ASIA PACIFIC MINISTERIAL CONFERENCE ON PPPs Dr. Salman Shah

ASIA PACIFIC
MINISTERIAL
CONFERENCE ON PPPs
Dr. Salman Shah
Advisor to Prime Minister on Finance
and Economic Affairs
Country Profile
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Population: 160 million (2006 est)
GDP (Nominal):US$145 billion (FY07)
Foreign Investment: US$ 8.4 billion (FY07)
GDP per capita: US$925 (FY07)
Country Rating:
– S&P
B+ long term, B short term, Positive
– Moody’s
B1 stable
– OECD 6
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FX Reserves: US$16 billion
Stock Market Index. (30th June 2007): 13,772
Market capitalization – US$66.4 billion (June 30, 2007)
Stable Exchange rate for 6 years
State of the Economy
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Pakistan’s economy has grown at an average rate of about 7.5% in the last
three years (2003/2004 – 2005/2006), positioning itself as one of the fastest
growing economies in South Asia
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The Government of Pakistan estimates that less than half of the
infrastructure investment needs can be covered by public funds, signaling
the need for private sector involvement
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Private sector investment in infrastructure projects has been forthcoming,
averaging 1.4% of GDP
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However, over the next decade, Pakistan needs to invest around 7.5% of its
GDP per annum in infrastructure to sustain a GDP growth of 7-8%
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This indicates significant private sector participation for every rupee that the
Government of Pakistan spends on infrastructure development
Historically …..
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Investment in Infrastructure has been largely Stagnant
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Public Sector Funds for Infrastructure Investment are unlikely to increase
greatly
– Limited Fiscal Space - Fiscal Responsibility and Debt Limitation
Legislation
– Competing Needs from Social Sector
– Lack of institutional capacity
– Lack of an enabling Policy environment and Legislation
– Underdeveloped Long-term Debt Markets
– Lack of Expertise, Latest Technology, and Best Practice in public sector
Situation Improving …
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Policy Regime Stable
Pro Business Investment Policies
Improved Regulation
Financial Sector & Capital Market Reforms
Deregulation, Privatisation and liberalization policies
being implemented – success stories in the
telecommunications, financial and energy sectors
• Multilateral and international donor support for Private
Sector Infrastructure
PPPs An old Concept – New Impetus
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A relationship between public and private sectors on a specified set of
contractual obligations that promotes cooperation between the two sectors to
provide services
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PPPs are structured and procured on the basis of outputs, not inputs and as
services, not assets
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Key Features:
– Contracting authority specifies the outputs of a service
– Contracting authority or end users buy the specified outputs from a private
party
– Private party determines the inputs required to achieve the specified output
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Projects driven by output specifications allow maximum risk transfer to the
private party, ensuring greater value for money for the government
PPPs An old Concept – New Impetus (cont.)
•PPP agreements are useful in unregulated sectors as they allow
‘regulation by contract’ on a project to project basis.
• A Policy and Regulatory framework for PPP in the telecom and
energy sectors is present.
• However, a framework for unregulated sectors like transport
and logistics, municipal services, sanitation, solid waste
management, social sector, and real estate does not exist.
PPP- GOP’s Objectives and Plan
The Government’s objectives in promoting PPPs are to
provide:
• More services, to meet increasing demand in basic
services such as water and sanitation, solid waste
management, transport and rural electricity.
• Better services, to improve the quality of existing
services and provide incentives and funding for
infrastructure maintenance and up-gradation.
PPP- GOP’s Objectives and Plan (cont’d)
• Affordable services, to segments of the population that
cannot pay cost recovery tariffs.
– The Government will provide targeted (to low income
consumers), explicit (not hidden as budget support)
and performance based (only provided once the
service is actually delivered) subsidies.
• Timely services, to meet the immediate service
demands of citizens.
Program Structure
TASK FORCE ON PPPS
(established in June 2006)
Policy and Legislative Framework)
WG on Policy and
Legislation
WG on Standardized
Provisions
IPDF
(Section 42 Company
Incorporated in May 2006)
•Task Force Secretariat
•Project Development
•Capacity Building
•Guidelines (Feasibility Study,
Procurement, Contract
Monitoring etc.)
