PPP in Korea. Highlights on its Institutions. Director General Hyoung-Kwon, Ko. Ministry of Strategy and Finance. November 11.

Transcription

1 PPP in Korea Highlights on its Institutions November Director General Hyoung-Kwon, Ko Ministry of Strategy and Finance 1

2 Table of Contents I Framework of PPPs in Korea II Performance Highlights III PPP Policy Direction in Korea 2

3 I. Framework of PPPs in Korea 3

4 1. What and Why PPPs? PPPs Rationale and Role of PPPs Public & Private Partnerships to provide infrastructure facilities and related public services Provides a new option for public service delivery under fiscal constraints Utilizes private sector s efficiency and innovation Provides stable & long-term investment opportunities for the private sector 4

5 2. Eligible Facility Types The PPP Act designates 48 types of infrastructure facilities in 15 sectors as eligible for PPPs. Airport (1) * Positive listing Port (3) Road (4) Railroad (3) 15 Categories Communication (5) Water Resources (3) Energy (4) Environment (5) Welfare (4) Public Housing (1) Forestry (2) Education (1) Military Housing (1) Culture & Tourism Logistics (9) (2) 5

6 3. Stakeholders in PPPs Professional Operator (Maintenance, Operation) Equity Operation Rights Construction Company (Design, Build) Equity Construction SPC Construction Company Operating Company Financial Institution Dividends/Interest Payment Equity/Loan Financial Investor Transfers the ownership of the facility Grants Operational Rights The Government (Competent Authority) 6

7 4. Implementation Methods - BTO Build - Transfer - Operate 1 Construction by the private sector 2 Ownership transferred to government 3 Operation by the private sector IRR is determined through negotiation(8~15%) - BTL Build - Transfer - Lease 1 Construction by the private sector 2 Ownership transferred to government 3 Lease and payment by the government IRR = Reference rate (government bond) + α(80~120bp) Others : BOT, BOO, etc. delivers Service User Private Participant (SPC) Pays usage fee BTO Grants operating rights Transfers Ownership Government User Private Participant (SPC) Transfers Ownership delivers Service Fees(If necessary) BTL Lease payments Government 7

8 5. How Are Projects Selected? 1 Relevance to Higher National Plans (Competent Authority) Road projects must be checked whether or not they are included in the National Land Development Plan or Transportation Plan, etc. (Ministry of Land, Transportation and Maritime Affairs, and Local Government-level) Priority on the roads to be constructed 2 B/C Analysis and VFM Test (KDI PIMAC) (1 st Stage) B/C analysis : B/C >1 (2 nd Stage) VFM Test : VFM >0 (3 rd Stage) Alternative proposal : To suggest optimal cost, toll level, amount of fiscal support, etc. 3 PPP Review Committee (MOSF) Subject to review: BTO KRW 200 billion, BTL KRW 100 billion Other projects are reviewed by their own committees. 8

9 6. Period of Operation Decided in the contract between the competent authority and the private sector concessionaire Within 50 years under the PPP guidelines < Average Operation Period > Road : 30 years (20 ~ 40 years) Railroad : 30 years Port : 50 years (30 ~ 50 years) BTL : 20 years 9

10 7. Government Support Land Acquisition Infrastructure Construction Credit Financial Support Subsidy Tax Guarantee Fund Termination Risk Sharing Measures, etc. Benefits Minimum Payment Revenue Guarantee ( ) 10

11 II. Performance Highlights 11

12 1. Signed PPP Projects in Korea (As of Dec. 2011, Signed Projects only) TOTAL (# of projects) Project Cost (USD) % Completed In construction In preparation TOTAL (600) 79.6 bn (100%) 100% (417) 46.1 bn (143) 22.1 bn (40) 11.3 bn Competent Authority Central Government Local Government (151) 46.6 bn (449) 33 bn (25.2%) 58.4% (75.2%) 41.6% (79) 26.2 bn (338) 19.8 bn (52) 10.9 bn (91) 11.2 bn (20) 9.6 bn (20) 1.8 bn Project Type BTO BTL (200) 57.9 bn (400) 21.7 bn (33.3%) 72.9% (66.6%) 27.3% (144) 34.9 bn (273) 11.1 bn (34) 12.7 bn (109) 9.4 bn (22) 10.2 bn (18) 1.1 bn 12

13 2. Sectoral Analysis BTO Total project costs of signed BTO as of Dec amount to $57.9 bn. BTL Total project costs of signed BTL as of Dec amount to $21.7 bn. 13

