USAID Workshop: Infrastructure for Rebuilding and Developing Countries. Conflict, Infra Reconstruction and Small-Scale Private Service Providers

Transcription

1 USAID Workshop: Infrastructure for Rebuilding and Developing Countries Conflict, Infra Reconstruction and Small-Scale Private Service Providers December 19 th, 2007 Jordan Schwartz The World Bank 1

2 Understanding the role of the private sector in reconstruction and basic service provision What are the growth and aid patterns of conflict-affected countries? How does this relate to their ability to leverage the private sector to rehabilitate their infrastructure? Is there really an infrastructure investment gap for post-conflict countries? If so, how big is the gap? and in what sectors? What is the timing of investments? Does it differ according to the State s functioning capacity? What is the relationship between perceptions of risk and the willingness of the private sector to invest in infrastructure? 2

3 Patterns and Policy Options: Sources of analysis Data from PPI Database, Euromoney Country Risk Indicators, World Development Indicators, Doing Business Data, Surveying of REEs in Cambodia2001, Meta-analysis of SPSPs , SPSP Surveying Case analysis, statistical outliers and review of PPIAF reports Broader literature on post-conflict development 3

4 Background Data: Income, Infrastructure, Growth and Aid 4

5 Distribution of World Infrastructure Stock, by Income Level 100% 90% Low Income $ % Middle Income 70% 60% 50% High Income 60% 40% 30% 20% 39% 45% 28% 10% 0% 16 % 13 % $800 $1600 Share of Population Share of Infrastructure Stock Individual s Share of World Infrastructure Stock Value 5

6 Distribution of Conflict Countries, by Income 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 30% Low Income Middle Income High Income 44% 25% Share of World's Countries by Income Level 61% 39% Share of World's Countries that Are Post-Conflict 76% 24% 0% 0% Share of World's Countries that Are Non-Functioning States and Post-Conflict 6

7 Indicators of Access, Use and Quality of Infrastructure Category of Infrastructure Sub- Saharan Africa Conflict- Affected a Sub- Saharan Africa Non- Conflict a/b Republic of South Africa High Income Countries Electricity: kwh used per capita c ,793 8,421 Telecommunications: Fixed and mobile lines per 1000 people ,283 Roads: % of that are paved 13% 27% 20% 93% Water: % of population with access to improved water d 52% 67% 86% 96% 7

8 GDP, AID and GROWTH: Diminishing Returns Average GDP Growth and Aid as Percent of GDP from End of Conflict 20% 15% 10% 5% 0% -5% Year After Conflict GDP Growth ODA as % of GDP 1. Aid Floods In 2. GDP Grows 3. Aid as % of GDP Declines 4. GDP Growth Rate Declines -10% -15% 8

9 Prototypical response to infrastructure needs in post-conflict countries Donor-driven contracts for rehabilitation and emergency operation that are not linked to long-term arrangements Reliance on pre-conflict institutional and structural arrangements for infrastructure provision, regardless of current applicability. Postponement of regulatory and structural reform of infrastructure in the face of so many urgent policy initiatives. The emergence of small-scale private investor-operators offering basic services without the benefits of debt financing, scale economies, official recognition or quality-of-service regulation. 9

10 Longer-term Solutions: Patterns in Large-scale PPI Investments in Postconflict Countries 10

11 PPI in Non-Conflict, Conflict and Non-Functioning or Weak State Conflict Countries, PPI in Non-Conflict and Non-functioning Conflict Countries, Data from 1990 to 2002 Non-Conflict Countries (107) All Conflict Countries (31) Non-functioning Conflict Countries (25) Average annual GDP $41 bill. $33 bill. $7 bill. Average GDP per capita $1,936 $917 $665 Total PPI $632 bill. $112 bill. $15 bill. Average annual PPI $455 mill. $278 mill. $46 mill. Ratio of PPI to GDP % countries with no PPI 3% 13% 16% 11

12 Post-conflict infrastructure investments: waiting for stability PPI Investment After Conflict 25 PPI Projects After Conflict 2002 US$million El Salvador Rest of Countries Number of Projects El Salvador Rest of Countries Year after Conflict Year After Conflict Minimal investment for 5 years 12

