April 1, 2010—Experts on public-private partnerships (PPP) gathered in Manila last week and agreed that more PPPs will be needed to meet demand for infrastructure finance of an estimated $300 billion a year in Asia, and $93 billion in sub-Saharan Africa.
"So much could be gained from tapping 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."
Experts Sharing Experiences
Mr. Teves made the remarks in his keynote address to Public-Private Partnership (PPP) Days 2010, a global meeting co-hosted in Manila by the Asian Development Bank (ADB) and the World Bank Institute (WBI). PPP Days brought together 250 public sector PPP practitioners from 50 countries 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.
The last 18 months have been challenging for PPP financing—the costs are higher, and projects need greater support and risk-bearing from governments. We’re here to talk about designing programs to bring in financing while also providing value-for-money.Clive Harris, PPP Practice Manager, WBI
"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."
The Asian Development Bank's Managing Director General, Rajat Nag, praised PPPs as timely solutions to pressing 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.
Bridging the Infrastructure Gap
Infrastructure gaps are an urgent development challenge. In Africa, for example, $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 percent of the continent’s GDP, or comparable to what 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 with access to safe water and 2.6 billion with 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 the Asian Development Bank, the 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 $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 realized 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 the Private Sector Operations Department of the Asian Development Bank and Chair of the PPP Task Group in ADB. "With this in mind, ADB endeavors to play a pro-active role in PPP advocacy along with other key donors and private sector stakeholders."
This fourth annual PPP Days was held in Asia for the first time, supported by the ADB Institute, the Multilateral Investment Fund, a member of the Inter-American Development Bank Group, the International Finance Corporation, the Development Academy of the Philippines and the Government of the Philippines through its Department of Finance.
To ensure an ongoing exchange of knowledge, the forum launched the Global PPP Network (www.PPPNetwork.info), an open online platform that invites the global community of PPP practitioners, policy makers and experts to exchange knowledge, discuss ideas, and connect with each other.
WBI, ADB, and the Multilateral Investment Fund are collaborating with the Public-Private Infrastructure Advisory Facility (PPIAF) to develop an innovative capacity building resource on PPP for policy makers. This initiative will bring together leading academic institutions and practitioners to create a body of PPP knowledge. This project will help bridge the gap between academic training and applied problem-solving, drawing on lessons of real-world PPP experience from around the world.
Contact Clive Harris for more information on PPP Days or the World Bank Institute’s PPP Practice
Visit the Global PPP Network to watch a video of WBI Vice President Sanjay Pradhan’s opening remarks, and join a global community of practice on PPPs
More about PPP Days 2010