Download Vojislav Kandić, International Finance Corporation

Dr Vojislav Kandić
IFC Advisory Services in Infrastructure
Private Sector Participation in
Infrastructure in the Balkans
- Experiences and Lessons Learned September 25, 2009
International Finance Corporation
IFC is a member of the World Bank Group
International
Finance
Corporation
1956
International
Development
Association
1960
Provides
concessional
loans to
governments of
the poorest
countries.
International
Bank for
Reconstruction
and
Development
1945
Lends to
governments of
middle income
developing
countries.
Multilateral
Investment
Guarantee
Agency
1988
Provides
guarantees to
foreign investors
against noncommercial risk
International
Centre for
Settlement of
Investment
Disputes
1966
Settles
investment
disputes
between
foreign
investors and
host countries.
General Benefits of PPPs
Well structured PPPs provide following general benefits:
1.
performance enhancement through higher efficiency;
2.
transfer of know-how and management expertise;
3.
development of facilities and customer service;
4.
easier access to capital;
5.
performance-based compensation for the private operator/investor; and
6.
concession/tax income for governments
• It is important to understand that PPP structure should always be tailored to suit the specific
economic, political, environmental, social and other conditions, and that it does not necessary have
to fit one of the models
IFC’s Approach to PPPs in Emerging Markets
• Combining the commercial realities acquired from its financing activities with the developmental
mandate of a multilateral financial institution, IFC has developed a unique approach to advising
governments on PPP transactions.
• Emerging markets are in many ways different from the developed markets and are characterized by
a number of specific conditions which requires application of distinctive PPP structures
Types of PPPs according to Risk Handling Abilities
PPP should be structured in a manner which allocates specific risks to the parties which are best
positioned to handle them.
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Technical Assistance
Management Contracts
Lease Agreements
Build-Transfer (BT)
Build-Own-Transfer (BOT)
Build-Own-Operate (BOO)
Build-Own-Operate-Transfer (BOOT)
Build-Operate-Renewal of concession (BOR)
Build-Lease-Transfer (BRT)
Rehabilitate-Own-Transfer (ROT)
Rehabilitate-Own-Operate (ROO)
Divestiture
• Private capital is at risk, and should be engaged by the party that is best able to attract private capital
• Commercial Banks as key partners – providing financing and putting discipline in the process
Types of PPPs and Risk Handling
Full Divestiture – often not an option
• By minimizing project risk and involvement of the Government, full divestitures generates
maximum amount of revenue for government (or minimize subsidies). Some sectors, airports and
ports in particular, tend to face less public resistance to full divestiture compared to water, waste,
road, and rail sectors, as the latter are considered a “social service” in the emerging countries
IFC - advisor sensitive to the specifics of emerging markets
Specific forms of PPPs that are often applied in the emerging markets are different form PPP
structures typically found in the developed countries:
1) Projects require definition—and sometimes redefinition
2) The advisor has to help the client understand what is realistic
3) Understanding the concerns of the bidders and working with the client to address possible
issues
4) It is extremely difficult to pre-negotiate a perfect contract that will fit all possible scenarios
5) Important issues not addressed in the early stages of the tender can have a potentially
devastating effect later
The advisor often needs to start with creating a legislative framework that would be conducive to
PPPs and reflect best international practice, and help establish a PPP unit/agency
IMF Study - IFC by far the most experienced IFI in PPPs
IFC Infrastructure Advisory in the Balkans
•Ashta Run-on-River Hydro Power Plant, Albania – Verbund, 2008
•KESH Power Distribution, Albania – CEZ, 2009
•Bar-Boljare Full Motorway, Montenegro - Konstruktor, 2009
•Moraca Hydro Cascade Power Plants, Montenegro
PPP – Challenges for Financing in the Balkans TODAY
“...after living 20 years in the most advanced nations, I have come to the conclusion that civilization
consists of having security in regard to life, honor and goods. That, and only that, is what we call
civilization...”
Juan B. Alberdi,
father of the Argentine Constitution of 1853
• Foreign government as the newest party for direct financing infrastructure projects in the Balkans –
through direct bilateral arrangements, no tender process involved
• Ability of the Government to pay Availability Payments becomes to be questioned
• PPP Comparator
• Prices of inputs (materials, energy, labor) and outputs (tariffs and charges), as key for bankability, are
changing dramatically
• International Finance Institutions (IFIs) as new key partners on both public and private side in a PPP
New - PPPs in Educational, Health, Sports and Culture Facilities
Municipal Infrastructure – Subnational Level PPPs
IFC as Lead Advisor for PPP Transactions
• IFC can make a special contribution, as Lead Advisor, for the following reasons:
1. Experience in Sector Transactions
2. Balancing Private and Public Sector Interests
3. Transparency and Investor Confidence
4. Exceptional commitment to the Balkan region – Regional Office in Belgrade
5. Multi-Skilled and Experienced Team
6. Pursuit of sustainable economic and social benefits
7. Synergies within the World Bank Group
8. Ties with the Global Investment Community
9. Willingness to go “the extra mile”
Thank you for your attention…