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Some countries and regions were successful in reviving their infrastructure project finance markets in 2015 compared with the previous year, others less so. Overall, there was a slight rise in volumes, with the transport and renewables sectors leading. In 2016, the trend so far has been toward lower volumes and fewer closed deals. This webinar will look at the current trends in infrastructure project finance in major regions of the world from the perspective of the lender.

The Republic of Korea has a long history of PPP. Its early experience consisted of individual legislation for specific projects. In 1994, the government began to formalize its process with the passing of the Act for the Promotion of Private Capital Investment in Social Overhead Capital, which provided the legal framework for the broader use of PPP. The legislation was revised in 1999 to produce the Act for Public-Private Partnerships in Infrastructure, which provided for the establishment of a PPP unit. The Korea Development Institute’s Public and Private Investment Management Center (PIMAC) currently serves as Korea’s PPP unit. From 1994 to 2015, the country implemented 684 PPP projects.

PIMAC is authorized to conduct prefeasibility studies for publicly financed projects with a total project cost of at least W50 billion, where W30 billion or more is subsidized by the State. Under the PPP legal and institutional framework, PIMAC screens and appraises PPP projects during the selection process. Solicited projects costing W200 billion or more for build-transfer-operate projects, or at least W100 billion for build-transfer-lease projects, and all unsolicited proposals are subject to analysis by PIMAC.

In Korea, potential PPP projects are identified by line ministries, or the private sector in the case of unsolicited proposals. As part of the feasibility assessment, projects (publicly financed and PPP) are subject to the Analytic Hierarchy Process, which includes economic, policy, and balanced regional development analyses. Following this process, projects go through project appraisal, where qualitative and quantitative (including value-for-money) analyses occur. If a project successfully completes this process, PIMAC will recommend it for procurement as a PPP.

The Netherlands has a rich history of private participation in the development of its public infrastructure, dating back to the country’s beginnings in the sixteenth and seventeenth centuries. However, the idea of formalized PPP immigrated to the Dutch political establishment in the 1980s from the United Kingdom’s experimentation with private finance initiatives. As a solution to the country’s budgetary woes, the Dutch government attempted PPP for a couple of tunnel projects at the end of the decade. Unfortunately, these projects experienced cost overruns and unpopularity, and the idea was abandoned for future projects until the late 1990s.

In 1999, the Ministry of Finance established the PPP Knowledge Centre, which drove much of the policy discussion on PPP until 2006. In 2004, the European Commission published a Green Paper on Public-Private Partnerships and Community Law on Public Contracts and Concessions. This paper currently serves as the legal guidance for Dutch PPP, and served as a catalyst for additional PPP development in the Netherlands. In 2006, the Ministry of Transport, Public Works, and Water Management started a PPP unit, beginning a rigorous campaign for PPP development. The success of this unit was followed shortly thereafter by the Ministry of Housing, Spatial Planning, and the Environment developing its own PPP unit, and later by the Ministry of Agriculture, Nature, and Food Quality. Cooperation between these three units led to the fast development of the Netherland PPP market and best practices, including standardized contracts, uniform reporting to Parliament, and standardized risk matrixes. This work precipitated project responsibility to fall to the executing ministry, with essential framework developments from the Ministry of Finance.

The Netherlands has developed its PPP selection process over the past decade, paying special attention to streamlining and publicizing the process to attract potential investors. The idea of creating an efficient and expeditious process was developed from the necessity to attract the private partners drawn to the larger PPP markets in France and the United Kingdom. This is also why the Netherlands only procures Design-Build-Finance-(Operate)-Maintain PPP projects. The Netherlands developed a small but dedicated group of civil servants, fostered by PwC, to create an enabling PPP environment. The Dutch approach to PPP selection is encompassed in three main analyses: Market Scan, Public-Private Comparator, and Public Sector Comparator.

In 1997, the South African Cabinet approved an inter-departmental task team to create a package of policy, legislative, and institutional reforms to create an enabling environment for PPPs. To facilitate this work, several pioneering PPPs were carried out by the South African Roads Agency, Department of Public Works and Correctional Services, South African National Parks, and two municipalities. The lessons learned from these preliminary projects helped in the development of a strategic framework for PPPs in 1999. The Parliament of South Africa passed the Public Finance Management Act (PFMA) in 1999. In 2000, the National Treasury enacted Treasury Regulation 16 in terms of the PFMA, which outlined the definitions and functions of PPP. This led to the establishment of the PPP Unit within the National Treasury and the publication of the Public Private Partnership Manual in 2004, which has since been updated to reflect changes to law and policy.

The Government Technical Advisory Centre (GTAC) provides specialized analytical support to the National Treasury for the assessment of proposed large infrastructure investments. Project appraisals of megaprojects are undertaken to determine the likely economic and financial viability of the project, particularly where financial support is being requested from the fiscus. GTAC also performs related types of analysis, such as the likely impact of infrastructure investments on the financial sustainability of public utilities, financial cost comparisons of different elements of proposed investment programs, and potential funding mechanisms for infrastructure projects and programs. GTAC’s aim is to ensure that support is provided to the government in identifying public projects that offer the greatest value for money and contribute the most toward promoting economic growth and social welfare. The Capital Projects Unit has developed in-house methodologies for assessing projects and programs.