14 3. Major Projects: BTO Incheon Bridge Total Project Cost: USD 1 billion IRR = 8.48%(Aftertax real rate of return) Length: 12.3 km, 6 lanes (21.4 km including gov t financed access road) Competent Authority: Ministry of Land, Transport and Maritime Affairs Construction Period: Operation Period: 30 years Busan New Port Total Project Cost: USD 1.4 billion IRR = 9.5%(Aftertax real rate of return) Work Scope: 9 berths (50,000t), 3.2km Competent Authority: Ministry of Land, Transport and Maritime Affairs Construction Period: Operation Period: 50 years 14

15 3. Major Projects: BTO Metro Subway Line no. 9 Total Project Cost: USD 900 million IRR = 8.9% (Aftertax real rate of return) Work Scope: 25.5 km, 25 stations Competent Authority: Ministry of Land, Transport and Maritime Affairs Construction Period: Operation Period: 30 years Landfill Gas Power Plant at Sudokwon Landfill Site Total Project Cost: USD 77 million IRR = 8.44% (Aftertax real rate of return) Work Scope: 50MW (supplies electricity to 180,000 households / year) Competent Authority: Ministry of Environment Construction Period: Operation Period: 11 years 15

16 4. Major Projects: BTL Chungju Apartment Housing Total Project Cost: USD 16.3 million Work Scope: 200 households and convenience facilities Competent Authority: Ministry of Defense Construction Period: Operation Period: 20 years Ulsan National Institute of Science and Technology Total Project Cost: USD 219 million Work Scope: Site 1,028,200m2, Total Floor Area 153,691m2 Competent Authority: Ministry of Education, Science and Technology Construction Period: Operation Period: 20 years Anhwa High School Total Project Cost: USD 0.8 million Work Scope: Site 13,264.03m2, 5 stories Competent Authority: Gyeonggi Province Office of Education Construction Period: Operation Period: 20 years 16

17 5. Key Success Factors Solid Legal Framework of International Standards Clear & consistent implementation procedures regulated by the PPP Act & Implementation Guidelines No discrimination between domestic & foreign investors Strong Government Commitment to support the PPPs Construction subsidy, MRG, risk sharing measures, etc. Technical assistance provided by PIMAC Review of RFPs & PPP contracts, assistance in project evaluation & negotiation, research for PPP policies & guidelines, etc. Central Role of MOSF Development of national PPP policies, guidelines, & fiscal rules Coordination of sectoral PPP plans. Review & approval of PPP projects under national management MOSF convenes the PPP Review Committee when necessary 17

18 III. PPP Policy Direction in Korea 18

19 1. Preserving the Role of PPP Fiscal resources are limited due to increased spending in welfare and the government s effort to expand Korea s future growth engines Private investment will continue to complement the government s limited fiscal resources in public infrastructure investment. BTO BTL Priority given based on economic viability, PPP feasibility, and the potential to alleviate infrastructure bottleneck, etc Roads : In the most congested areas Railroads : Light rail in congested areas Ports: Contingent on varying commercial traffic End user benefit is increased by the timely provision of necessary infrastructure. School Facilities Military housing/leisure facilities Sewage/Sanitary Systems Cultural/Welfare facilities 19

20 2. Fiscal Management Rule 2% Limit Rule - Limited to 2% of the total estimated annual expenditure - Allows flexible fiscal management without placing heavy burden on government expenditure - Estimate of total expenditure on PPPs is less than 1.6% of the government s estimated total annual expenditure * Estimate : 2009 (1.2%) 2013 (1.6%) Government Expenditure on PPPs : Lease Payment for BTL Projects, Land Acquisition Cost for BTO Projects, Construction Subsidy, and Minimum Revenue Guarantee (MRG) 20

21 3. Korea s Knowledge-sharing Initiative Establishes new strategic partnerships by transferring Korea s PPP experience to the developing economies. Infrastructure development is essential for strong, sustainable, and balanced economic growth Fiscal resources in the developing economies may not be sufficient to satisfy their infrastructure needs. PPPs are increasingly being recognized as a means to complement budget constrains and leverage the private sector s technical innovation. By leveraging the resources and technology of the private sector, the necessary infrastructure can be supplied in a timely manner in the highest construction quality with the greatest value for money. Korea is committed to sharing its PPP knowledge, experience, and best practices with the developing economies by engaging in: Joint-research initiatives Mutually-beneficial support programs Regional cooperation initiatives 21

22 4. Bilateral Cooperation Obstacles to PPPs in the Developing Economies Many developing economies are considering PPPs as a powerful alternative to traditional procurement of infrastructure such as energy, water supply, ICT facilities, etc. However, it is difficult to attract private investment when the government lacks fully developed policies and legal framework, and adequate experience in project development and management. Customized to Each of our Partner Countries Needs To ensure that every one of our partner country successfully launches a set of PPP policies tailored to their market specific needs, the Korean government provides a Capacity Building Program customized to each country s needs, based on our thoroughly conducted a Needs Analysis Research. 22

23 T h a n k Y o u! 23