Infrastructure Asia 2010 Conference
15 April 2010, Jakarta, Indonesia
It is my pleasure and privilege to address the opening session of the Infrastructure Asia 2010 Conference under the theme “Breaking down the barriers to PPPs in infrastructure development”.
The Asia-Pacific region is home to 60 percent of the world’s population. It contains some of the biggest and smallest countries in the world as well as some of the richest and poorest people. It is thus both a region of diversity and of disparities, the latter has been made worse by the recent financial crisis, food-fuel insecurity and climate change. Indeed, the gap between developed and developing countries has become wider.
The financial crisis of 2008 has come as a sober reminder that growth cannot be taken for granted and that the road to prosperity is not always as smooth as we would like it to be. This crisis has exposed the limitations of ‘manufactured in Asia – consumed in the West’ model for sustaining growth. New drivers of growth based on increasing intraregional trade especially with larger markets within Asia are now emerging strongly but there is a desperate need for more investment in capacity and services.
In this context, infrastructure plays a key role in promoting and sustaining economic growth and intraregional trade. However, despite the significant progress in the development of infrastructure in most of the countries of the region in recent years, investment has not kept pace with the demands placed on it by economic growth. Recent estimates suggest that on average, Asia needs to invest about US$ 750 billion per year in infrastructure during the period 2010 – 2020 to meet the strong growth of populations and economies. Approximately two-third of this amount will be earmarked as new investments, with the remaining third used for the maintenance of existing infrastructure assets.
The infrastructure challenge demands a shared approach in the delivery of projects between the public and private sector. Inclusion of the private sector is not only a way of providing finance, but more importantly enhancing the efficient delivery of infrastructure.
In 2007 the Ministerial Conference on Public-Private Partnerships for Infrastructure Development in Asia and the Pacific held in Seoul, Republic of Korea, concluded with the Seoul Declaration on Public-Private Partnerships for Infrastructure Development in Asia and the Pacific. The Declaration noted that PPPs were an effective means to complement the efforts of governments in the development and provision of infrastructure facilities and services. In response, a number of Governments in the Asia-Pacific region are now promoting the role of private sector investment in infrastructure as a key priority; with several of them developing policy and regulatory frameworks to further encourage private sector involvement in infrastructure development.
Ladies and Gentlemen,
Notwithstanding these efforts, countries of the region are still facing a number of barriers hindering the progress of public-private partnerships in infrastructure development.
Firstly, there is the lack of awareness about PPPs among government officials. Indeed, the lack of understanding on how to handle risk management, concession agreements and sharing of obligations can lead to situations where the private sector feels less confident in its investment decisions. Similarly, a lack of expertise among private investors and developers can contribute to derailing the implementation of infrastructure development projects. This barrier requires a redoubling of efforts to increase awareness of policy makers as well as public and private sectors personnel.
Secondly, it is essential that more efforts are directed towards addressing capacity building in both the public and private sector. In this context, training programmes need to be developed to enhance knowledge and skills of the public-private partners. While a wealth of information in the area of public-private partnerships for infrastructure development exists, most of the material is often not readily available in a coherent form. To overcome this barrier and make best use of existing experience, training institutes and universities as well as PPP units and programmes need to be deeply involved in these capacity building endeavours.
Thirdly, many developing countries of the region lack the administrative and regulatory frameworks necessary to ensure an environment conducive to PPPs. Legislative frameworks, policies and operational strategies relating to PPPs are often developed on a piecemeal basis which in turn hampers the confidence of private investors. To overcome this, well-defined governance structures that allow for an appropriate distribution of duties and responsibilities to all players is needed. It is also necessary that detailed operational guidelines for implementation of the frameworks are developed.
Fourthly, PPP contracts are mostly drafted on an ad hoc basis. As a result important elements are not clearly articulated or are omitted. In many cases this leads to a different understanding by the contracting parties to the agreement. The development of standard model concession agreements and model documents is one means of addressing this issue.
Fifthly, the processes and procedures for project identification, development, procurement, implementation, operation, and contract management need to be clearly defined and have timelines that are adhered to by the relevant parties. In this respect, work needs to be embarked upon to standardize these elements in the overall process. Once developed, they can significantly enhance and streamline the administration and management of PPPs. To assist countries, ESCAP has contributed to establishing databases on PPP activities, laws, guidelines and examples of modal agreements.
Lastly, at the policy level, partnership between government and private investor still needs to be nurtured. Promoting policy dialogue between the public and private sectors to identify, and then address barriers can promote and strengthen public-private partnership in infrastructure development.
Ladies and Gentlemen,
The recent global economic crisis has brought about new challenges to Public-Private Partnerships and its modalities. The convening of the Infrastructure Asia 2010 Conference comes therefore at a very timely juncture as it provides a platform for a dialogue between government officials, private sector developers and financiers on how to improve public-private partnerships for infrastructure development.
I am confident that you will seize this opportunity and share practical experiences on different issues related to PPP project development, implementation, management and operation as well as suggest measures to break down the barriers to public-private partnership to infrastructure development.
I look forward to successful deliberations of the Conference.