GTAC seeks to assess proposals based on their value for money. Value is the economic and social activities the infrastructure supports, and money is the cost to put the infrastructure in place. The Capital Projects Unit assesses a proposal’s value for money by examining its social and economic context, demand, viability, financial aspects, and project deliverability.

Afghanistan, like many developing countries, has been seeking ways to develop and improve infrastructure within the framework of limited fiscal capabilities. In recent years, the World Bank Group has been working with the Government of Afghanistan on increasing private participation in infrastructure. Public-private partnerships are increasingly seen as a means to harness private innovation and finance while the government maintains ultimate ownership and insurance of the public interest. Although procuring infrastructure projects through PPP methods may be more efficient and provide greater value for money, the pre-tender project development costs tend to be higher than those associated with traditional procurement. In an effort to reduce waste in resources, it is important to have an effective methodology and tools to aid in identifying and screening potential PPP projects before resources are utilized in a full feasibility analysis. In 2015, the World Bank Group assisted the Government of Afghanistan in legal and regulatory reform to foster the growth of PPP. One of the products of this effort was the development of the PPP Suitability and Prioritization tool. This tool seeks to streamline the PPP process and ensure that resources are only used for proposals with a greater chance of viability.

This is a joint initiative of the World Bank Group and the PPP Unit Kenya. PPP projects of all sizes have faced challenges securing commercial financing. Governments have therefore attempted to improve the bankability of projects using key support instruments in the form of equity, debt, grants, guarantees, fiscal incentives, and specific contract clauses based on project needs. Often governments do this on a case-by-case basis through customized solutions, and it can also be done by preparing frameworks and standard operating procedures for the use of these instruments. All of these instruments, particularly grants and guarantees, can be powerful mechanisms of risk sharing provided they are used judiciously. This webinar will look at the role of tolls, viability gap financing, and other forms of funding and financing required to make PPPs in Kenya successful. There will be a focus on issues in financing and funding Kenya’s flagship PPP projects in the transport and social sectors.

Globally, social enterprises are significant contributors to economic growth and prosperity - they provide a source of income and employment for themselves, create employment for others, produce innovative products and/or services, contribute to skills development and drive greater upstream/downstream value-chain activities. Housed within T&C, the Social Enterprise innovations program supports using social enterprises to improve the lives of those living in extreme poverty. The program identifies innovative business models in service delivery to the base of the pyramid with evidence of social impact. It then aims to realize the potential of these enterprises to be scaled, replicated or mainstreamed through public or private channels of service delivery, including Bank operations.

An increasing number of WBG projects are targeting social enterprise sector as an emerging new area of public policy: several countries seek to stimulate private sector contribution to development outcomes, and social enterprises could be important players in that agenda. However, those seeking a middle ground between for-profit and non-profit sectors to enable social enterprise have found data, policy research and legal frameworks to be lacking. The webinar will present the WBG work and findings in this areas and generate discussions about the lessons from various countries.

While legal and regulatory frameworks enable the creation and implementation of PPPs, it is important that there is a second tier of institutions and processes to facilitate the implementation of the law, regulations, rules, and policies. In the absence of these institutions, PPPs are less likely to come to fruition, or may develop much more slowly. In addition, the entities entrusted with specific roles and responsibilities under legislation are unable to fulfill their responsibilities appropriately.

This webinar will discuss the quality of PPP institutions, their influence, authority, maturity, and impact on PPP implementation in Kenya.

Kenya’s PPP Act of 2013 requires every PPP project to be assessed for its impact on the government’s balance sheets. The assessment is mandated to take place at the feasibility stage, following the completion of negotiations with the preferred bidder, and at any point during a project when amendments or modifications to the contract change the government’s fiscal exposure.

Based on the legal mandate, a fiscal commitment and contingent liabilities management framework has been created in Kenya with the Public Debt Management Office (PDMO) as one of the key drivers of the process. Kenya is among the first lower-middle income economies to develop such a framework. This webinar will discuss the framework, its development, and implementation, as well as its implications for Kenya’s PPP program.

Brazil, Latin America’s largest economy, has had broad experience with PPPs, and since the global economic slowdown in 2009, the Brazilian government has further prioritized infrastructure investment. As host of the World Cup in 2014 and the Olympics in 2016, Brazil is seeking to overcome its infrastructure gaps. Brazil has undertaken PPP projects at the federal and subnational levels. The 2014 Economist Intelligence Unit Latin America & Caribbean Infrascope categorizes Brazil’s PPP readiness as developed, and places it within the top two in the region. The discussion will provide the audience with the latest market trends and state of PPPs in the country. Based on the current political and economic conditions in the country, the speaker will address the importance of the enabling environment for PPP market development.