WBG “Financing for Development: unlocking investment opportunities”

1. PROMOTING PPP IN
LIBERIA: AN ACTION PLAN
WBG “Financing for
Development: unlocking
investment opportunities”
James Davie

2. INTRODUCTION
In 2016 the British Embassy in Monrovia and
the Liberian National Investment Commission
commissioned a Public Private Partnership
(PPP) Readiness Assessment.
This Development Finance Impact Project
proposes building on the findings of the
Readiness Assessment to develop an
achievable PPP Action Plan.
This presentation is addressed to
Government and could form the basis for a
financing solution that can unlock financial
opportunities in Liberia through
implementation of a programme to create an
enabling environment for PPPs.
The complete and original Readiness
Assessment and subsequent
recommendations remain property of the
commissioning entities. For enquiries about
further information please email:
jamesdavie@altracapital.com
Development Finance Impact Project
By James Davie, April 2017

3. WHAT IS THE PROBLEM?
What are the reasons that
the government, official
aid provider or private
sector would want to
participate?

4. Infrastructure Gap
Supply (available
public investment
relative to population
and expectations)
Time
VolumeandcostofInfrastructure
Demand (increases in
population, continued
urbanisation, higher
expectations and ageing
populations)
© Altra Capital Limited
2011
THE INFRASTRUCTURE GAP

5. IMPROVING PUBLIC SERVICES IN
LIBERIA
In Liberia, creating economic opportunities for its citizens in essential. If
Liberia is to sustainably achieve this it must rebuild and increase its
infrastructure, but there are limited available resources to provide all that is
needed. The Government, in partnership with the development community, is
making strides in addressing the infrastructure and institutional challenges.
Through public-private partnerships, private investors could not only help to
provide the financing, but also help to ensure that a project is run efficiently.
If contracts are designed properly, private investors have an incentive to see
that an infrastructure project is executed efficiently – because it increases the
likelihood that their investment is safe and as profitable as expected. As
private sector involvement can improve both the execution and the financing
of a project, the crucial role of the public sector is to provide the right
conditions to reap those benefits.*
Source: Development Initiatives, 2014 http://devinit.org/post/role-private-sector-financing-post-2015-agenda-sustainable-development/

6.  Kinshasa

Cape Town

Cape Town
 New York
 Seattle
 Los Angeles
 Cairo
Washington 
Beijing 
Shanghai 
 Hong Kong
 Mombasa Mombasa
 Delhi
 Mumbai
 Madras
 Kinshasa
Population
World 7,433 billion
Africa 1,216 billion (16%)
UK 65.5 million
USA 326 million
China 1,388 million
India 1,343 million
Liberia 4.6 million
GDP Nominal (billions of $)
World 79.890
Africa 2.390 (3%)
UK 2,649
USA 18,561
China 11,391
India 2,250
Liberia 2.168
Source: International Monetary Fund World Economic Outlook (October-2016)
AFRICA IS HUGE…

7. Source: UNCTAD, FDI/MNE database
Figures in US$ billions
…BUT RECIEVES SOME OF THE
LOWEST FDI INFLOWS BY REGION

8. THE OPPORTUNITY
The provision of good infrastructure is key to Liberia's continued recovery
and it is not surprising that the country is looking to PPP and private sector
investment to assist in this area. Involvement of the private sector in
infrastructure investment is becoming increasingly necessary to fill this gap.
At present, most spending on Liberia’s infrastructure is from domestic
sources, with very little from private investors, emerging market financiers
or development assistance.
With currently only 10% of all Liberian roads paved and many bridges in a
decayed condition, transportation infrastructure has been identified as one
of the main constraints on the Liberian economy. The positive impact of
better roads would be particularly strong on tradable goods in the
agricultural and forestry sector. Some PPP projects might be possible to
alleviate this chronic shortage of access to markets, but would require a
fundamental change from the current silo approaches of various ODA and
NGO programmes.