WG on Viability Gap
Funding (VGF)
Ministry of Finance
•Project Support
•Credit Enhancement
WG on Risk
Management Fwork
IPFF
(Being Incoporated as an
NBFC)
•Long Term Fixed Rate Local
Currency Residual Financing
Transaction
Advisory
Funding
VGF
Guarantees
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IPDF – Bridge between Public and Private
Sectors
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The Government has set up an Infrastructure Project Development
Facility (IPDF) under the auspices of the Ministry of Finance (MOF), to
generate PPP projects with Implementing Agencies (line ministries,
provincial Governments, local bodies, state owned enterprises etc.).
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IPDF will provide direct access to a professional PPP Unit that will help
Implementing Agencies to improve proposals and prepare them for
tendering, without becoming a contract signatory to those transactions.
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Projects may be submitted for any necessary complementary financing
to a proposed independent financing body – the Infrastructure Project
Financing Facility (IPFF) – for any ‘residual’ financing needs that are
not available in the market.
IPDF – Bridge between Public and Private
Sectors – (cont’d)
PPP project evaluations will focus on, but will not be limited to, the
following sectors:
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Transport and logistics including provincial and municipal roads,
rail, seaports, airports, fishing harbours as well as warehousing,
wholesale markets, seaports, slaughter houses and cold storage.
Mass Urban Public Transport including buses, and intra and
inter-city rail.
Municipal Services including water supply and sanitation; solid
waste management; low cost housing, and health / education
facilities.
Small Scale Energy Projects other than those being facilitated
by Private Power Infrastructure Board (PPIB) and the Alternative
Energy Development Board (AEDB).
Overview of Active Projects
Overview of Active Projects (cont’d)
Project Pipeline (con’t)
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SECTOR
NAME OF PROJECT
PROVINCE
Energy
7-MW DG Khan Link-III Hydro Power Project
Punjab
KWSB 80 MW Captive Power Plant
Sindh
Power Generation in Lasbella (LIEDA)
Balochistan
Bus Rapid Transit System (BRTS) Corridor 2-4
Sindh
Driver Training Institute
Sindh
Inter-City Bus Terminal Facility - National Highway
Sindh
Inter-City Bus Terminal Facility - Super Highway
Sindh
Intra-City Bus Terminal Facilities (22 Terminals)
Sindh
Karachi Circular Rail
Sindh
Karachi Light Rail Mass Transit System (Corridor 2-6)
Sindh
Motor Vehicle Inspection System
Sindh
Urban Transport System
Punjab
Date Processing Plant (Turbat)
Balochistan
PTDC Islamabad Tourist Village
ICT
Industrial Park
Balochistan
Mass Urban Public Transport
Office/Industry Infrastructure
Project Pipeline (con’t)
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Municipal Services
Transport & Logistics
Car Parking Garages
Sindh
CDA Water Supply Pipeline
ICT
Development of Car Park Garages
Sindh
Gwader Desalination Plant
Baluchistan
Gwader Solid Waste Management
Baluchistan
Integrated Meat Processing Facility
Punjab
Karachi Desalination Plant
Sindh
Low Cost Housing
Sindh
Poly Tech College Kotly
AJK
Shelterless Primary Schools
Baluchistan
Slaughterhouse
Baluchistan
Quetta Solid Waste Management
Baluchistan
Transportation of Garbage
Sindh
Cold Storage
Baluchistan
International Flower Auction Facility
Punjab
Sindh Coastal Highway (278 KM)
Sindh
Strengthening of Civil Works Division
Baluchistan
Distribution of All Infrastructure Projects
across Sectors
Criterion: Number of projects
Distribution of Active
Infrastructure Projects
across Sectors (by
number)
Distribution of Active
Infrastructure
Projects across
Sectors (by value)
The Way Forward…
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Enactment of PPP Law
Setting up the Viability Gap Fund (VGF)
Setting up a Guarantee Fund
Sector specific policies, guidelines and toolkits
PPP Cells at the federal, line ministries, second and
third tier governments
• Multilateral and Bilateral support
– Faster project implementation
– Enhanced accountability
• Capacity Building of institutions and Development of
Financial Products
Thankyou