Public-Private Partnership Days 2010

Public-Private Partnership (PPP) Days 2010 brought together more than 250 mostly public sector officials from 40 countries to review the impact of the global financial crisis on PPP activities, the outlook for PPP projects in the short and medium term, and the implications for government policies.

The three-day event at the Asian Development Bank (ADB) in Manila, Philippines, stimulated active discussion on a broad range of issues impacting PPP projects in key sectors and at various stages of planning and implementation. It was organized by ADB and the World Bank Institute, with support from ADB Institute; the Department of Finance, Philippines; the Development Academy of the Philippines; the International Finance Corporation; the Multilateral Investment Fund (FOMIN), a member of the Inter-American Development Bank Group; and the World Bank. ADBI's support was a continuation of its work with the Multilateral Public Private Partnership in Infrastructure Capacity Building Initiative (MP3IC).

PPP Days 2010 was targeted at mid to senior-level government officials in developing countries across the Asia-Pacific region and worldwide with PPP policy, management, and technical responsibilities at the national and sub-national levels. It aimed to improve their ability to influence PPP development in their country by sharing knowledge and country experiences, and profiling best practices in a range of sectors related to priority policy issues that currently constrain developing countries worldwide in accelerating PPP programs.

The environment for PPP projects in Asia and globally has been severely impacted by the financial crisis. In its February 2010 Assessment of the impact of the crisis on new private participation in infrastructure projects – Update 5^*, the World Bank found that on a global basis private activity as measured by number of infrastructure projects was slower in 2009 than before the financial crisis. The number of projects reaching closure was 27% lower in the third quarter of 2009, and 10% lower in the first three quarters of the year, than in the same periods in 2008, according to the Update.

The Update notes that market participants report reduced availability of commercial bank lending and a “flight to quality” by investors and financiers. As a result, “new projects are facing higher financing costs… [and] for projects able to raise financing, the conditions are more stringent, with lower debt/equity ratios, shorter tenors, and more conservative structures.”

Given this context, and recognizing the unique nature of each national market, several themes came out of event discussions.

Government interest in PPP approaches is rising. While the number of new PPP projects coming online has declined since the onset of the global financial crisis, event participants noted broad rising interest in PPP modalities among developing country governments. Growing pressure on state budgets has made PPP approaches increasingly attractive options to develop public infrastructure while limiting public investment.

At the same time, the global financial crisis has reduced the availability of private financing. A rising number of project proposals and a shrinking pool of potential investors and money have increased competition among countries, regions, agencies, and individual projects seeking financing.

This has sharpened attention on governance issues in individual markets. The reduced number of investors actively seeking and able to finance deals are increasingly selective and demanding. Key issues highlighted by private sector speakers include the need for countries to establish a clear regulatory and legal framework for PPPs at the national and sector level, certainty in legal processes, and a well-defined flow of deals to attract high-quality and sustained private sector interest.

The need to improve the capacity of government officials to develop and implement such frameworks and to interact productively on individual deals with private sector investors was highlighted as a critical challenge facing many countries in Asia and around the world. Speakers noted the large gap between the public sector in most countries and the private sector in terms of resources, knowledge, and experience with structuring, negotiating, and managing PPP projects.

More information on PPP Days 2010 including access to presentations and related papers is available at www.pppnetwork.info^*

* These links take you outside the ADBI.org website