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African Strategic Infrastructure Initiative

Transnational Infrastructure Programme Management

(TIPM)

September/October 2014

WEF - Concept paper on TIPM_Master Deck_vf.pptx 1

Agenda

Introduction

Drawing some distinctions

Transnational infrastructure globally and in Africa

Challenges in TIPM

A best practice framework


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Key activities offered at the Forum

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Initiatives

Meetings1

3

2

Key values provided by the Forum

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About Sharing


Advancing Infrastructure

Finance

Global Infrastructure

Knowledge Series

Note: AM = Annual Meeting (Davos) 1. Programme for Infrastructure Development in Africa 2. Early stage project financing facility

Infrastructure Initiative engages globally and regionally since 2011

Infrastructure planning & project prioritization

Preparation of Public-Private Partnerships

Operations & Maintenance of existing assets

2011 2012 2013

Session on infrastructure finance with Gordon Brown & at AM

Infrastructure finance policy blueprint & risk mitigation instruments

Concept note on creating sustainable ESPF2

Knowledge & Collaboration

Platform

Input to Cannes recommendations

Consultation on St. Petersburg recommendations

Coordination of Infrastructure Network

Regional Acceleration

AfricaProject prepa-ration funding & transnational infrastructure programme mgt.

Africa:Prioritization of PIDA1 Priority Action Plan projects

AfricaEarly Stage Project Preparation Finance Model

Define Replicable Project Acceleration process

Latin AmericaNew engagement focus on Colombia, Mexico, Brazil

Plan for 2014/15

Infrastructure risk mitigation (focus on political & regulatory risk)

Advance infrastructure financing, coordinating with the B20/G20, including developing regional financing frameworks with specific countries (India, Colombia, and Poland), high-level meetings with the MDB community, and a High Level Summit at the Annual Meeting 2015

Focus today

1

2

3

4

Proposal on developing a global Knowledge & Collaboration platform submitted as part of B20 Australia proposal, and for further discussion within the GAC Infrastructure


Why transnational infrastructure is gaining importance globally and in Africa?

—Political leaders around the world increasingly share the common vision of regional integration

—Cross-national infrastructure in transport, energy, ICT provides the physical backbone for the cross-border exchange of people, goods and services – but also foster cordial bilateral relations

—Initiatives for the establishment of transnational infrastructure in place in all regions (e.g., Trans-European Networks in Europe, Greater Mekong Subregion Programme, PIDA in Africa)

—Costs (particularly externalities) and benefits of cross-border infrastructure projects are often asymmetrically distributed – key challenge to establish regional business case and to apportion costs and benefits


Agenda

Introduction



Challenges in TIPM



Project

A programme is the joint management of a group of related projects to obtain specific benefits

Programme vs project vs portfolio Programme management

Integrate, monitor and control the interdependencies among the components

— Coordinating the supply of components, work or phases

— Resolving resource constraints and/or conflicts that affect multiple projects within the programme

— Mitigating risk activities that run across components, such as contingency planning

— Aligning organizational/strategic direction that effects project and programme goals and objectives

— Resolving issues and scope/costs/schedule/quality changes

— Tailoring programme management processes and interfaces

— Enables appropriate planning, scheduling, executing, monitoring and controlling across projects within a programme to achieve programme benefits

Portfolio

ProgrammeProject

– A portfolio is a collection of projects or programs grouped together to facilitate effective management of efforts to meet strategic objectives

– These projects or programs are not necessarily interdependent or directly related, but may share a common resource pool or compete for funding

– A project is a temporary endeavor undertaken to create a unique product, service or result

– Has a specific start and end date with a clearly defined deliverable produced

– A programme is a group of related projects managed together to obtain specific benefits and controls that would likely not occur if these projects were managed individually

– Projects within a programme are related through a common outcome or a collective capability that is delivered

Source: Project Management Institute (2008)

ProjectProject Project

Programme

However, definitions not consistently applied in practice

Sub-Programme


A transnational infrastructure programme can often be broken down into national projects

