trends and overview of ppp in asean
DESCRIPTION
Part of Capacity Building Program run by ERIA in cooperation with host governments in Cambodia, Lao PDR, and Myanmar.TRANSCRIPT
Trend and Overview of PPP Framework in ASEAN 5
Economic Research Ins/tute for ASEAN and East Asia (ERIA) PPP Seminar: U"lizing Efficient Infrastructure Development Framework
Phnom Penh, 4th of July 2013
Fauziah Zen
Supported by
Outline
Background
General SituaIon
Country Fiscal Landscape
PPP Trends
Challenges
Lessons
Background
ERIA has been acIvely studying and supporIng ASEAN member countries to maximize their potenIal.
Infrastructure is one of the keys to accelerate development
Problems in infrastructure boRleneck: regulatory framework, technical and financing.
PPP: as an alternaIve to the tradiIonal ways to finance infrastructure
PPP is not a panacea for infrastructure problems but has several advantages
General SituaIon
ASEAN member states have different
stages of infrastructure policy, financing method,
and financial capacity.
Singapore and Brunei have abundant
domesIc financial resources to build infrastructure. Play fewer roles in AC.
Malaysia, Indonesia, Thailand, and
Philippines have been adopIng PPP quite progressively to fill financing gap and to tap private sector’s
competence.
In Cambodia and Vietnam, private
sector parIcipaIon is increasingly becoming
important in infrastructure
development even though they need to conInue the reform.
Laos and Myanmar are sIll facing mulIple challenges: lacking fiscal resources, low capacity, lacking
regulatory framework, and challenging fiscal
sustainability.
Regulatory Framework Some countries have too many and complicated
regulaIons, but oXen sIll inadequate.
Some countries lack sufficient regulaIon.
The main regulaIon should be at the proper level in regulatory hierarchy of respecIve country, since PPP involves cross sectors and insItuIons.
PPP regulaIons can be dynamic but should be kept straighZorward and (quite) simple.
InsItuIon and Technical Capacity Keyword: CAPACITY
InsItuIonalized fundamental process
Champion for PPP
Strong leadership
Involve key stakeholders (incl. subnaIonal governments, line ministries, etc.)
CooperaIon with internaIonal supporters
Capacity building is not an instant process
Financing
Broad opIons are available with different requirements.
Recognize fundamental requirements to aRract funding.
UIlize both domesIc and
external financial resources.
Manage fiscal sustainability.
Prepare the Projects properly
before selling the ideas.
Financing'Infrastructure'
Commercially+Viable+Project+
Economically+Viable+Project+
Nonviable+Project+
Private'Sector'
Government' ODA/OOF'
PPP'Contract'
SPV'
Contractors'
Lenders/Sponsors'
Gov'Contrac>ng'Agency'
Private Sector
Public Sector
Construction-Operation
Financing
Guarantee
O@aker'or'User'
Loan/TA
Awarded
Form
Form
Pay Pay
Fiscal Support
Traditional Procurement PPP Scheme
Available Funding Sources
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Funding Sources
External Sources
Public
Private
ODA
OOF
Grants
Technical Assistance
Concessional Loan
Loan
Equity
Foreign Direct Investment
Bank Loan
PorZolio Investment
Internal Sources
Public
Private
Tax Revenue
Bank Loan
Direct Investment
PorZolio Investment
Government Bonds
Source: Isono and Sugiyama (2013)
Financing Infrastructure (incl. ASEAN ConnecIvity)
Background
General SituaIon
Country Fiscal Landscape
PPP Trends
Challenges
Lessons
Indonesia unequal infrastructure development
across regions, progress on regulatory development, good pracIces on managing conIngent
liabiliIes (fiscal discipline), mulI-‐Ier government in handling PPP.
Philippines progressive implementaIon of PPP in both hard
and social infrastructures, championship of inter-‐departmental
coordinaIon, mulI-‐Ier government in handling PPP, quite substanIal use of external support.
Malaysia clear objecIves of naIonal development,
sIll unclear framework of infrastructure financing, uIlizing bonds (especially Islamic sukuk/bonds) to
finance infrastructure development.
Thailand lessons from over esImated revenue of PPP
projects, challenges in managing risk allocaIon, new PPP law: hope for clear framework, list of projects, and PPP’s commiRee.
Country Highlights
Singapore dual roles of public sector both as
regulator and operator have weakened interests in PPP, no project list for PPP,
no champion for PPP outside MOF, idenIfying moIvaIon to have increasing role in advancing AC.
