the views expressed in this presentation are the views of the authors and do not necessarily reflect...
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The views expressed in this presentation are the views of the authors and do not necessarily reflect the views or policies of any of the institutions named above, specifically the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), the World Bank Institute, the World Bank, the Multilateral Investment Fund, and the Inter-American Development Bank, nor the Board of Directors of each of these institutions, nor the governments they separately represent. These institutions do not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with official terms used by these institutions.
PPPs for Infrastructure: PPPs for Infrastructure: Global OpportunitiesGlobal Opportunities& Emerging Market & Emerging Market
PotentialPotential
Elaine GlennieSenior Capacity Building SpecialistAsian Development Bank Institute
Govindan NairLead Economist
World Bank Institute
David BloomgardenProject Specialist
Multilateral Investment Fund –Inter-American Development Bank
Global TrendsGlobal TrendsPre-Financial CrisisPre-Financial Crisis
PPI Investment by Region, US$ MillionPPI Investment by Region, US$ Million
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1990 1992 1994 1996 1998 2000 2002 2004 2006
Sub-SaharanAfrica
South Asia
Middle Eastand N. Africa
Latin Americanand theCaribbean
Europe andCentral Asia
East Asia andPacific
Source: World Bank PPIAF Database
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1990 1992 1994 1996 1998 2000 2002 2004 2006
Telecom
Energy
Transport
Water andSewerage
Source: World Bank PPIAF Database
Global TrendsGlobal TrendsPre-Financial CrisisPre-Financial Crisis
PPI Investment by Sector, US$ MillionPPI Investment by Sector, US$ Million
BRICs Emerged as Top BRICs Emerged as Top PPPI Recipients in 2007PPPI Recipients in 2007
CountryShare of total
investment (%)Investment in US$ billions*
Share of total
projects (%)
India 14.2 % 22.5 17.4 %
Russian Federation 12 % 19 4.9 %
Brazil 10.1 % 15.9 3.1 %
Mexico 6.3 % 9.9 4.9 %
China 4.7 % 7.5 28.1 %
Flows from Emerging Flows from Emerging Economies to Africa Grew Economies to Africa Grew
SignificantlySignificantly In 2006, emerging
financiers – including China, India and Arab states – committed more than $8 billion to infrastructure in Africa.
Chinese investment in Africa was at least $7 billion in 2006 and estimated $4.5 billion in 2007.
In June 2006, Premier Wen Jiabao said China has offered more than $44 billion over past 50 years to finance 900 infrastructure projects.
Annual Commitments to Infrastructure Projects in Sub-Saharan Africa by
Emerging Market Financiers, 2001-2007
And then...the Financial And then...the Financial Crisis:Crisis:
Impact on Short-term Economic Impact on Short-term Economic HealthHealth
Source: Morgan Stanley Research, December 2008
Asia (Ex-Japan)Real GDP (%)
Latin AmericaReal GDP (%)
9.3 9.5
7.6
5.36.8
2006 2007 2008E 2009E 2010E
5.4 5.74.3
(0.4)
2.6
2006 2007 2008 2009E 2010E
Global Economic OutlookReal GDP (%)
5.1 5.03.6
0.9
3.32.8 2.40.9
(1.4)
1.4
7.7 7.86.3
3.15.1
2006 2007 2008E 2009E 2010E
Global Economy Industrial World Developing World
6.6
4.8
1.3
3.4
7.0
2006 2007 2008E 2009E 2010E
CEEMEAReal GDP (%)
Growth Growth Growth
