Meaning of infrastructure
  • Meaning of private equity
  • Reasonable targets of private investment in a
    developing economy
  • How the public sector can assist
  • Investing in a bottoms-up manner instead of
    from the top down

3
Traditional Private Equity
  • High-profile financial investor/ major
    corporation
  • Taking target operations private, no public
    reporting
  • Stock market exit at high multiple

4
Infrastructure Investment in Developing Countries
Urgently Needed
  • Infrastructure investment can directly assist the
    poor by
  • Enhancing economic activity
  • Removing bottlenecks in a local economy
  • Generating distributional effects by increasing
    the access of the poor to product markets

5
Infrastructure
  • OECD defines as power, telecoms, roads, and water
    supply
  • More really constitutes infrastructure that is
    suitable for PPP investment
  • Political and social constraints

6
Expanded Infrastructure
  • Small and medium sized businesses where a
    relatively small, targeted private equity
    investment can have a general multiplier effect
  • More targets for investment
  • Maintains local ownership of resources in the
    host country

7
SME-targeted Private Equity Investment
  • Stresses the importance of small and medium sized
    enterprises (SMEs) to produce economic growth and
    human security
  • Portfolio investment
  • Jumpstart a business that needs development
    capital but for various reasons cant access more
    traditional capital
  • Stimulate growth in the SME sector that in itself
    will be able to have a greater opportunity to
    expand and build infrastructure, as widely
    defined

8
SME-Targeted Model
  • Not a controlling investment
  • High risk
  • Ties to Management Training
  • Usable with Islamic Financing Techniques
  • Lower Leverage

9
Afghanistan Renewal Fund
  • Mix of European and Afghan management
  • 20 million committed
  • High-net worth individuals
  • Development finance institutions and donors
  • Pipeline over 200 potential deals
  • Entrepreneurs seeking total investment of 380
    million
  • Deal-pipeline growing at 10-20 deals/month

10
Effective Public Sector Participation
  • May come in various forms
  • Public sector participates as investor
  • Publicly funded development finance institutions
    can partner with private sector in investing
  • Public Sector as asset owner
  • Private sector participates with low capital and
    investment risk through service or management
    contracts

11
Effective Public Sector Participation
  • Public sector participation in the form of
    financial project support, such as guarantees and
    insurance, can mitigate investment risk
  • Public sector participation, through tax or
    concession incentives, might encourage packaging
    of investment in infrastructure that has sectoral
    or regional significance with business licenses
    for tradable opportunities
  • Public and private interests to create a
    fundamental utility (for example, water, power
    and sewage treatment and development rights)
    might support
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