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Understanding challenges of developing transportation PPPs in the Middle East

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Delivered at : IQPC 2nd Annual PPP Investment Kuwait in February 2013

Delivered at : IQPC 2nd Annual PPP Investment Kuwait in February 2013

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  • 1. Understanding challenges ofdeveloping transportation PPPsin the Middle EastDr Rupert BoothFIET, FCMA, PMP, CEng974 7021 7320Rupert.Booth@atkinsglobal.com
  • 2. Agenda• Social, political & economic context• PPP Sector & Regional Comparisons• Integrated Transport Strategy: laying the foundation• Programming: setting priorities• Selecting candidates for PPP• Rail-specific and Road-specific issues• Ports and airports• Common PPP process problems• Transportation summary
  • 3. Middle East social and political context Demands never greater… But so are limits on supply…Growing populations need: Availability of funds:● Employment needs ● Banking contraction● Infrastructure Country risk:Support GDP growth after recent ● Low demandeconomic shocks ● Change of lawSource: PPIAF (2009)
  • 4. Funds flowing elsewhere…Source: PPIAF Database (MENA excludes GCC)
  • 5. PPP sector comparisonsPower, Water • Airports● IWPP model – Hajj terminal (BTO) Road & Rail established – Queen Alia terminal ● Mafraq-Ghweifat ($3bn)● 44 projects planned • Waste-water ● Saudi Landbridge ($7bn)Social Housing – Jordon, Egypt, Kuwait ● General concerns: (BOT)● Saudi ($130b) – Demand risk • Healthcare/ Education – Multi-modal linkages – Management Contracts, e.g. Abu Dhabi (185 schools, major clinics)
  • 6. Transportation: Need for integrated strategyExample of Abu Dhabi Surface Transport Master-Plan: Objectives StrategiesEconomic Growth Congestion Infrastructure Management ComponentsEconomicDiversification Accessibility of the Plan Health, Safety andSpatial Change SecurityMobility Pedestrian Realm PortfolioEnvironmental Improvement sorted byImplications Freight Management trancheEconomic Implications Low CarbonSocial and Cultural EnvironmentalImplications Protection Master Schedule
  • 7. Project Portfolio Management (PPM) Portfolio Strategic Program- Project Management Planning -ming Scoping Activities Create PPM will lower Reflect the Qualify Purpose vision Programme Projects risk, e.g. to deliver demand risk, in chosen projects Portfolio Develop Define Refine the Projects & Activities Review Strategies Prioritized Programmes Business Cases Appraisal Strategic Programme Project
  • 8. Selecting candidates for PPP Possible Objectives Identify for each CandidatePublic sector wishes to retain some • Objectivescontrol over certain assets but also – Economic, social andseeks: environmental• Risk transfer • Level and type of public support and fiscal impact• Process excellence • Distribution of benefits between• Transparency stakeholders• Private sector skills • Risks to benefits:• Maintaining public debt ratios – Economic, social and environmental• Boost to economy – Financial• Economic efficiency • Performance indicators linked toBut there must be: objectives • Proposed corrective actions• Bank-ability• Contract-ability
  • 9. Road versus Rail contrast Road Railways• Control over design, • Infrastructure is a part of a construction, maintenance, wider network operation & revenue • Multiple operators requires collection. system operator• Facilities are generally • Scheduling: standalone • Between operators• Few uncongested alternatives • For maintenance • Competing facilities can• No system operator increase traffic risk • External oversight of safety & tariffs
  • 10. Rail: Disaggregated view Range of: • Risks • Services • Opportunities for private finance  Adopt a slice and dice approachSource: Indian Railways (Nov 2012), Experiences with PPP in Rail Projects
  • 11. Lessons from India…Source: Indian Railways (Nov 2012), Experiences with PPP in Rail Projects
  • 12. Sector-specific issues: RoadNeed to ensure measurability of performance:• Align project Key Performance Indicators (KPIs) with public goals• Include provision to modify KPIs over contract• Examine practicality of data collection• Mandate Asset Management Plans (AMPs) to supplement KPIs• Focus on outcomes rather than outputs• Focus on service performance rather than asset condition• Apply incentives• Encourage Asset Management culture in interactions• Include KPIs for Design and ConstructionSource: Adapted from International Technology Scanning Program (2011), KPIs in PPPs
  • 13. Alternative project approaches… Five-way Assessment Business Construct- Funding Delivery Revenues ion New Build Finance Bulk Fee Existing Refurbish (Investment User Tariffs … Refinance) Other Factors:  Scope of work  Design Risk  Asset Handover  Asset Handover  Asset Renewal  SubsidiesSource: Delmon (2010), Understanding Options for Public-Private Partnerships in Infrastructure
  • 14. … reflected in range of PPP optionsSource: Delmon (2010), Understanding Options for Public-Private Partnerships in Infrastructure
  • 15. Port Projects… sailing forth ) Investors by nation: 16% China 11% UAE 10% Denmark 7% Philippines 7% Brazil 6% SingaporeSource: IFC (2011) Handshake
  • 16. Airport glide path Objectives Programme • Improving economic • Establishing a legal framework performance and level of • Defining a Contract acceptable to service by involving an highly bidders and lenders experienced Airport operator • Defining a regulatory scheme over • Funding infrastructure needs by the concession period private investments (releasing funds for other Government • Preparing a concept design or priorities) including it in bid • Proposing tax exemption scheme • Transferring airport project development risk to a private • Designing Public Authority party remuneration scheme • Improving airport profitability • Selecting team of advisors Source: ADP (2009), PPP in Airport Infrastructure Business
  • 17. Common PPP challenges Barriers to Competition ● Unknown, uneven pipeline ● Uneven commitments across jurisdictions ● Size of bid costs Procurement inefficiencies ● Stop/start process leading to inefficient resourcing ● Excessive information requirements ● Inconsistent tender processes ● Delayed decisions Underlying causes ● Skill and expertise of Government team ● Governments; commitment to PPP modelSource: KPMG 2010 report ‘PPP Procurement’ for Infrastructure Australia
  • 18. Transportation summary PPP successful in the Middle East , e.g. energy Transport PPPs successful worldwide, including roads and rail, i.e. linear assets Transport PPPs in Middle East mixed: ● airports and port operation successful ● linear assets less so Future effort: ● Political cooperation on linear assets, GCC Rail ● Demand risk allocation ● Institutional knowledge management