GFC Impact:GFC Impact:Emerging Market Spreads Increased Emerging Market Spreads Increased
DramaticallyDramatically
0
3
6
9
12
15
18
21
J an-07 Apr-07 J ul-07 Oct-07 J an-08 Apr-08 J ul-08 Oct-08
Asia CEMBI
Emerging Europe CEMBI
Latin America CEMBI
1
2
3
4
5
6
7
8
9
10
11
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08
Latin America EMBI
Asia EMBI
ECA EMBI
Emerging-market Sovereign Bond Spreads: EMBI January 2007 – December 5, 2008
Emerging-market Corporate Bond (CEMBI) Spreads: January 2007 – December 1, 2008
Source: World Bank PPIAF Database
GFC Impact:GFC Impact:Constrained Access to CapitalConstrained Access to Capital
For new PPP projects : Reduced access to lending particularly from foreign banks, requirements for greater sponsor equity, shorter underwriting periods, more stringent conditions, and greater financing costs for long-term concessions
For existing PPP projects : Increased refinancing risk for long-term concessions, potential delays in refinancing with risk of cancellation and market disruption
GFC Impact: GFC Impact: Project Closures Down 26%Project Closures Down 26%
By Income Group: upper middle income countries reporting lower
investments lower middle income countries attracting higher
investments low income countries seeing stable investmentsBy Region: Eastern Europe/Central Asia, Latin
America/Caribbean hardest hit Sub-Saharan Africa stable Asia and the Pacific, and the Middle East and
North Africa attracting higher investment By Sector: Transport, energy and water reporting lower
investments
But PPP Remains an But PPP Remains an Actively Pursued OptionActively Pursued Option
Increasing public infrastructure demands worldwide
Fiscal constraints place more importance on private sector engagement
Fiscal stimulus responses to global financial crisis focus on infrastructure
… Countries continue to tender/award new PPP projects and/or prepare new project pipelines
Asia Pacific PPPs: A Asia Pacific PPPs: A Diverse Diverse Picture of “Stars and Black Picture of “Stars and Black
Holes”Holes”Total 2007 PPP Investment, US$ MillionTotal 2007 PPP Investment, US$ Million
India22,485
China7,456
Philippines4,386Viet Nam
1,332
Indonesia1,441
Cambodia816
Pakistan4,487
Thailand1,050
Sri Lanka387
Malaysia1,057
Source: World Bank PPIAF Database
Afghanistan240
Papua New Guinea150
Kazakhstan833
Recent Asia PPP Recent Asia PPP Trends:Trends:
Enormous infrastructure demand
(Annual infrastructure needs, 2005-2010)
0 50000 100000 150000 200000 250000 300000
East Asia and Pacific
South Asia
Central Asia
Asia Total
Road Railway Electricity Generation Water Sanitation Telephone
In US$ Million
Source: World Bank Policy Research Working Paper
India: World’s Biggest PPP India: World’s Biggest PPP Market?Market?
Average Project Size Reaching Financial Close, US$ Average Project Size Reaching Financial Close, US$ MillionMillion
0
200
400
600
800
1000
1200
1400
1600
Water andSewage
Transport
Telecom
Energy
India: PPP LandscapeIndia: PPP Landscape
Value and Average Size of Projects(Total Value USD15.8 billion)
Airports
Ports
Power Transmission
Railways
Roads & Bridges
Water Supply
Power DistributionSolid Waste Management
(100.00)
-
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
900.00
0 2 4 6 8 10Sector
Ave
rage
Siz
e U
SD
Mill
ion
Asia Pacific Asia Pacific RegionRegion: : PPP Country ReadinessPPP Country Readiness
31 ?
8 ?
2 ?
2 ?
1 ?
0 ?