9. OBSTACLES TO
UNLOCKING FINANCIAL
OPPORTUNITIES
… and principles for
overcoming them

10. AFFORDABILITY
Liberia has conflicting imperatives – political realism versus economic
necessity
Alternative financing structures may be the only way to begin to pay for
sustainable infrastructure
In essence this will require a form of hybrid PPP
Equity, or some form of appropriate guarantee programmes, may have to
come, in part, from the MDBs to balance the repayment risks that the private
sector will perceive
Combining elements of existing programmes may provide the initial funding
for some projects
 looking at whether Output Based Aid (OBA) programmes might be included in a PPP structure
is one possibility
Project development must be designed to deliver the information needed for

11. FINANCIAL ENVIRONMENT
Liberia's financial system remains shallow while the economy recovers and
remains vulnerable to political and economic instability. Financial intermediation
is low while the high cost of credit and scarce access to financing
Poor infrastructure still represents a major impediment to the expansion of
financial services across the country. The Liberian financial system is dominated
by the bank sector. The banking system remains capitalized and liquid, but risks
are elevated stemming from high non-performing loans and low profitability.
Access to the financial sector has gradually increased in recent years, supported
by substantial improvements in legal and regulatory frameworks. The Central
Bank of Liberia has progressed with new initiatives to expand financial
intermediation.
The Liberian capital market is now in the very early stages of re-emergence. With
no government securities issued, the country receives no sovereign rating by any
of the major credit rating agencies.

12. LEGAL AND REGULATORY
ENVIRONMENT
Generally, although great improvements have been made in the rule of law
since the civil wars, there are still significant issues relating to corruption,
access to justice, inadequate legal and court infrastructure, inconsistent
policy and practice and poor record keeping. The Ministry of Justice are
working with partners such as the Law Reform Commission and the Liberia
National Bar Association to address these issues.
Liberia has no specific PPP law or regulations although a draft law is in
preparation. A PPP law, however, is only part of the legislative package
needed and must be backed up by PPP specific regulations, designed to
formalise and clarify all aspects of the PPP process.
It is suggested that any draft legislation is reviewed by international experts
who have carried out PPP law reviews in other countries, to ensure that the
law meets international standards, best practice and meets the expectations
of the international finance community.

13. TRANSPARENCY AND
GOVERNANCE
Given that transparency in procurement is one of the key factors that
overseas investors are looking for in PPP, then the development of a new
national PPP policy offers the opportunity for the government to present PPP
as a ring-fenced, open and transparent process.
Particular and visible government oversight and a declaration of the
importance of this in the National PPP policy in this area is highly
recommended
Liberia’s admittance to the WTO commits the country to ensuring non-
discriminatory treatment of foreign investors from 1 Nov 2019
PPPs cannot be financed in circumstance where real or perceived corruption
is a factor. That means there is an urgent need for convincing and effective
measures to be taken against corruption in Liberia.

14. CAPACITY BUILDING
There is insufficient in-depth ability to implement a PPP programme to
deliver viable projects.
The capacity of the Government procuring bodies needs upgrading to a level
sufficient to enable it to negotiate with the private sector on a basis of
equality
A structured approach to PPP capacity building for government in Liberia
should be taken
Eventually, capacity building will not just be needed by government but also
by the local private sector as they become involved in delivery on behalf of
government
Care should be taken in the appointment of consultants to ensure that they
have the necessary expertise and appropriate international experience

15. MULTILATERAL COORDINATION
The aid system has become a competitive struggle between NGOs for
donor contracts, which often results in a rush to show short-term
results, collaboration between organizations is rare and staff turnover
is high.
Better cooperation among providers of development assistance is
important in PPP training programmes, and arrangements should be
more formalized in a new multilateral framework of cooperation
It is recommended that a national PPP unit takes the exclusive lead on
all proposed PPP activity involving these agencies
The PPP Unit should be at the forefront of exploring funding and
financing opportunities to support these projects

