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A national investment infrastructure bank {nib} presentation 1 11-11(01)


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Presentation on need for National Infrastructure Bank

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A national investment infrastructure bank {nib} presentation 1 11-11(01)

  1. 1. A National Investment Infrastructure Bank {NIIB} A Preferred Approach to Public Private Partnership [PPP] for Small Developing Countries Eng. Winston Riley F.A.P.E. 02/11/11.  
  2. 2. Involvement of Engineers <ul><li>The Association of Professional Engineers of Trinidad and Tobago as a body “ owes a duty to the public … and shall act at all times with fidelity to public needs.” [Code of Ethics APETT] </li></ul>
  3. 3. The United Kingdom - NIB <ul><li>Institute of Civil Engineers - ICE </li></ul>
  4. 4. Institute of Civil Engineers[ICE] - UK ICE believes that “ there is consensus across the political spectrum that investment in infrastructure must be maintained in order to <ul><li>ensure the UK's future economic competitiveness,
  5. 5. deliver energy security and
  6. 6. underpin the transition to a low carbon economy … </li></ul>
  7. 7. ICE –UK In the last year the ICE has been working with organisations across industry and civil society to:- <ul><ul><li>Examine how the UK can improve processes for strategic planning and prioritisation and co-ordination of infrastructure development.
  8. 8. Develop new thinking on the future funding and financing of UK infrastructure
  9. 9. Unlock new sources of funds and ensure value for money from investment </li></ul></ul>
  10. 10. Action identified in ICE report <ul><li>Reduce perception of high risk by private investors
  11. 11. Identify clear and secure funding streams
  12. 12. Provide mechanisms to direct savings to infrastructure investment </li></ul><ul><li>Provide a center of expertise accessible to the Public Sector
  13. 13. Create a NIB to contribute to these policy goals </li></ul>
  14. 14. CANADA - PPP <ul><li>Association of Consulting Engineering Companies
  15. 15. (ACEC) </li></ul>
  16. 16. Understanding Public Private Partnership in Canada - Some conclusions <ul><li>“ PPP is a valid form of project delivery when used in the appropriate circumstances.”
  17. 17. PPP is not a panacea
  18. 18. “ Properly executed, conventional delivery models can deliver many of the benefits of PPP.”
  19. 19. the greatest benefit for both the public owner and the private sector PPP partner generally occurs when the asset is large and the private sector is contracted to maintain and operate the asset for 25 to 35 or more years </li></ul>
  20. 20. PPP IN THE CANADIAN CONTEXT The Canadian Council for Public-Private Partnerships (CCPP) defines PPP as follows: <ul><li>“ First, it relates to the provision of public services or public infrastructure arrangements.
  21. 21. Second, it necessitates the transfer of risk between partners. </li></ul>Arrangements that do not include these two concepts are not technically 'public-private partnerships' ”
  22. 22. NO FINANCING INVOLVED FINANCING INVOLVED Design-build Build-own-operate Management contract Joint development agreement Design-build-operate-maintain Design-build-finance-operate Build-operate-transfer Concession Asset Sale Table 1 Types of PPP Contractual Arrangements
  23. 23. NIIB & PPP
  24. 24. Table 2 PPP Projects Funded 1985-2004 (AECOM) PPP / NIB –Experiences of Canada and UK
  25. 25. What Fuels PPP? <ul><li>Lack of financial resources of Governments to maintain and expand infrastructure networks vital to achieving economic development and stability.
  26. 26. Heavily indebted governments perceive an opportunity to close the infrastructure gap earlier.
  27. 27. The reluctance of Governments to raising taxes. </li></ul>
  28. 28. Findings of The House of Commons Treasury Committee <ul><li>“ Private financing organised by PPP project entities some (4%) more expensive than government borrowings.
  29. 29. Savings from efficiencies using the variations of design-build delivery systems no more than under traditional approaches.
  30. 30. Design innovation and quality of PPP projects sometimes poor compared with projects under the traditional method. </li></ul>
  31. 31. Findings of The House of Commons Treasury Committee <ul><li>The remaining advantages of PPP which have nothing to do with value for money are </li></ul><ul><ul><li>PPP debt can be considered off balance sheet
  32. 32. Government departments use PPP to leverage up their budgets </li></ul><li>Incentives unrelated to value for money need to be removed and stricter rules and guidelines governing PPPs introduced.
  33. 33. PPPs only likely to be suitable where risk associated with future demand and usage of an asset can be efficiently transferred to the private sector.” </li></ul>
  34. 34. Additional Concerns <ul><li>Transparency issues leading to lack of community involvement with its ‘knock-on’ effect on Urban Planning and accessibility to basic information.
  35. 35. The lack of flexibility in long term contracts created major problems for Governments when demand changed. </li></ul>
  36. 36. INITIATIVES BY THE LOCAL ENGINEERING AND CONSTRUCTION SECTOR <ul><li>2010 The Case for a National Investment Infrastructure Bank for Trinidad and Tobago (NIIB TT) </li></ul>
  37. 37. Commitments – Participation and Financing Participation <ul><li>International Finance Corporation (IFC)
  38. 38. Caisse des Depots