Tanzania Rwanda

Portfolio e.g. PIDA

Programmee.g. Central Corridor

Sub-Programmee.g. Rail network upgrade and extension

Sub-Programmee.g. Road network upgrade and extension

Sub-Programmee.g. port upgrade and expansion

Projecte.g. road upgrade Dar es

Salaam – Dodoma

Projecte.g. road upgrade Dodoma –

Rwanda Border

Projecte.g. Construction of one-stop

border post on Tanzania/Rwanda border

Projecte.g. road upgrade Tanzania

Border – Kigali

Programmee.g. Central Corridor

Sub-Programmee.g. road network upgrade and extension

Sub-Programmee.g. rail network upgrade and extension

No port projects in Rwanda

Projecte.g. construction of one-stop

border post on Tanzania/Rwanda border

Sub-Projecte.g. work on

Tanzania side

Sub-Projecte.g. work on Rwanda side

Highest degree of coordination required to achieve project goals


Three key types of transnational infrastructure programmes can be differentiated

– Main physical facility located within one country

– Coordination of policies and strategies to align investment decisions

1. Transnational planning/policy coordination

2. Transnational infrastructure network

3. Cross-border physical infrastructure

PID

A e

xam

ple

– Physical infrastructure network spans national borders

– Usable at national level, but transnational connection greatly increases its value

– Physical infrastructure asset located in two countries

– Either physical infrastructure on the border or main transmission line into other countries

– Nacala port expansion

– Walvis Bay new container terminal

– Regional hub port and rail master plan

– One-stop border posts

– Batoka hydroelectric plant

– Kenya-Uganda pipeline

– Lesotho Highlands Water Project –water and energy components

– Abidjan-Lagos coastal corridor

– North-South multimodal corridor

Low/medium transnational complexity High transnational complexity

Descri

pti

on

Bu

sin

ess c

ase – Business case positive,

regardless of any interaction with other countries

– Business case usually positive, regardless of interaction

– Interconnection increases internal rate of return

– Realization in a single country not possible, or business case depends strongly on foreign consumption


Agenda

Introduction



Challenges in TIPM



Middle East (12)

Africa (54)

North America (2)

Africa with great necessity to build infrastructure across borders due to high number of landlocked countries and large share of land borders

Number of landlocked countries

Region overview Key indicators

002571316

EUR1Africa NA6ME5LAC4SEAP3CA2

Latin America and the Caribbean (34)

Europe (43)

Central Asia (10)

Southeast Asia and the Pacific (38)

EUR

144

NA

9,906

CA

2,207

SEAP

1,146

LAC

851

Africa

614

ME

498

Average number of border countries8

NA

1.5

LAC

3.1

SEAP

3.6

EUR

4.0

ME

4.0

Africa

4.5

CA

6.0

Share of land border at total border7

SEAP

49%

CA

56%

LAC

60%

ME

66%

Africa

84%

9%38%

NAEUR

1. Europe 2. Central Asia 3. Southeast Asia and Pacific 4.Latin America and Caribbean 5. Middle East 6. North America 7. On region-level – total length of all land borders/all land borders + coast (excl. islands) 8. Within region (excl. islands) 9. Within region in '000 sq.km. (excl. islands) Note: 193 UN member countries considered in analysis

Notes: — Number of countries within region in brackets— Landlocked countries in dark shading, coastal countries in light shading

Average country size9


Low level of regional trade is both cause and consequence of poor transnational infrastructure

Intra-regional trade in percent of total trade ('08-'12)1 Other reasons

1. Total trade comprises intra-regional and international tradeSource: Calculated from UN Comtrade (United Nations 2014)

25.1

5.8

North America

Africa Middle East

13.3

55.3

EuropeSoutheast Asia and

the Pacific

53.4

10.6

19.5

Central Asia

Latin America and the

Carribean

– Low traffic volumes render projects financially unviable

– Small size of markets

– Low production capacities and lack of complimentarily and diversity

– Weak human and institutional capacities

– Political instability

– Insufficient trade facilitation

– Insufficient soft infrastructure (import quotas, anti-dumping regulations, countervailing duties, border tax adjustments; tax barriers)