13 Post-conflict infrastructure investments: easy investments first PPI Project Number of PPI Project by Sector Transport Water Energy Telecom Year After Conflict Telecom sector is the first to benefit 13

14 Post-conflict infrastructure investments: uneven sectoral spread Water Road Railway Airport Gas Port Telecom Fixed Electricity Distribution Electricity Generation Telecom Mobile Water Airport Transport Telecommunications Fixed Electricity Energy Generation Network infrastructure and long-term assets less likely to attract investors: Longer return periods Harder to secure (easier to sabotage) 0% 25% 50% 75% 100% Proportion of countries with PPI Projects 14

15 Post-conflict infrastructure investments: Levels of investment tied to perceptions of risk 50 Conflict Countries Both correlations significant Country Risk Rating % 1% 2% PPI as Percent of GDP Non-conflict Countries FDI/GDP in Developing Countries Conflict countries more elastic No correlation for Foreign Direct Investment generally 15

16 Interim Solutions: Local & Diasporaowned Small-scale Service Providers 16

17 Small-scale private provision parallel occurrence and important interim solution World Bank/PPIAF funding of global mapping initiative 16 countries documented with SPSP in electricity: 9 are conflict/p-con 46 with SPSP in water, about half are conflict/post-conflict General observations Almost all equity; no medium-term financing available Usually unlicensed Wide range in cost and revenue structures Unregulated Only alternative for many consumers 17

18 SPSP s: Quicker to mobilize, even without debt financing Energy Investments: Big, Int l & Slow versus Small, Local & Fast PPI Projects Number of PPI Energy projects Gas Distribution Electricity Generation Electricity Distribution Year After Conflict 12% 10% 8% 6% 4% 2% 0% Before 1990 Estimated Annual Establishment of Cambodia's Small-scale Private Electricity Providers, Initial Peace agreement Armed conflict; Coup d etat New elections Debt:Equity = 70:30 Debt:Equity = 30:70 18

19 Energy and Water Supply SPSPs (countries with one or both: water, energy) Source: Coverage data: JMP, SPSP presence: database 19

20 Water Sector Country Data - Overview Type/Country Estimated no. of SPSP Estimated Population served Piped network Point source Cambodia 280 9% of rural pop. with access to improved water sources (35%) Kenya % of rural pop. with access to improved water sources (46%) Philippines Coop 215 < 1% of total pop. with access to improved water sources (85%) Philippines Housing Estate Providers 500 2% of urban pop. with access to improved water sources (87%) Kenya 4,600 8% of urban pop. with access to improved water sources (83%) Bangladesh 200 legal in Dhaka only >40% of slum population in Dhaka Philippines >310 in Cebu City only 10-15% of population in Cebu City Mobile vendor Hand carters and/or Truckers were covered in all countries under medium level/qualitative surveys, with no attempt to estimate the total number of operators and the population served Electricity Sector Type/Country Estimated no. of SPSP Estimated Population served Cambodia % of total pop. with access to electricity (21%) Kenya % of rural pop. with access to electricity (4.6%) Philippines negligible and declining share of population served Bangladesh 2-3,000(?) not applicable (mainly commercial clients) Bangladesh 12,200 2% of total population Grid operator Battery charger Cambodia 8,000 16% of total population Kenya >1,000 2%(?) of total population Own estimates - typologies covered under large scale survey: Other figures are based on own calculations on data from secondary sources 20

21 Country Data - Cross Time Comparison Cambodia REEs Indicators Consolidation process REE population Network length < 150 m. 9% 0% Clients served Increased efficiency Trained staff 21% 40% Supply continuity (average hours / day) Diffusion of transformers 4% 14% Weekly interruptions 42% 12% Limited increase in prices Tariff per kwh US$ 0.55 US$ 0.71 Tariff / GNI per capita 0.20% 0.17% Access to finance not improved Loan from a financial institution 16% 19% 21