  39. 39. Director, Metropolitan Infrastructure Initiative and present Advisor to the Obama Administration on a NIB
  40. 40. The Institute of Civil Engineers (ICE), Great Britain
  41. 41. General Manager Inter-American Corporation for Infrastructure Finance (CIFI)
  42. 42. Caribbean Financial Services Corporation (CFSC) B’dos. </li></ul>Financing <ul><li>Cassie des Depots of France
  43. 43. First Citizen Bank
  44. 44. First Caribbean International Bank
  45. 45. The Caribbean Financial Services Corporation. </li></ul>
  46. 46. Why a NIB for T&T? <ul><li>The budget 2011-2012 projects T&T’s third year of deficit financing.
  47. 47. Funds are available both in the local and international markets at extremely low interest rates.
  48. 48. The local financial Institutions are flush with funds with little investment opportunities
  49. 49. A similar situation exists internationally
  50. 50. In the period 2009-2010 there existed a clear trend towards implementing a PPP model in T&T </li></ul>
  51. 51. Why a NIIB for T&T? <ul><li>The lack of control over the foreign exchange component of projects
  52. 52. The preference for Design- build coupled with finance provides an efficient suction pump for foreign exchange to leave the country
  53. 53. The institutional and organizational infrastructure for delivery of physical infrastructure is in shambles </li></ul>
  54. 54. The Politics of Procurement <ul><li>1960’s – World Bank and IDB funding conditions privileged the private sector resulting in the deterioration of public sector organisations such MOW
  55. 55. 1970 ’s as a result of the oil bonanza procurement was outsourced through a series of Gov’t to Gov’t arrangements
  56. 56. 1990 ’s inefficiencies in delivery by the public sector led to the creation of several Governments owned organisations in the private sector responsible for infrastructure delivery. </li></ul>
  57. 57. Proposals of Professional Bodies <ul><li>The JCC promoted since 2000, the setting up of a National Roads Authority
  58. 58. APETT has made repeated calls for the setting up of a Transit Authority and a Drainage Authority </li></ul><ul><li>The JCC for the past 8 years has been active in the promotion of procurement reform - procurement legislation if enacted as proposed by the JCC will go a long way in providing a foundation for the regulatory framework necessary for the setting up of the NIB. </li></ul>
  59. 59. Table 3 Economic Intelligence Unit (2009 ) Evaluating The Environment for PPP In Latin America and The Caribbean Trinidad & Tobago Overall Laws Institutional Operational Investment Financial Index Regulations Framework Maturity Climate Facilities Ranking 12 8 (tied) 9 (tied) 19 6 5 (tied) Score 22.9 25 25 4.3 64.3 58.3
  60. 60. NIIB The Way to Promote Public Private Partnership <ul><li>It allows the private sector to be involved in funding public sector projects and is an improvement on relying on current modes of Public Private Partnership (PPP) arrangements as it delinks the financing from the contractual arrangements. Once the contractual arrangements are linked to the financing under design build delivery systems the owner loses control of the project on signing of the contract. </li></ul>
  61. 61. POSITIVE EFFECTS OF A NIIB <ul><li>Greater owner control over the process during the design, construction and operating stages of the project
  62. 62. Better management of risk transfer mechanisms.
  63. 63. The existence of a NIIB promotes long term planning of infrastructure on a sector basis.
  64. 64. Plays a defining role in improving the Operational Maturity of the country
  65. 65. Financial institutions can now play a more defining role in the development process </li></ul>
  66. 66. POSITIVE EFFECTS OF A NIIB (cont.) <ul><li>Reduction of political risk.
  67. 67. Greater control over the use and monitoring of foreign funds for investment in infrastructure
  68. 68. Promoting of planning through existing organisations and the setting up of organisations
  69. 69. A more organized and sustainable construction sector by ameliorating the boom and bust scenario
  70. 70. A stable labour market
  71. 71. Maintenance of a skilled labour force
  72. 72. Standardisation and industrialisation of design, construction and maintenance processes. </li></ul>
  73. 73. Important Metrics <ul><li>The return on investment (ROI)
  74. 74. A cost benefit analysis (COBA)
  75. 75. The social return on investment (SROI) </li></ul>
  76. 76. SIX STEP METHODOLOGY <ul><li>Establishing scope and identifying key stakeholders .
  77. 77. Mapping outcomes
  78. 78. Evidencing outcomes and giving them a value .
  79. 79. Establishing impact.
  80. 80. Calculating the SROI .
  81. 81. Reporting, using and embedding . </li></ul>
  82. 82. TAX AS A MECHANISM FOR FUNDING A NIIB More Productive use of Government Subsidies . It will be imprudent to remove subsidies and at the same time impose fuel taxes. Examine how subsidies can be reduced e.g some of the funds that go to Petrotrin be placed as assets in the NIIB to go towards road infrastructure projects
  83. 83. SUMMARY <ul><li>Favourable environment for developing a unique model of a NIIIB
  84. 84. Encourages medium and long term planning
  85. 85. Supports job security in the construction sector
  86. 86. Greater transparency </li></ul><ul><li>Builds trust with the private sector and strengthens their involvement in the society
  87. 87. Promotes the engagement of local professionals </li></ul>
  88. 88. Thank You