Mobilizing PPPs to Finance Infrastructure Amid Crisis | World Bank Institute (WBI)

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September 7, 2009—For almost two decades, governments in both industrial and developing economies have used public-private partnerships to accelerate investment in infrastructure and improve service delivery. To design and execute such programs, governments have typically established Public-Private Partnership (PPP) units to acquire expertise on procurement, negotiations, and monitoring of infrastructure works and services. The quality of this expertise is a critical factor in determining whether or not developing-country governments can create and sustain effective public-private partnerships that share the risks of large investments and deliver gains to both sides.

Approach

To help countries build this knowledge base, WBI has been gathering experts for its annual knowledge exchange event, Public-Private Partnerships in Infrastructure (PPPI) Days. During the most recent PPPI Days, WBI sought to foster a deeper understanding on how PPP projects most affected by the financial crisis can continue to access long-term financing.

The facilitated discussions drew extensively on lessons from mature as well as emerging markets in attracting private financing and expertise to PPP projects, and explored the implications of current difficulties in credit and capital markets for the future of PPP. Participants also addressed new challenges in infrastructure funding through infrastructure bonds, infrastructure funds, and structured finance, as well as how these approaches might shape the future of PPP projects in emerging markets.

Results

The meeting, which was attended by some150 senior government officials and experts from private companies involved in public-private partnerships in infrastructure from 65, developed and developing countries. All of them were undertaking massive investments in infrastructure as part of stimulus packages to respond to the economic crisis.
 
The experts identified ways of restoring debt and equity market financing for roads, power generation and distribution, and other infrastructure amid the global financial crisis. Panel discussions explored how public and private sectors can share the financing, risks and benefits of infrastructure projects in sectors such as energy, transport, water, and sanitation, in which private sector companies often deliver services, as well as in education and health, where the public sector is more often predominant.

Regarding the Asia-Pacific region, Asian Development Bank Director Michael Barrow told the conference "We are already seeing major challenges ahead in closing deals, with indications that the future may be more difficult. None of this however, undercuts the strong interest in well-designed, bankable projects." 

Acknowledging these challenges in the global market, Arvind Mayaram, a delegate with the Government of India, nonetheless emphasized the continued importance of PPPI as an instrument for financing and service delivery. Mayaram, who played a key role in developing India’s policy and regulatory framework for PPPI, noted that India has about 300 existing PPPI projects of all sizes at central and state levels, covering the spectrum from airports to metro rail networks, along with 400 more projects in the pipeline. "PPP will remain important in India," he said, "We expect an additional $150 billion in private investment in PPP in the next five years. Of course, as a service delivery instrument, PPP remains important to capture efficiency gains from private sector maintenance and operation of assets."