Call for more extensive public-private partnership
PORT LOUIS: Experts on public-private partnerships (PPP) have agreed that more PPP will be needed to meet the demand for infrastructure finance estimated at $300 billion a year in Asia, and $93 billion in sub-Saharan Africa.
“So much could be gained from tapping the private sector participation in infrastructure development,” said Margarito Teves, finance secretary of the Philippines. “Public-private partnership schemes can combine the strengths of governments, which have the responsibility to ensure the provision of public goods, with the strengths of the private sector — in particular, its ability to move swiftly and deliver high-quality services on time. Such involvement can come in a number of forms, from the traditional turnkey type arrangements for construction to complicated Build-Operate-Transfer agreements.”
Teves made the remarks in his keynote address to Public-Private Partnership (PPP) Days, an annual meeting co-hosted in Manila by the Asian Development Bank (ADB) and the World Bank Institute. The event allows public sector practitioners from around the world to share experiences on new financing models for infrastructure-such as sustainable transport, water supply, health and education-that have emerged during the global economic crisis.
“Governments face higher borrowing costs, lower levels of credit, and reduced international capital flows as a result of the crisis,” said Sanjay Pradhan, vice-president of the World Bank Institute. “This makes it all the more urgent to find innovative ways to combine public and private financing to meet the mounting demand for infrastructure.”
ADB’s managing director General Rajat M Nag praised PPPs for coming up with timely solutions to budget gaps. “Through collaborative efforts of the multilateral development banks, the PPP approach has emerged as an effective tool for governments to enhance the private investments in infrastructure and social sectors needed for economic development and poverty alleviation,” said Nag.
Infrastructure gaps are an urgent development challenge. In Africa, $93 billion in infrastructure investment is needed annually over the next decade, about half of which is needed in the power sector. The new estimate amounts to roughly 15 per cent of the continent’s GDP, or comparable to what the people’s Republic of China has invested in infrastructure over the last decade.
In Asia the figure is estimated to be $300 billion per year and the magnitude of the problem is even greater. These investment needs are based on the amount required to provide over a billion people access to safe water and 2.6 billion people access to basic sanitation.
In addition, curbing rising levels of greenhouse gases and helping countries adapt to anticipated impacts of climate change will also require substantial investments in infrastructure. Last week in Manila, the Clean Technology Fund (CTF), implemented jointly by ADB, World Bank and other multilateral development institutions, endorsed plans for four more countries, including Indonesia, to help provide such investments. There are now 13 CTF investment plans in place around the world and some $4.3 billion of CTF co-financing allocated to projects ranging from solar power development to the greening
of public transport systems. This is expected to leverage
an estimated $36 billion in the coming years from other sources, including the private sector through PPPs, bringing the total to be mobilized to US$40 billion.
To meet these needs, financing must come from both the public and private sectors, domestic and international. This means more PPPs on a scale not yet realised or even contemplated.
“The last 18 months have been challenging for PPP financing,” said Clive Harris, Manager of the World Bank Institute’s Public-Private Partnership Practice Group. “The costs of financing are higher, and projects need greater support and risk-bearing from governments. PPP Days discussed how governments can best design programs to bring in financing while also providing value-for-money. The conference also focused on the frontier areas for PPP investment, such as health, education, reducing the carbon footprint of cities, and sustainable urban transport.”
“PPP assistance is most effective when it is part of a long-term engagement effort and integrated with broader sector reforms and institutional capacity development,” said Jo Yamagata, deputy director General of Private Sector Operations Department of the ADB and Chair of the PPP Task Group in ADB. “With this in mind, ADB endeavours to play a proactive role in PPP advocacy along with other donors and private sector stakeholders.”