1 / 10

Istanbul, Turkey 8 November 2006

PUBLIC-PRIVATE-PARTNERSHIPS FOR INFRASTRUCTURE FINANCING IN THE MENA REGION “The Political Economy of PPP’s” by Charles Kovacs, Vice Chairman Committee on Non-Member Economies BIAC – Business and Industry Advisory Committee to the OECD. Istanbul, Turkey 8 November 2006.

keola
Download Presentation

Istanbul, Turkey 8 November 2006

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. PUBLIC-PRIVATE-PARTNERSHIPS FOR INFRASTRUCTURE FINANCINGIN THE MENA REGION“The Political Economy of PPP’s”byCharles Kovacs, Vice ChairmanCommittee on Non-Member EconomiesBIAC – Business and Industry Advisory Committee to the OECD Istanbul, Turkey 8 November 2006

  2. The Political Economy of PPP’s – The Background EUROPE’S AND AMERICA’S INFRASTRUCTURE WAS BUILT MAINLY BY PRIVATE CAPITAL • 18th CENTURY: POSTAL NETWORKS, TURNPIKES, CANALS • 19th CENTURY: RAILWAYS(PPP), UTILITIES • 20th CENTURY: TOLL ROADS, PIPELINES, • RECENTLY:PRIVATIZATION OF INFRASTRUCTURE, PRIVATE CAPITAL FOR GOVERNMENT FACILITIES OF ALL TYPES

  3. The Dynamics of PPP’s – Public Sector Issues THE NEED FOR INFRASTRUCTURE: • OBJECTIVE FACTORS: COMMUNICATIONS, ECONOMIC GROWTH, PUBLIC HEALTH • SUBJECTIVE FACTORS: PRESTIGE, POLITICS, AND PATRONAGE • PPP FOR RISK REDUCTION AND OFF BALANCE SHEET FINANCING • INABILITY TO INCREASE TAXES • CHANGES IN IDEOLOGY • POLITICIANS DESIRE TO AVOID HARD CHOICES AND/OR RESPONSIBILITY

  4. The Dynamics of PPP’s – Private Sector Issues THE PROFIT MOTIVE: • LARGE BANKS ARE NOW FOCUSED ON RETAIL RATHER THAN WHOLESALE, CORPORATE, INTERNATIONAL FINANCE • LENDERS RECEIVE A LOWER RETURN THAN BUILDERS AND/OR OPERATORS FOR ESSENTIALLY THE SAME RISK • PROJECT/INFRASTRUCTURE FINANCELESS ATTRACTIVE THAN BEFORE, ESPECIALLY IN DEVELOPING COUNTRIES

  5. The Dynamics of PPP’s – Private Sector Issues THE PROFIT MOTIVE: • INTERNAL STRUGGLES IN BANKS OVER CREDIT APPROVALS FOR PPP FINANCE • PREFERENCE FOR ADVISING AND RAISING FINANCE FROM THIRD PARTIES • CONSTRUCTION COMPANIES NEED LARGE INFRASTRUCTURE WORK ABROAD • OPERATORS (SOME GOV’T OWNED) LIKE OVERSEAS PROJECTS FOR PROFITS, VARIETY, AND AS POTENTIALPOISON PILLSAGAINST PRIVATIZATION • RISK ALLOCATION IS A MAJOR ISSUE

  6. Risks for the Public Sector • LOSS OF CONTROL (EMPLOYMENT, PATRONAGE) • LOCAL HOSTILITY TO FOREIGN PRESENCE, PRACTICIES, AND/OROWNERSHIP • HIGHER COST OF FINANCING • LACK OF REGULATORY CAPABILITY • POPULAR HOSTILITY TO PAYMENT FOR PREVIOUSLY FREE OR CHEAP INFRASTRUCTURE

  7. Advantages for the Public Sector • CERTANITY OF CONSTRUCTION AND ITS COSTS • EFFICIENT OPERATION • INCREASED AND POSITIVE ATTENTION FROM ABROAD • POSITIVE BUDGETARY IMPACT

  8. Risks for the Private Sector • CONSTRUCTION • PERFORMANCE • COMMERCIAL • POLITICAL • LEGAL • ENVIRONMENTAL

  9. Striking a Balance = Mitigating Risks • BOT TO MITIGATE NATIONALISTIC OBJECTIONS • USE OF FOREIGN LAW AND ARBITRATION • EXTENSIVE AND DETAILED CONTRACTS • INSURANCE • AVOID POLITICS OR POLITICISATION • INCLUDE INTERNATIONAL FINANCIAL INSTITUTIONS

  10. Conclusions • PPP HAS A GOOD TRACK RECORD • PPP IS A DILEMMA FOR MANY GOVERNMENTS DUE TO POLITICS AND/OR IDEOLOGY • GOVERNMENTS NEED TO UNDERSTAND PPP AND THEN DECIDE WHETHER OR NOT TO PROCEED • APPROACH/REQUIREMENTS FOR ATTRACTING CAPITAL ARE SAME AS FOR FOREIGN DIRECT INVESTMENT • IMPORTANCE OF DOCUMENTATION AND LEGAL ISSUES

More Related