A few IPPs or nothing much at all
Mainly IPPs, trying others
Extensive but limited sectors
Extensive but very domestic
Extensive, established, largely domestic, mainly physical infrastructure
Complete buy-in, institutionalized, open, international, physical & social infrastructure
Latin America: PPP MarketLatin America: PPP MarketPrivate-Sector Commitments to Infrastructure Private-Sector Commitments to Infrastructure
Investment, US$ MillionInvestment, US$ Million
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000
1997* 1998* 1999* 2000* 2001* 2002* 2003* 2004* 2005* 2006* 2007*
Year
Inv
es
tme
nt
(US
D M
illi
on
s)
Emerging Market PPPs: Emerging Market PPPs: Capacity and Knowledge Capacity and Knowledge Gaps are Key BottlenecksGaps are Key Bottlenecks
Public Sector: PPPs a “new procurement approach” that requires “new PPP skills”
Private Sector: A new market opportunity that requires market intelligence to evaluate “emerging country” opportunities
MP3IC: Global PPP Learning MP3IC: Global PPP Learning ProgramProgram
Cutting edge learning modules to enable PPP institution building and development of PPP practitioner skills
Benchmarking tools to identify gaps and remedy PPP institutional and policy frameworks which deter investors
MP3IC: Global PPP Learning MP3IC: Global PPP Learning ProgramProgram
Strategic DesignStrategic Design Designed as a global learning product with
features to adapt to country circumstances Customized to multiple audiences – policy
makers, managers, professional and technical staff
Based on multiple global comparative analyses and tools– MP3IC Country and Project Case Studies– Law and Infrastructure website– Global PPP Readiness Index
MP3IC Global ComparisonsMP3IC Global Comparisons: : Infrastructure & Law WebsiteInfrastructure & Law Website
www.worldbank.org/inflawwww.worldbank.org/inflaw
Takes users through the PPP project development process - starting with Government Objectives, then moving on to Legal and Regulatory Frameworks and Agreements
MP3IC Global Comparisons: MP3IC Global Comparisons: Infrascope Readiness ScorecardInfrascope Readiness Scorecard
1. Legal and regulatory framework1.1 Consistency and quality of PPP regulations1.2 Effective PPP selection and decision making1.3 Fairness/openness of bids, contract changes1.4 Dispute resolution mechanisms
2. Institutional framework2.1 Quality of institutional design2.2 PPP contract, hold-up and expropriation risk
3. Operational maturity3.1 Public capacity to plan and oversee PPPs3.2 Methods and criteria for awarding projects3.3 Regulators’ risk allocation record3.4 Experience in transport & water concessions3.5 Quality of transport and water concessions
4. Investment climate4.1 Political distortion4.2 Business environment4.3 Social attitudes towards privatization
5. Financial facilities5.1 Government payment risk 5.2 Capital market: private infrastructure finance5.3 Marketable debt5.4 Government support for low income users
MP3IC Global Comparisons: MP3IC Global Comparisons: PPPI ApproachesPPPI Approaches
Public Sector Comparing PPP
Attractiveness Identifying what it
takes to improve PPP attractiveness
Prioritizing actions to improve PPP attractiveness
Private Sector Identifying
Opportunities Evaluating
Conditions Predicting
Bottlenecks
PPPI Days 2009PPPI Days 20099-13 November 2009, Manila 9-13 November 2009, Manila
PhilippinesPhilippines
ADB Business Forum
PPPI Knowledge Sharing - Comparing PPP Programs, Projects, and Country Readiness
PPPI Days Conference
PPPI Knowledge Sharing – Frontier Issues in Global PPP Development
9-10 November
10 November
11-12 November
13 November
PPPI Days 2009:PPPI Days 2009:PPPs in a Changing Global PPPs in a Changing Global
EnvironmentEnvironment
Revisiting Risk in the Aftermath of Global Financial Crisis
Megacities and Rise of Urban PPPs Climate Change and Greening of
PPPs Escalating Demand for Social
Services Globalization and Increasing Need
for Harmonization
PPPI Days 2009:PPPI Days 2009:New PPP FrontiersNew PPP Frontiers
Social Sectors – Unlocking PPP Potential for Human Capital Development
Bundled Service Delivery and Multisectoral PPP Approaches
Harmonization and Cross Border PPPs Challenges for PPPs in Fragile and
Small Island States
MDBs Role in Changing MDBs Role in Changing LandscapeLandscape
Strengthening policy guidance and Bringing additional financial and technical expertise
Expanding lending programs to assist in rapid delivery of infrastructure projects
Offering innovative range of credit enhancements and risk mitigation measures
MDBs Role in Changing MDBs Role in Changing LandscapeLandscape
Investment
Economic Growth
Entrepreneurship
Poverty
Alleviation
Enabling
Environment
Catalytic Transactions
MDBs
The views expressed in this presentation are the views of the authors and do not necessarily reflect the views or policies of any of the institutions named above, specifically the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), the World Bank Institute, the World Bank, the Multilateral Investment Fund, and the Inter-American Development Bank, nor the Board of Directors of each of these institutions, nor the governments they separately represent. These institutions do not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with official terms used by these institutions.
Thank youThank you
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