– Red tape in cross-border trade


The Programme for Infrastructure Development in Africa defines programmes of regional importance

54

33

3

147 6 3 5

TransmissionPipelineGeneration

AquifierDam

Broadband

36

RoadRail Multimodal

Cross-border physical infrastructure

6

Transnational infrastructure network

11

Transnational planning/ policy coordination

24

By sub-sector

PIDA PAP covers 51 infrastructure programmes ... ... each involving several countries

By type of transnationality

Air

Energy Water ICT

Average # of countries involved

— Programme for Infrastructure Development in Africa (PIDA) was formulated by the African Union Commission (AUC), the New Partnership for Africa's Development (NEPAD) Planning and Coordinating Agency and the African Development Bank (AfDB)

— Four key sectors: Energy, Transportation, Water, ICT

— PIDA aims at:— Increasing energy access and reducing power

generation costs— Reducing transport costs and boosting intra-

African trade— Ensuring water access and food security— Increasing global connectivity

— Priority Action Plan (PAP): PIDA subset of 51 Infrastructure programs to be implemented by 2020

— PAP representing more than US$ 60 billion of investment

— Programmes are selected due to their regional importance and involve directly or indirectly more than one country

Average # of countries involved

All programmes are continent-wide

Driven by transnational production/consumption split1

1. These are programmes, where the production (e.g., electricity) is in one country and the consumption is in another. Classical cross-border physical infrastructure programmes regularly involve only two or three countries; Source: PIDA

Only transnational planning/policy

coordination programmes

Transport


Southeast Asia and PacificCentral AsiaEurope

All regions have some kind of programmes for the development of transnational projects...

Regional initiative

— Trade and transport facilitation in the Southeast Europe Program (TTFSE)

— Target sectors: Transport

— Includes eight projects in eight countries (35 border-crossing points) with an investment need of US$ 120m

Regional initiative

— Greater Mekong Subregion (GMS) Programme

— Target sectors: Energy, transport, communications, water supply and non-infrastructure sectors (education, industry and trade, health and nutrition)

— Project portfolio consists of 58 projects with a budget of US$ 26.5bn

Source: Black Sea JOP; ENPI; TCDD, NTPC, CAREC, TASIM, Asian Development Bank, Press search

Exemplary regional projects

— Nam Theun 2 Hydropower ProjectConstruction of hydro-electric power plant on Nam Theun river; US$ 1.45bn (completed in 2010)

— Thai–Lao Friendship BridgeConstruction of bridgecrossing the Mekong river; US$ 30m (completed in 1994)


— Channel Tunnel50km underwater tunnel;US$ 20bn (opened in 1994)

— Highspeed railway Bursa-Bulgaria(under construction)

— Øresund BridgeBridge-tunnel combination to connect Denmark and Sweden; US$ 6bn (opened in 2000)

Regional initiative

— Central Asian Regional Economic Cooperation (CAREC)

— Objective: Financing of infrastructure projects


— North South Transnational CorridorCentral Asian Rail Link of 677km; US$1.4bn(completed in 2012)

— Trans-Eurasian Information Super HighwayTransnational fiber-optic line covering Western Europe and Eastern Asia; US$100m (in preparation)

Backup


North AmericaMiddle EastLatin America and

the Caribbean

... and have already implemented cross-border infrastructure projects

Regional initiative

— Initiative for the Integration of Regional Infrastructure in South America (IIRSA)

— Target sectors: Transport, energy, telecommunications

— Project portfolio consists of 583 projects with an investment need of US$ 159bn in 12 countries in Southern Latin America

— 43% are transnational projects which link two countries

Regional initiative

— Canada-United States Border Infrastructure Investment Plan (BIIP)

— Target sectors: Transport

— Partners: US Homeland Security, US Department of Transport, Transport Canada

— Interagency and binational planning mechanism to establish a mutual understanding of recent, ongoing and potential border infrastructure investments


