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Trends and Overview of PPP in ASEAN
 

Trends and Overview of PPP in ASEAN

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Part of Capacity Building Program run by ERIA in cooperation with host governments in Cambodia, Lao PDR, and Myanmar.

Part of Capacity Building Program run by ERIA in cooperation with host governments in Cambodia, Lao PDR, and Myanmar.

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    Trends and Overview of PPP in ASEAN Trends and Overview of PPP in ASEAN Presentation 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   9   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:   18   •  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   PDF     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     fauziah.zen@eria.org