22 Cross Country Comparisons Piped Network Operators Indicators Cambodia Kenya Philippines Main source (s) of water SW: 71% SW: 78% GW: 63% Volume of water yearly distributed HH clients served through direct connections Average supply continuity (average hours / day) Distribution / Customer (m. of pipe per connection) 22,000 m 3 45,000 m 3 105,000 m Operating cost coverage ratio 24% 46% 35% Domestic water charges (% of GNI per capita) US$ 0.45 (0.10%) US$ 0.35 (0.06%) US$ 0.27 (0.02%) FTE water supply staff ratio / 1,000 connections Share of HH poor clients 47% 60% 51% Households consumption rate (litres/hh/day) Turnover US$ 8,600 US$ 9,100 US$ 24,000 22

23 Per Unit Cost of Water as Charged by Smallscale Private Service Providers $5.00 $4.50 US$ per Cubic Meter $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 Public Private Piped Unitized $0.50 $0.00 Public Utilities Private Networks Point-source Vendors Tanker Trucks Carters Key: = Median to Average 23

24 Cross Country Comparisons - Quality Wide spectrum : From PNO operating fully equipped integrated systems to BCS reselling electricity via homemade chargers Overall limited quality of services Share of ENO operating medium voltage power lines: 20% Share of PNO with a water treatment equipment: 21% (0% in Kenya) Share of BCS with a charge controller: 18% but not too bad in some respects: Only a handful of PNO reporting cases of waterborne disease Only 15% of all SPSP receiving frequent complaints from customers 24

25 Spatial Demographic Factors Population density exhibits a positive correlation with the presence of SPSP 25

26 Can we help them get there? Paraguay Characteristics of Selected Communities Phase 1 Towns Phase 2 Monday Acaray Caraguataity Tarumandy Nanawa, Puerto Falcón, Beteretecué Province Alto Paraná Alto Paraná Central Central Presidente Hayes Number of families in service area Population density Medium Medium Low to Medium Low Medium Source of income Mostly wageearners, medium-to-low income Mostly wageearners, medium-to-low income Small farmers and day laborers (poor) Small farmers and day laborers Mostly wage-earners and traders. medium-to-low income Current water source Winning bid Household wells with and without electric pumps (high water table, poor quality) About US$50/ connection Household wells with and without electric pumps (high water table, poor quality) About US$50/ connection Household wells and polluted stream About US$67/ connection Household wells About US$67/ connection Very small piped system in central Nanawa, private vendors, household wells, polluted river TBD 26

27 Can we help them get there? Paraguay Characteristics of Bidding Processes Fixed component Companies bid on Winning bid Risk of uncompetitive bid assumed by Phase 1 Phase 2 Subsidy to private operator of US$150/connection; Tariffs paid by community Connection cost to be charged to users US$50 to $67 from users per connection Community Community contribution: Connection cost of about US$80/connection (households); about US$112/connection (businesses & institutions); Tariffs paid by community Connection subsidy required from the government T.B.D Government Preliminary design provided as part of bidding documents? No (simple borehole, disinfection, storage and single-settlement distribution system specified) Yes (preliminary design provided as part of bidding documents: surface water intake, filtration and disinfection systems, elevated and ground storage tanks, multisettlement distribution system) 27

28 Importance of the Local Private Sector Provision of infrastructure: different view of risk Maintenance services, support services, suppliers Users of infrastructure: Growth and stability depend upon the local private sector What constraints do local business people face? Are post-conflict countries worse off than the rest of the world? 28

29 Constraints to the Private Sector: Setting up a business Region or Group Number of Procedures Duration (days) Cost (% per capita income) East Asia & Pacific % Europe & Central Asia % Latin America & Caribbean % Middle East & North Africa % OECD: High income % South Asia % Sub-Saharan Africa % Canada 2 3 1% Low-income post-conflict countries % 29

30 Constraints to the Private Sector: Enforcing contracts Region or Group Number of procedures Time (days) Recovery rate for creditors in bankruptcies (%) East Asia & Pacific % Europe & Central Asia % Latin America & Caribbean % Middle East & North Africa % OECD: High income % South Asia % Sub-Saharan Africa % Japan % Low-income post-conflict countries % 30

31 Lessons from Analysis Bundling: Infrastructure risks worth bearing when anchored to tradable investments (Mozambique) Fundamentals underpin business activity: Clear & simple regulations, business laws, local credit sources, collateral and contracts; harness remittances and diaspora (El Salvador) Respect small solutions: Set the local private sector free (Cambodia) 31