— Continental Rail Gateway Connecting of Detroit and Windsor; US$ 400m (operational in mid 2014)

— Juan de Fuca Power Cable Energy transmission cable Victoria to Port Angeles; US$ 665m (operational in 2015)


— Itaipu Dam Construction of hydro-electric power plant; US$ 16bn (completed in 1983)

— Georgetown–Albina roadRoad upgrade; US$ 350m(under contruction)

— Communications system Fiber cable to facilitate navigation on Paraguay river; US$ 4m (in preparation)

Regional initiative

— Middle East Economic Digest (MEED)

— Target sectors: Construction, Economy, Finance, Industry, Markets, Oil & Gas, Power, Telecommunications, Transport, Water

— Middle East and Northern Africa

— More than 7,000 projects (not only infrastructure) with an investment need of US$ 5.6trillion


— Gulf railway network 2,117km of rail connectingall six Gulf states; US$ 31bn (operational in 2018)

— King-Fahd Causeway Combination of dam and bridge; US$1.2bn(operational in 1986)

Source: IIRSA, JDFCP, BIIP, MEED, Press Search

Backup


Agenda

Introduction



Challenges in TIPM



Focus of this concept paper are challenges that arise from the transnational nature of projects

General challengesin the management of large infrastructure projects

— Minimise Capex requirements— Design project to value— Apply rigorous risk management— Achieve excellence in procurement— Optimize contracting strategy— Secure scarce resources— Ensure quality— Deliver project on time and at cost

Additional challengeswhich arise from the transnational nature of an infrastructure project

++

Focus of this document

Source: BCG (2012)


Transnational nature of a programmes leads to specific and aggravated challenges

Financial Technical Regulatory People Governance

• Reach and implement agreement on sharing risks, costs and benefits

• Optimize financing structure across countries with different economic capacities

• Structure financing under different currencies

• Align different technical standards

• Align different operating requirements

• Provide and enforce legal agreements

• Harmonize different procedures

• Build relationships based on trust, and overcome historical legacy of political differences

• Overcome language barriers

• Align different national agendas, and ensure ownership of programme in countries involved

• Coordinate responsibilities within and between the participating countries

• Overcome national interests in staffing

• Structure supranational business unit

• Manage greater demand and cost risks

• Manage the technical complexity and construction risks

• Manage the risk of regulatory changes in all participating countries

• Coordinate a large number and variety of stakeholders with diverse interests

• Manage a heterogeneous team

• Manage the risk of political changes in all participating countries

• Deal with inertia and lengthy decision-making processes

Challenges that are aggravated by the transnational nature of a programme

Challenges that arise from the transnational nature of a programme


Challenges are even more compound in the African context

Financial Technical Regulatory People Governance

• Countries differ greatly in terms of funding capacities and credit rating

• Infrastructure projects in Africa regularly involve one or several donors and development banks

• There are 40 different national currencies in Africa, most of them being very volatile

• National public energy and transport companies often with weak balance sheets

• Different technical standards due to the colonial history (e.g., three different rail gauges in use)

• Weak supranational organizations to drive cross-national standardization

• African countries with weak institutions and limited rule of law

• Plethora of national and local languages being used in Africa

• Long history of interstate conflicts and political unrest

• Large number of landlocked countries and high average number of border countries requires coordination with many other countries

• Lack of capabilities in the public sector to manage large programmes


Majority of African countries without sovereign debt rating and with immature public institutions

1. At least from one rating agency (Standard & Poors/ Fitch: BBB+ or higher; Moodys: Baa3 or higher) 2. Standard & Poors/ Fitch: BB+ to B-; Moodys: Ba1 to B3 3. Standard & Poors/ Fitch: CCC or lower; Moodys: Caa1 or lower Source: World Economic Forum (2014); Trading Economics (2014)

Backup

Sovereign debt rating Maturity of public institutions

High maturity (4.5 – 7.0)

No data available

Medium maturity (3.5 – 4.5)