Brunei small populaIon,
abundant oil and gas revenue in the long term has reduced the needs of
strong private sector, idenIfying moIvaIon to have increasing role in advancing AC
Country Highlights
Country Highlights
Vietnam Macroeconomic instability, high inflaIon, price volaIlity à higher risks for infrastructure projects,
high debt makes difficult to increase ODA,
implementaIon of new PPP law is compeIng with government priority
for reducing inflaIon
Cambodia increasing role of private
parIcipaIon, breakthrough/innovaIon taken by
government, managing debt,
improving credibility before internaIonal donors
Lao PDR lacking fiscal resources,
low capacity, lacking regulatory framework, challenging fiscal sustainability, problem with managing debt,
low credit raIng, undiversified sector of private sector
parIcipaIon (hydropower), inappropriate financing mechanism has led to macroeconomic instability.
Myanmar lacking fiscal resources,
low capacity, lacking regulatory framework,
no credit raIng challenging fiscal sustainability, heavily dependent on ODA
Financing Infrastructure
Background
General SituaIon
Country Fiscal Landscape
PPP Trends
Challenges
Lessons
PPP Trend (1)
PPP starts with tradiIonal cooperaIon between public and
private sectors. It oXen is introduced through BOT and concession models.
The Governments found that the model could be
developed further towards PPP as in
internaIonal common pracIces.
The primary raIonale for PPP is to fill financing gap
in public sector.
The moIvaIon is enlarged to uIlize private sector
competencies into public services provision and to secure output of public
faciliIes.
PPP Trend (2)
Some countries have been adopIng PPP scheme without having specific law on it, then they improve the framework by
issuing the required law.
Clear Regulatory Framework of PPP is important, since it
will provide potenIal investors with sufficient iniIal informaIon and
security.
Single law is usually not all-‐inclusive for
PPP, since it involves several
sectors and requires inter-‐departmental coordinaIon. It also
needs some flexibility for direcIves.
PPP law usually needs several supporIng
regulaIons (e.g.: VGF, PDF, Land
Clearing, Ownership,
Guarantee, etc.)
Financing Infrastructure
Background
General SituaIon
Country Fiscal Landscape
PPP Trends
Challenges
Lessons
Financing Problem?
• YES. But it’s not on the lack of supply per se. Instead there are quite abundant potenIal financial resources that can be uIlized.
• More serious issues are:
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• regulatory framework, legal certainty, appropriate incenIves.
Lacking investor friendly environment
• poor preparaIon, lacking competent human resources, low fund allocated for Project Development Facility (PDF), lacking communicaIon to internaIonal community.
Lacking properly prepared projects
Shopping List
PPP Challenges: Causal Nexus
Project PrioriIzaIon
Project PreparaIon
Tender
SelecIon
Awarded
Project ImplementaIon
Poor Project PreparaIon
Market bias
SelecIon bias or Fail
Poor risk esImaIon
Failures
BAD Precedence
Financing Infrastructure
Background
General SituaIon
Country Fiscal Landscape
PPP Trends
Challenges
Lessons
Shopping List List of important Project
PPP Challenges: Causal Nexus
Project PrioriIzaIon
Project PreparaIon
Tender
SelecIon
Awarded
Project ImplementaIon
Poor Project PreparaIon
Market bias
SelecIon bias or Fail
Poor risk esImaIon
Failures
BAD Precedence
Transparent & sound promoIon
Clear Criteria, transparent, fair
Clear and Adequate Fiscal Support
Successful ExecuIon
GOOD Example
Addressing the Challenges (1)
Project PrioriIzaIon:
• Be consistent with NaIonal Development Priority
• Manage fiscal issues (support vs. liabiliIes)
• Transparent process • Market sounding
Project PreparaIon:
• This is criIcal part, don’t rush but work Imely.
• Start with workable scale and size.
• Adequate funds, human resources, and Ime.
Addressing the Challenges (2)
Tender and SelecIon Process:
• Be transparent and Ime consistent.
• Contestable market.
Awarding Project:
• Clear contract (output, dispute resoluIon, Imeline, ownership, etc.)
• Sufficient fiscal and poliIcal support.
Project ExecuIon:
• Monitoring and EvaluaIon
• Addressing problems if any
• PromoIng successful stories.
S T E P S
Determine the goals of
adopIng PPP.
Assess current situaIon: exisIng condiIon, missing elements, capacity.
IdenIfy needs to achieve the goals in #1
Explore ways and opIons.
Adjust if needed.
Cooperate with stakeholders and supporters (internal and external)
Strong determinaIon.
Thank You for Your ARenIon