Urban Development - Investing in the business potential of displaced people in cities like Freelandia’s capital city of Quema and to identify the biggest risks for these opportunities

1. URBAN DEVELOPMENT - INVESTING IN
THE BUSINESS POTENTIAL OF
DISPLACED PEOPLE IN CITIES

2. INTRODUCTION TO THE STUDY
• Freelandia’s capital city of Quema is experiencing rapid urbanization as
32,000 Andrivian refugees and 18,000 Internally Displaced People (IDPs)
have moved to informal settlements around the city. The massive influx of
displaced people has strained infrastructure and municipal services causing
frequent blackouts, housing shortages, and limited water and sanitation
services
• Differences in access to services, assistance and resources have emerged
between those living in camps and those living outside them. Gated
communities for wealthier residents are being built amid security concerns.
Access to power and water is limited in the settlements and there is a black
market for them. Quema’s residents, whether displaced or not, face the
challenge of finding sustainable livelihoods.

3. • Freelandia is requesting financial support from the international
community as compensation for providing what it regards as a global
public service - hosting refugees from Andivia. A significant portion of
international aid for refugees has been geared towards repatriation
and improving conditions for their return to Andrivia.
• Freelandia has several SMEs owned or operated by refugees. Most
work informally without work permits, many are women. The local
government is negotiating with the government of Freelandia to
introduce a work visa program for refugees to formalize their
employment. Meanwhile, an association of refugee women business
owners in Quema has applied for a microfinance program offered to
women entrepreneurs by a private bank. Back2Business, an
international NGO received funding from international donors to start
an incubator with urban refugees in the settlements.

4. PUBLIC PRIVATE ALLIANCE OPPORTUNITIES WHICH
MUTUALLY BENEFITS BOTH THE SECTORS
• Utility Restructuring, Corporatization and Decentralization
• Civil Works and Service Contracts
• Management and Operating Agreements
• Leases / Affermage
• Concessions, Build-Operate-Transfer (BOT), Design-Build-Operate
(DBO)
• Joint Ventures and Partial Divestiture of Public Assets Full Divestiture
• Full Divestiture
• Contract Plans and Performance Contracts

5. OPPORTUNITIES TO LIFE
•Better infrastructure solutions than an initiative that is wholly public
or wholly private. Each participant does what it does best.
•Faster project completions and reduced delays on infrastructure
projects by including time-to-completion as a measure of performance
and therefore of profit.
•A public-private partnership's ​return-on-investment (ROI) may
be greater than traditional, entirely private or government methods
because innovative design and financing approaches become available
when the two entities work together.
•Risks are fully appraised early on to determine project feasibility. In
this sense, the private partner offers a brake on unrealistic government
promises or expectations.

6. •The operational and project execution risk is transferred from
government to the private participant, which usually has more
experience in cost-containment.
•Public-private partnerships may include early completion bonuses that
further increase efficiency. They can sometimes reduce change order
costs as well.
•By increasing the efficiency of the government's investment, it allows
government funds to be re-directed to other important socio-economic
areas.
•P3s' greater efficiency reduces government budgets and budget deficits
•High-quality standards are better obtained and maintained through
the life-cycle of the project.
•Public-Private partnerships that reduce costs also allow lower taxes.

7. BIGGEST RISKS FOR THE OPPORTUNITIES
• Every Public-private partnership involves risks for the private participant,
which reasonably expects to be compensated for accepting those risks,
which can increase government's costs.
• When there are only a limited number of private entities that can perform
these tasks -- the development of a jet fighter for instance -- the limited
number of private participants big enough to take on these tasks may limit
the competitiveness required for cost-effective partnering.
• Profits of the projects can vary depending on the assumed risk, competitive
level, complexity, and volume of the project being performed
• If the expertise in the partnership lies heavily on the private side, the
government is at an inherent disadvantage. It may be unable to accurately
assess the proposed costs,

8. INNOVATIVE FINANCING MECHANISMS THAT COULD
BE DEPLOYED
• Project equity finance
• Balance sheet finance
• Debt instruments
• Hybrid instruments
• Equity instruments
• Market vehicles