Low maturity (1.0 – 3.5)

Investment grade rating1

No credit ranking available

Lower B rating2

South Africa

Botswana

Tunisia

Mauritius


Agenda

Introduction



Challenges in TIPM



A best practice framework for the delivery of transnational infrastructure programmes

Source: Adapted from WEF (2013)

Aligneddecisions on

deliverymodel;

harmonized concession

scheme

Alignment of construction

process & O&M requirements

Integratedinfrastructure

plans & regional CBA

Competitive, transparenttendering & optimal financing structure

Balanced cost, benefit & risk allocation across

countries; harmonized regulations

Bankablefeasibility study for

transnational programmes

Conducive enabling environment

Regulatory system for transnational programmes

Capacities & capabilities for handling

transnational programmes

Trustful transnational relationships

Preparation phase

Origination phaseImplementation phase


Detailed best practices for each key element of framework (I/II)

– Establish a strong unit for programme implementation and operation with special rights

– Arrange a fair representation of all participating countries in all governance bodies

– Distribute corporate activities fairly across all participating countries

– Establish a regional sector planning framework with appropriate institutional arrangements

– Establish a regional business case that includes all pecuniary costs and externalities

– Leverage regional development banks as a way of involving isolated regional areas

Institutionalized cross-national collaboration

– Build strong relationships with all key stakeholders

– Agree on a single language

– Ensure high-level political commitment from each government, and highlight the value of communication

– Make early use of private-sector expertise

Integrated infrastructure plans & regional CBA Aligned delivery model & harmonized concession

– Award a single concession

– Develop a broad and flexible off-take agreement

– Remove revenues from national government control

Bankable feasibility study for transnational programmes Balanced risk allocation & harmonized regulation

– Find and commission a strong, impartial and respected arbiter to apportion costs and benefits

– Harmonize and radically simplify technical standards, regulations and specifications, taking advantage of international models

– Regulate the programme through special treaties or a regional agency


Detailed best practices for each key element of framework (II/II)

Conducive enabling environment

– Establish a single integrated framework for planning and designing transnational programmes

– Set up a procurement committee that includes neutral experts

– Establish regional financing instruments

– Leverage risk-mitigating guarantees

– Reduce exchange rate risks by reflecting revenue currencies proportionally in financing structure

– Make use of purchasing-power-parity protection to insure against exchange rate risks

Competitive tendering & optimal financing structure Aligned construction, operation & maintenance

– Set up an expert committee to supervise construction

– In the off-take agreement, specify management protocols for aligning demand and maintenance requirements

– Build up dedicated capacities and capabilities

– Invest in building relationships based on trust


Institutionally integrated planning required to fully realise programme-level benefits

Institutionalized cross-country collaboration

Separate planning without coordination

Separate planning with coordination

Institutionally integrated planning

– Each country has an individual planning process

– No alignment and coordination exist across countries

Assessm

.D

escri

pti

on

Exam

.

– North-South Multimodal Corridor1

– Not desirable, since programme is not managed as such

– Programme-level benefits are not realized

– Each country has an individual planning process

– The planning is coordinated between the different countries

– Maputo Corridor Logistics Initiative

– Minimum requirement for reaping some programme-level benefits

– Risk of unilateral deviation from coordinated planning

– Countries delegate the planning to a dedicated programme unit

– Countries give up part of their national sovereignty

– West African Power Pool (WAPP)

– Potential to manage transnational infrastructure as a real programme

– Hard to realize, since national sovereignty is curtailed

Bo

die

s

– No additional governance bodies – Some kind of coordination body exists, e.g. interministerialsecretariat or technical alignment forum

– Alternatively, supranational authority (e.g. RECs) could assume coordinating role

– Programme planning and implementation unit with special decision rights

– Alternatively, transfer of planning process to supranational authority (e.g. RECs)

1. The Memorandum of Understanding, which is between all participating countries of the North-South Corridor and would provide an operational framework, is still pending signature. However, progress has been made in implementing individual projects.


