TRADE & FINANCE 31
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“ Once the necessity and priority of projects are confirmed, the government needs to determine how to deliver the investment, and here, value for money is key.”
Across the region, countries are generally trying to improve their infrastructure investment climate and implement significant PPP regulatory and institutional reforms. For example, ASEAN countries such as Philippines, Indonesia, Thailand, and Viet Nam are in the process of revising their existing PPP acts and regulations. Further strengthening PPP units and establishing dedicated project development capacities are also key priorities for many countries, such as Mongolia, Bangladesh, Georgia, Kazakhstan, Kyrgyz Republic and PNG.
Turning to my third point, what are the impediments to more partnerships with the private sector?
While PPPs are gaining a solid foothold, it is also true that there are a lot of impediments and challenges. Although each country has its specific context and issues, we believe that three key areas will make them even more effective.
First, creating an“ enabling environment” is essential to attract private investment. Governments with good PPP track records have typically taken measures such as( i) development of a solid legal and regulatory framework,( ii) establishment of a dedicated PPP unit,( iii) strengthening of the government’ s project development function and capacity,( iv) creation of a mechanism for the government to provide financial assistance to PPP projects, and( v) ensuring integrity and transparency in the procurement process.
Good coordination among government agencies is also a key to attract private investors. Effective mechanisms for land acquisition, resettlement and compensation can help minimize delays in approvals and implementation.
Second, more PPPs can be implemented if governments deepen their knowledge and capacity, particularly in project preparation. It is important to select the right projects to pursue, and to manage fair and transparent bidding. Many governments are still building up their in-house capacity for PPP project preparation and procurement; this is encouraging, but it is a challenge. Along with capacity building, governments can create dedicated project development funds, focused on preparing and structuring bankable PPP projects for private investment.
Third, local and regional capital markets need to be deeper and broader to channel Asia’ s large savings to infrastructure investment. It is also essential to strengthen expertise of local banks in project finance. This is an important technical skill as most PPPs are financed on a standalone basis.
My fourth point is that ADB is very familiar with these challenges. Promoting PPPs is one of ADB’ s key agendas, and we have solid experience in helping governments plan, build and support sustainable PPP programs.
Between 1998 and 2020, ADB supported 406 projects with PPP elements( including sovereign loans, nonsovereign loans, and technical assistance).
Our operational approach is now based upon our PPP Operational Plan which was developed in 2012. I strongly encourage you to download it and read it – it shows how our support covers four areas or pillars, namely,( i) advocacy and capacity building,( ii) enabling environment,( iii) project development and preparation, and( iv) project financing.
Our regional departments are committed to support PPPs in our developing member countries. They provide capacity development, policy reform support, and financing to governments for PPPs. Our Private Sector Operations Department provides financing to the private sector, including companies that are contracted through PPPs. Aside from financing, we recognize the need to support our clients in facilitating, advising and developing PPP projects.
ADB provides formal transaction advisory services to our government clients. For example, we are working with a consortia of national gas companies in order to prepare and tender the 1,800-kilometer Turkmenistan – Afghanistan – Pakistan – India( TAPI) natural gas pipeline project. ADB is the mandated transaction advisor to the consortia, which reached a milestone last year( November 2014) with the incorporation of the TAPI Pipeline Company Limited.
In order to provide this kind of support across the region, ADB is setting up the Asia Pacific Project Preparation Facility or AP3F. This multi-donor trust fund will begin operations sometime during 2015. It will focus on project preparation work, including studies to cover technical, financial, legal, regulatory, and safeguards in preparing well-designed PPPs. And it will prioritize PPP infrastructure projects with regional cooperation, sustainable development, and climate change elements.
Finally, to further strengthen ADB’ s PPP operations, we recently established the Office of Public – Private Partnership( OPPP). This Office coordinates and supports ADB’ s PPP operations, and provides independent advisory services to government clients who need assistance in preparing and structuring bankable PPP projects.