16. PPP ACTION PLAN Key recommendations

17. IDENTIFICATION OF
A PPP CHAMPION
Given that Liberia is at a very early stage of
PPP development, identifying a champion
who is able to push PPP's within government
is a vital prerequisite for success for any
overall programme
The PPP Champion should be at a
sufficiently high level within government to
enable them to push through the measures
that would be necessary to get a
programme started and to influence both
governmental opinions, those of the general
public and those of the private sector
The PPP Champion should be situated in a
part of government that is likely to have
some influence over PPP implementation
Key recommendation 1

18. ADOPTION OF A
PPP POLICY
A PPP policy is needed to set a ‘roadmap’
for implementation of PPPs
Government should have clear goals and
objectives in its PPP Policy
The PPP policy should be developed
independently of the existing concessions
policy, legal structures and processes
The Government should include core values
and principles in the PPP Policy
Other matters that need to be addressed in
the PPP Policy are:
 coordination with a national development plan
 the degree of risk the Government is prepared to
accept and how Government intends the risks to be
managed
 the criteria for determining whether PPPs are a viable
method of service delivery
Key recommendation 2

19. ESTABLISHMENT
OF A NATIONAL
PPP UNIT
Existing competition between various
government departments as to who has
responsibility for PPP in Liberia should be
brought to a complete and immediate end
Responsibility for the PPP process needs
streamlining and clarifying
The PPP Unit should act as a taskforce to
provide central co-ordination for the roll-out of
a national PPP programme. The PPP unit should
be:
 the guardian and developer of policy, ensuring a
consistent approach is applied
 an evaluator and adviser in relation to risk issues
 a centre of best practice and expertise, and a focal point
for engagement with the PPP industry both internationally
and locally
The PPP Unit be the repository of standard PPP
agreements, standard contract clauses and
detailed procedures for identifying, evaluating,
procuring and measuring PPPs
Key recommendation 3

20. CONSTRUCT A
“PROJECT
PIPELINE”
It is important that a properly constituted
project pipeline, based on the national PPP
policy, is prepared and marketed both locally
and internationally
A website could also be used to give details
of projects in the process of negotiation thus
improving the transparency of the process
It is recommended that the pipeline be set
up under the National Investment
Committee, giving full details of:
 projects, their feasibility, scope, timing and indicative
cost
 details of future projects
 progress of current projects
 the results of procurements and how the awards of
contracts were made to aid transparency
the website should be updated regularly to
encourage both national and international
bidders to participate in future competitions
Key recommendation 4

21. PPP LEGISLATION
AND REGULATIONS
It is suggested adopting the “10 principles
for a PPP (Concession) Law” developed by the
European Bank for Reconstruction and
Development (EBRD) as the basis. It is
recommended that urgent attention is given
to:
 a PPP Policy Statement from the president/parliament
setting out the national policy towards using PPP
 well drafted central legislation governing PPPs for
national government (the PPP Law), including
comprehensive rules covering:
‐ the definitions of and forms of PPPs that the
Government will permit
‐ detailed procurement rules and administrative
structures and reporting lines
 a firm regulatory framework in terms of which national
government institutions can enter into PPP agreement
Current procurement processes should also
be reviewed against current international
standards to ensure consistency and
adherence to those standards
Key recommendation 5

22. PPP
COMMUNICATIONS
STRATEGY
The focus of this strategy, initially should be
split between:
 policy and programme communications aimed at wider
government and society
 project and process communications aimed at potential
local and international PPP participation
The strategy should focus on a number of key
areas:
 to communicate the justifications, objectives and delivery
of the PPP programme to all stakeholders in order to
create an informed understanding of the government’s
PPP policy
 to provide details on projects and process to those who
will be actively involved in delivering contracts from both
the public and private sector
 to build an international engagement strategy aimed at
the international PPP and infrastructure press and
overseas investors and operators to publicise Liberia’s
programme and projects
 to prepare project specific communications and focused
engagement in order to detail project benefits and
engage with those who will benefit from or have concern
about the planned projects
Key recommendation 6