building sustainability: partnerships and finance by s. adrian ross senior programme officer pemsea

BUILDING BUILDING SUSTAINABILITY: SUSTAINABILITY: PARTNERSHIPS AND PARTNERSHIPS AND FINANCEFINANCE

by by S. Adrian RossS. Adrian Ross

Senior Programme OfficerSenior Programme OfficerPEMSEAPEMSEA

$80 – $180 billion for investment in environmental facilities and services

70% of which is needed for:• Wastewater treatment

• Pollution abatement

• Nutrient reduction

• Water reuse/recycling

The NeedThe Need

Public sector has:

• legal authority

• law-making power

• monitoring and regulatory function

• mandate

…but lacks

• funding

• technical resources

• business skills.

The SituationThe Situation

Private sector has: • experience• expertise• technology• business skills• access to financing…but faces• a conflict between making long-term investments and reporting on short-term financial cycles.

The SituationThe Situation

NGOs have: • an understanding of local needs• ability to work with and influence people,

including poor communities• credibility• organizational and communication skills

…but lack• sufficient and predictable funding• staff and technical capacity• experience in partnership arrangements.

Building SustainabilityBuilding Sustainability

Set within a policy, regulatory and investment environment that is conducive to business participation

An alternative delivery mechanism…not the only one

Principles of multi-sector Principles of multi-sector partnershipspartnerships

Building SustainabilityBuilding Sustainability

Bringing together government, private sector and civil society to better tackle the challenges of providing water and sanitation services, as well as other services to communities

Recognizing two separate but related issues, namely:

Partnership development and sustainability

Project development and sustainability.

Principles of multi-sector Principles of multi-sector partnershipspartnerships

Constraints to Private Sector ParticipationConstraints to Private Sector Participation

Political risk

Regulatory risk

Commercial risk

• Financial risks

• Design fault

• Construction and operational risks

Revenue risk

• Tariff system

• Demand forecast/willingness to pay

Failure to identify or lack of sound projects

Bias against projects in small- and medium-sized urban and rural areas

Public-Private PartnershipsPublic-Private Partnerships

Local Government Local Government UnitsUnits

ICM Framework and ProcessICM Framework and Process

Planning and Implementation Cycle

Planning and Implementation Cycle

The implementation of ICM programs provide local

governments with:

a management framework

institutional arrangements and mechanisms

long-term vision and strategies

action programs addressing priority concerns

local community participatory process

climate for investment.

Political RiskPolitical Risk



Local communities, Local communities, NGOs and POs NGOs and POs

Manila Bay Coastal StrategyOctober 2001

Danang - 2001

PEOPLE’S COMMITTEE OF DANANG CITY

Coastal Strategy ofCoastal Strategy of DanangDanang CityCity

Community awareness/participation

• Information dissemination

• Consultation/communication

• Issues, causes and effects

• Shared vision, roles and responsibilities

Political Risk: Community supportPolitical Risk: Community support

Scoping the Needs/Capacities

• Socioeconomic considerations (services to poor communities)

• Community mobilization – as a partner in the project

• Expectations/benefits to be derived

• Willingness and ability to pay

• Monitoring and evaluation

Revenue Risk: AffordabilityRevenue Risk: Affordability

Revenue Risk: Tariff StructureRevenue Risk: Tariff Structure

Information and education campaign

‘Full-cost’ pricingpublic’s attitude regarding ‘public services’

Implications on the poor and disadvantaged sectors of the population

Efficiency of existing bureaucracies with regard to collection of fees and taxes

Increasing block structureLifeline price for the poor

Strengthen local governance



National Government National Government and in-country and in-country contractors, suppliers, contractors, suppliers, financial institutions, financial institutions, banks and investorsbanks and investors

Local communities, Local communities, NGOs and POsNGOs and POs

Delineation of responsibility:

• authority of local governments in the investment

area

• mandate local governments to form partnerships,

raise funds and impose tariffs for environmental

facilities and services

• stipulate standards against which performance can

be measured.

Regulatory RiskRegulatory Risk

Capacity building to fully implement delineated responsibilities by strengthening:

• technical/scientific skills

• regulatory and economic instruments

• monitoring and evaluation

• enforcement

Regulatory RiskRegulatory Risk

Commercial RiskCommercial Risk

Financial risk

• Exchange rate fluctuations

• High interest rates

• High inflation rates

Construction and operational risk

Start-up delaysConstruction and operating cost overruns & delays

Actions

• Access to domestic funds

• Innovative financial structures

• Financial commitment

• Performance standards

• Licensing/permit approvals



International operating International operating companies, investors companies, investors financial institutions, financial institutions, development agencies development agencies and donorsand donors



Capacity building is a major bridge for overcoming barriers to private sector participation in environmental investments.

Strengthening:

• capabilities in local governance (ICM)

• project development and management

• technical/scientific skills and support

• regulatory and economic instruments

• financial management

• monitoring and evaluation

• enforcement


Financial Risk• accessibility to multiple

sources of financing

• project portfolio that is affordable, self-sustaining and attractive to private sector

ActionsActions• Creation of

innovative financial mechanism to meet the needs and capacities of local governments and

their partners.




Public-Private Public-Private PartnershipPartnership

(PPP)(PPP)International operating International operating companies, investors companies, investors financial institutions, financial institutions, development agencies development agencies and donorsand donors



PEMSEA’s Guide to Environmental Investments

Is this a good time for environmental investments?

5 ICM sites and 2 hotspots:

• more than 40 investment opportunities identified

• priority environmental concerns screened

• 15 projects proceeding through pre-feasibility studies, lead by local stakeholders

• more than $600 million in capital investments

• local governments and local stakeholders providing concrete commitments

Is this a good time for environmental investments?

Contingent valuation surveys:

• overall willingness to pay for environmental services

• correlates with household income

• <1% of monthly household income

• ability to pay is a factor, as is education and age of respondent

• unwillingness to pay <1% of respondents

What about the private sector?

Challenges:

• Trust, transparency and confidence in the process and the other ‘partners’

• Goals, expectations, verification of viability

• Roles and responsibilities

• Governance structure of partnership

• Communication

What are the critical features?

Critical features:

• leadership

• concrete commitments of local government and local stakeholders

• private sector awareness and confidence

• innovative financial mechanism accessible by local governments and their partners

building sustainability: partnerships and finance by s. adrian ross senior programme officer pemsea

Documents

political risk slide

need slide

affordability slide

community support slide

implementation cycle

public sector

situation private sector

evaluation revenue risk