A special purpose public agency could be set-up to institutionalise cross-country collaboration

Source: Adapted from Conthe (2002).

Institutionalized cross-country collaboration

Operation & Maintenance

Construction Operation & Maintenance

Construction

Revenues A

Net revenues A

Country B

commissions commissionspays

investment

pays

investment

Government A Government B

provides capital,

guarantees and subsidies

Special bilateral treaty

Special Purpose Public Agency

(SPPA)

signssigns

provides capital,

guarantees and subsidies

Revenues B

Net revenues B

Infrastructure Project Preparation Facility (IPPF)

Provides preparation financing

and technical advise

Country A

establishes

invests invests

Monetary flows Contracts


Role of the SPPA over the programme lifecycle

Origination Preparation Implementation

– Commission all relevant studies (financial, technical, environmental)

OperationConstructionTenderingDesignFeasibility Financing

– None

Signing of special bilateral

treaty and

establishmentof SPPA

– Commission technical design studies

– Secure financing for the programme from public and private sources

– Prepare tender documents, select contractors and issue contracts

– Supervise construction and ensure alignment across countries

– Supervise operation and ensure alignment across countries

Could be outsourced to the IPPF (including the viability risk): if the programme is implemented, the SPPA pays back the preparation expenses

plus a return to the IPPF

Could be outsourced to a project management company (which will be supervised by SPPA)

Could be a joint concession for construction and operation - SPPA is supervising the

concessionaire; alignment across countries is done by the concessionaire

Over the whole lifecycle: Coordinate with all stakeholders and be single point of accountability

Implementation decision to be taken by national

governments


Differing regulations can be addressed on three levels

Level ExamplesDescription

Cross-national

standardisation

Programmespecific

regulations

Regulatory alignment

Effectiveness &Complexity

– Agreement on joint regulations on a bilateral or regional level

– Curtails national sovereignty

– Agreement on regulations which are specific to the project

– Might be transferred to similar projects or become part of harmonized national legislation

– Review existing regulations to identify overlaps and contradictions

– Reduce red-tape by joint usage of forms and systems and alignment of processes

– Driving and rest periods for transport workers (EU)

– Standardisation of protection system and transmission standards in Southern Africa Power Pool (SAPP) and West African Power Pool (WAPP)

– Joint standards for One-stop border posts (SADC region)

– Voltage transformation in cross-border electric power transmission

– Variable gauge system at the border to go from standard gauge to narrow gauge

– Definition of interfaces in IT systems at one-stop-border-posts use of joint forms

– Definition of specific procedures for a one-stop-border post

– Special rights for a SPV which manages a transnational project

– Special tax rules and tariffs in special economic zones

Balanced risk allocation & harmonised regulation

For different elements of a programme, different approaches might be

most appropriate


Pedro Rodrigues de AlmeidaDirectorHead of Infrastructure & Urban Development IndustriesEmail: [email protected]: +41 22 869 3613Mobile: +41 79 593 7033

Michael Max BühlerAssociate DirectorHead of Real EstateEmail: [email protected]: +41 22 869 1327Mobile: +41 79 590 6533

Alice CharlesSenior ManagerHead of Urban DevelopmentEmail: [email protected]: +41 22 869 3667Mobile: +41 79 571 8257

Vangelis PapakonstantinouSenior Community ManagerGlobal Strategic Infrastructure InitiativeEmail: [email protected]: +41 22 869 1206Mobile:

29

Pablo IzquierdoCommunity ManagerInfrastructure & Urban Development IndustriesEmail: [email protected]: +41 22 869 1283Mobile: +41 79 932 3835

Carla SequeiraSenior Team CoordinatorInfrastructure & Urban Development IndustriesEmail: [email protected]: +41 22 869 1258Mobile: +41 79 398 1838

Katerina KorcakovaTeam CoordinatorInfrastructure & Urban Development IndustriesEmail: [email protected]: +41 22 869 3596Mobile: +41 79 571 8294

Team Contact Details


End of Document

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