A Tale of Two Sisters: Bangladesh and Philippine PPP Programs 26 November 2014

Transcription

1 A Tale of Two Sisters: Bangladesh and Philippine PPP Programs 26 November 2014 Presented at the UNESCAP PPP Workshop on Public-Private Partnerships for Infrastructure Development in Myanmar

2 Background In early 2010, the governments of Bangladesh and Philippines both recognized a need to completely overhaul their approach to private participation in public infrastructure ADB, responding to this need, embarked on two Technical Assistance programs for national PPP framework development: Bangladesh December 2010 Philippines February 2011 ADB staff worked jointly to design the programs, drawing on Outline national policies generated by each government Each country s prior experience with PPPs both successes and failures Both countries had initially successful attempts at PPP in the late 1990s Neither repeated these successes for about 10 years at the time of the TA Drew on ADB s state-of-the-art knowledge of what elements were required for a workable, robust PPP program

3 Common principles, common design The following slides present the common elements of the Bangladesh and Philippine PPP programs The elements of these programs are now the standard by which successful national PPP programs are measured The World Economic Forum and the G-20 have both recognized the Philippine PPP program and its structures as the recommended approach for countries pursuing PPP G-20 Development Working Group Assessment of the Effectiveness of Project Preparation Facilities in Asia and Africa September World Economic Forum Accelerating Infrastructure Delivery: new evidence from international financial institutions September Why aren t we hearing the same things about the Bangladesh program?

4 Common elements of the PPP programs Central PPP Office A professionalized team led by a CEO with private sector experience Office sits above sector line ministries, serving all Empowered by the President/Prime Minister under both political and bureaucratic mandate to take control of the national development of PPP Enhanced Project Identification Objectively screen proposed projects from sector ministries/depts Use common criteria Assure they are viable as PPP Enhanced Project Preparation Use professional external advisors/consultants to prepare projects Preparation criteria in line with international project finance standards Development of robust project-level contracts that protect the interests of government, assure reasonable risk allocation, and are bankable Assure all preparatory work is done before letting out for tender

5 Common elements of the PPP programs Dedicated Project Development Funding Establish a fund that is used solely for PPP project preparation Allows coverage of the higher costs of professional advisors outside ordinary government operating budgets Fixed, objective criteria for consultant procurement and access to funds Transparent Tendering Process Standardized tendering process, outside ordinary govt procurement law Focused on achieving high quality output performance from projects (versus specifying inputs and quantities, like ordinary public sector procurement) Standardized prequalification documents to assure bidders have proper experience with building, financing and operating PPP projects Standardized request for proposal documents to assure bidders have all the information they need to lodge a firm proposal on an equal basis

6 Common elements of the PPP programs Consideration of PPP Project financial viability Seek to limit subsidies and rely on user fees wherever possible Seek to limit financial risk exposure of the government to PPP contracts, subject to the principle of fair risk allocation (party gets a risk who is best able to manage the risk) Subject to strict criteria, where a project is economically beneficial but commercially challenged, provide subsidies or viability gap financing from government, but limited to a maximum amount Public Financial Management Seek to quantify budget impacts and long-term liabilities that arise from PPP contracts Report on these metrics to Finance Ministry/Dept Track cumulative impacts of PPP program Monitor and manage exposures, currency Use as lever for driving future reforms at sector level

7 Bangladesh PPP structure CCEA provides: In-Principle Approval to proceed with project development Approves final project Line Ministry: Originates projects Prelim studies Technical resources Ultimate project ownership, regulatory oversight Planning Commission Sanctions Line Ministry development program Dept of Environment Compliance with environmental laws, approvals = PPP-specific functions = Other Govt functions Cabinet Committee on Economic Affairs Line Ministry Reviews and Approvals Law Ministry Contract vetting Project proposal Development coordination led by PPPO PPP Project PPPO PPP Office MOF PPP Unit PPPO determines which projects can access /need skills and financial support for project development Ministry of Finance Skills: Advisor Pool + Devel Money: PPP TA Fund PPPU reviews project proposals prepared by PPPO for financial vetting, quantifies and applies for financial supports Sanctions funding and supports VGF Budgeted Subsidies Guarantees 7

8 Philippine PPP Office Structure Independent Fund Manager Project Development and Monitoring Facility Hires and manages external advisors NEDA Office of the Exec Director PDMF Mgt Service Legal Service Policy Formulation & Evaluation Service Project Development Service Capacity Building & Knowledge Mgt Service Administrative Service Policy Formulation Project Development Mgt Information Svcs Finance Policy Evaluation & Monitoring Project Management Knowledge Mgt Human Resources Bulk of staff and services from this unit Capacity Building General Services

9 Actions taken Bangladesh Location Moved PPP functions from Board of Investment to under the Prime Minister s Office Staffing Established office with 6 govt administrative staff govt office Hired professionally experienced CEO Hired 6 staff professionallyoriented staff from govt cadre Fiscal oversight by MOF PPP unit Administers subsidies and support funds, against criteria Support funding from government PDF: $12m VGF: $325m Infra Fund: $200m Philippines Location Moved PPP Center from Dept of Trade & Industry to National Economic Development Authority Staffing Hired professionally experienced CEO Hired 20 professional staff initially Quickly began adding staff with growth in work load Fiscal oversight responsibility of PPP Center, initially Support funding from government Established PDMF: Initially, $13m Increased in increments to $90m Contingent Liabilities Fund: $200m

10 Outcomes to date ( ) Metric Bangladesh Philippines Office staffing: Initially (2Q2011) Now (4Q2014) (Professional/Total) 1/6 7/19 (Professional/Total) 16/20 75/100 Sectors being covered 7 8 Projects screened > 200 > 200 Projects identified Projects at concept stage 9 11 Projects procuring advisors 11 9 Projects under preparation 8 11 Projects tendered 4 15 Projects awarded 1* 8 * Project awarded before PPP framework and procedures completed; project currently stalled due to deficiencies in project preparation and contracts.

