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

1. 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

2. Outline
Background
General
SituaIon
Country
Fiscal
Landscape
PPP
Trends
Challenges
Lessons

3. 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

4. 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.

5. 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.

6. 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

7. 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.

8. 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

9. 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)

10. Financing
Infrastructure
(incl.
ASEAN
ConnecIvity)
Background
General
SituaIon
Country
Fiscal
Landscape
PPP
Trends
Challenges
Lessons

11. 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

12. 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

13. 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

14. Financing
Infrastructure
Background
General
SituaIon
Country
Fiscal
Landscape
PPP
Trends
Challenges
Lessons

15. 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.

16. 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.)

17. Financing
Infrastructure
Background
General
SituaIon
Country
Fiscal
Landscape
PPP
Trends
Challenges
Lessons

18. 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

19. 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

20. Financing
Infrastructure
Background
General
SituaIon
Country
Fiscal
Landscape
PPP
Trends
Challenges
Lessons

21. 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

22. 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.

23. 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.

24. 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.

25. Thank
You
for
Your
ARenIon
fauziah.zen@eria.org