The lack of good quality, adequate infrastructure has been a long-standing challenge in Asia and the Pacific. Meeting infrastructure needs in areas such as access to electricity and water is not only critical for economic growth but also to improve the quality of life for the populace, and contribute to achieving the UN Sustainable Development Goals.
Against this backdrop, many governments have increasingly echoed ambitions to unlock more capital for infrastructure financing. One such approach is Public-Private Partnership (PPP), which helps to mobilise private resources while aiding governments to overcome resource constraints and improve delivery.
In this respect, the UN Economic and Social Commission for Asia and the Pacific (UNESCAP) organised the second meeting of the Infrastructure Financing and Public-Private Partnership Network of Asia and the Pacific in Manila, the Philippines from 7 to 9 August 2019. This was held with the support of the Public-Private Partnership Center of the Philippines, the Philippines National Economic and Development Authority (NEDA), and the China Public-Private Partnerships Center (CPPPC), the Ministry of Finance of China. The second meeting advanced the dialogue from the first network meeting and deepened engagement with network members on the role of this platform¹ as well as to explore the development of the web portal and project pipeline, among other topics.
SIIA Senior Policy Research Analyst (Sustainability) Ms. Lau Xin Yi (pictured below) spoke on the panel, “Innovative Financing”, which examined selected innovative financing schemes and how they help to bridge the region’s expanding infrastructure needs. She noted that Singapore has ambitions to become an infrastructure financing hub for the region. Last year, the government established the Infrastructure Asia office as a one-stop agency to facilitate collaboration on regional infrastructure development. In addition, financial players in Singapore have taken steps towards innovative financing. Bayfront Infrastructure Capital as well as Sunseap’s first green loan for rooftop solar projects in ASEAN with ING Bank are examples where capital can be further unlocked with better risk management and consideration of sustainability goals.
Here’s a look at the other topics which came up during the meeting:
The PPP approach should be seen as complementary to state financing, for projects which are not fully commercial. Governments have a key role to play in developing good project pipelines by considering the types of projects that would fit the most important and strategic interests of the country. This is because it can be hard to engage the market when there is a lack of deep and robust project pipeline across the different sectors. Governments also play a huge part in facilitating better risk and revenue sharing so that the projects are more bankable and feasible. PPP carries foreign exchange risks as foreign investors use foreign currency while these investments tend to be local, and use local currency. Government should play a role in mitigating these risks.
The institutional arrangements for PPP differ across countries and the level of experience in promoting PPP varies widely across governments. Some countries such as the Philippines and Kazakhstan, have established a PPP Centre to facilitate implementation of the PPP projects, conduct capacity building and offer technical assistance, among others. However, in Indonesia and Vietnam for instance, PPPs are still handled by the government. Indonesia has set up a joint taskforce consisting of seven institutions in the central government to facilitate and coordinate capacity building for the line ministries and local governments. While professional consulting firms are available to advise the government, there is also emphasis on knowledge transfer when working with these experts so that implementing and regulatory agencies can gain knowledge and develop in-house expertise in the long term. Government representatives from countries which are more experienced in PPP, also alluded to their interest in engaging and bringing in responsible investors to explore sub-national opportunities both domestically and in the region. Similarly, Vietnam does not have a PPP center. The line ministries and local governments develop and approve the PPP projects on their own and investors are accountable to the relevant government ministry overseeing their projects. Since 2009, Vietnam also started a pilot e-procurement system which provides information on PPP projects for government organisations and the private sector. This move is key to encourage transparency, competitiveness, economic efficiencies and reduce corruption.
PPP units or institutions should seek to communicate their progress to the public on a regular basis. In many cases, there is a lot of work that goes into the preparatory stages and projects take a long time to complete. This could be due to requirements such as environmental and social impact assessments where many studies are involved alongside consultations with non-governmental organisations. However, this is not always obvious to the public and the lack of communication with the public could erode their confidence and support for PPP projects.
As Asia and the Pacific grow, there will be increasing opportunities for PPP in infrastructure. While PPP provide solutions, more needs to be done to better understand how the different PPP models work and their respective success factors. As governments take steps to create a conducive environment for private financiers in their respective domestic markets, foreign and domestic investors’ perceptions of risks also matter. Therefore, platforms such as UNESCAP’s Infrastructure Financing and Public-Private Partnership Network of Asia and the Pacific are key to promoting timely information sharing between the public and private sectors. This would in turn, unlock more opportunities for PPPs in this region and more importantly, generate support to work towards a common goal.
¹The Infrastructure Financing and PPP Network of Asia and the Pacific is a platform to provide support to countries to develop PPP projects and infrastructure financing strategies that contribute to regional connectivity and sustainable development.