11 Challenges encountered both countries Project identification: First round is a battle with sector line ministries/departments Typically initially throw weak, non-viable or leftover projects at PPP unit Not used to having someone else vet their projects and have the full authority to do so Haven t had to think about performance outcomes previously, mostly focus on inputs and quantities Lack of understanding of commerciality, bankability, risk allocation Consultants/Advisors Procurement of transaction advisors requires material amounts of PPP staff time and effort and must be factored into development timeline Traditional national procurement standards may not be appropriate for advisors; focus is on quality and experience, less on cost Consultants/advisors need oversight, require PPP units to obtain key decisions from government ministries, both in sector and with umbrella level rules/policies

12 Challenges encountered both countries Project management in development PPP unit staff must have hands-on management of all aspects of the PPP project development process There must be sufficient staff of appropriate quality to manage projects Need to liaison with govt ministries on sector-based inputs, integration with other existing programs/infrastructure Need to support garnering of approvals, permissions from other govt bodies for the projects Tendering PPP units face tremendous pressure from government to get projects out the door, often before they are fully ready Evaluation of projects based on technical competency on a pass/fail basis worries technocrats Government ministries try to avoid key sector issues that impact project economics or ability to implement; this leads to challenges in developing fully-formed project contracts Staffing Never enough! Need procurement, legal, financial, and tech staff

13 Next steps in evolution Bangladesh Petitioning govt for more staff, outside of govt pay scale Greatly needed to accelerate consultant procurement, administer to projects under development/bidding, consult with govt ministries Exhausting PPPTAF monies; petitioning for top-up Nearing first success in 1Q15 Govt in need of proof of concept ahead of additional funding; will that be too late? Philippines Moved fiscal oversight unit out of PPP Center to Dept of Finance, creating adversarial review process Will manage quantify, track, and manage contingent liabilities arising from PPPs Near term prospects to get recycling of PDMF funds from awarded projects Govt is not topping up the PDMF as a result (not necessarily negative!)

14 Lessons learned Political will and leadership is of paramount importance Empowerment and independence of PPP unit is essential PPP unit leadership must be of highest professional quality Staffing quantity and quality of high importance; has material impact on speed, efficiency and quality of outcomes Clear, consistent, reliable rules, processes and institutional application is key to attracting investors and lenders Sustained commitment of government funds and resources required Adequate TA funding required upfront with external support from development partners ($1.725m in BAN vs $7.20m in PHI) Projects take longer to prepare and tender than initially anticipated: PDF monies need to be sized to account for this Once initial projects are through the process, it gets easier Outcomes from transparent competitive tendering have yielded High quality participants Value for money proposals

15 PPP, done correctly, can deliver too for Myanmar Public-Private Partnerships can be a key component of national development Creates additional sources of investment Can deliver higher efficiency and performance Complements public sector/sovereign investments Better manages national finances, and contingent liability exposures But getting it right is important There is a proven formula for success in PPP Grounded in the principles of international project finance Evidence shows that varying from this formula usually results in sub-optimal outcomes Structuring and tendering PPPs correctly requires Skills technical, legal, financial/commercial Project development capital to hire skills, conduct studies Informed management to drive outcomes, manage results National oversight of financial impacts for sustainability PPP holds potential for Government to achieve significant development investments at lowest cost and highest quality

16 ADB Contacts J. Grant Hauber PPP TA Project Manager and Principal Public-Private Partnership Specialist Public Management, Financial Sector and Trade Southeast Asia Department T: M: M: Thatha Hla Financial Sector Economist Public Management, Financial Sector and Trade Myanmar Resident Mission, Naypyitaw thla@adb.org T: M:

17 Bangladesh PPP structure Prime Minister PPP Advisory Committee Policy Consultation CEO In-Principle and Final Project Approvals Cabinet Committee on Economic Affairs Central point of PPP coordination for internal government, external investor, lender and civil society stakeholders. Screens, supports development of PPP projects, administers tendering, negotiates, and supports financing process on behalf of Government, specifically sector line ministries Core of PPP Program Creates and sanctions Annual Development Plan (ADP), which includes identification of specific development projects and associated capital budget allocation. Responsible for development of Five-year Plans Planning Commission Proposed development program PPP Office (PMO) PPP Project Proposals Line Line Ministries Line Ministries Line Ministries Ministries Fiscal Sanctioning of Individual PPP Projects Budget Allocation Sanctioned Projects and Expenditures in ADP PPP Unit (MOF) Finance (MOF) Fund Allocations Assesses fiscal viability and risk of PPP Projects Sanctions VGF, Subsidies Monitors Contingent Liabilities Sanctions and Administers Budgets for: Annual Development Plan (capital expenditure budget) Non-plan Budget (annual operating budgets) Special allocations for funds, such as PPPTAF, VGF, BIFF