Download Vincent Piron_Paris 2014

Public-Private Partnership
Usefulness and socio economic benefits
Confederation of International Contractors’ Association
Paris
November, 17-18, 2014
Presentation by Vincent Piron (PIRON Consulting)
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GENERAL ECONOMICS
• Global GDP worldwide is growing slowly
• In OECD countries it is growing more slowly than in Asia
• But the GDP is not a adequate parameter:
•
•
•
•
Ex: USA, where GDP increases and median salary decreases
Ex: China, where pollutuion and housing are masking reality
Ex: the global problem of urban development
Ex: the environmental question, sea level in cities nearby seas
• Interest rates cannot anymore decrease because they
are around zero
• So we have now a new model to develop
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WHERE THE MONEY FOR INVESTMENT
MAY COME FROM
• It is usually said that the States have no money to invest
in housing and infrastructures (I hear this since 45 years)
• But it is a matter of allocation of money because money
is there, it has been printed by the central banks
• The Juncker Plan (300 billion €) is just a reallocation of
existing budgets, and further support from EIB and
private sector. In USA it is the same music.
• But what is new is the idea of coordination and
profitability of investment
• « further support » means « profitable investment » in
order to reimburse the « additional debt»
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WHICH TYPE OF INVESTMENT
• Digital economy, Energy, Transport Infrastructure
• Social infrastructure and environment
• These last two items practically mean « housing » and
organisation of urban development
• Digital economy and Energy are paying the investment
directly through invoicing directly the final client
• For Transport Infrastructure and housing the final client
will never repay directly the investment and the State
should provide support.
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ECONOMIC INDEXES VERSUS TRAFFIC
Household
consumption
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Manufactured
goods
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GDP
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HOW TO PROVIDE SUPPORT
• There are two ways to evaluate the profitablility of a
project: financial and socio-economical
• Financial profitability is a clear and well known notion
• Socio-economical profitability means that benefits to be
considered are not only monetary benefits but also
wellfare, safety, social amenities, better housing,…
• These socio-economic benefits generate indirect GDP
growth,
• In there is GDP growth, there is additional renevues from
taxes and thus increase of budget
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WHICH INFRASTRUCTURE FOR WHICH
SERVICE
• Transportation
• Water supply
• Waste management
• District heating
• Telecommunications
• Education
• Health
• Recreation
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• Roads, airports, rail …
• Dams, reservoirs, plants
• Incinerator compost u.
• Plant, network
• Tel exchanges & lignes
• Schools, University
• Hospitals
• Stadia, theatres …
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CONDITION TO HAVE WELL PREPARED
PROJECTS (CONCESSIONS AND PFI)
• In order to develop this process:
• The States have to choose the relevant projects
• The States have to be convinced of the fact that additional
revenues « in cash » for their budget will come from the
implementation of the project
• Then they will accept to provide grants and subventions, or
guaranties for loans
• To help to develop this virtuous process, CICA is working
since many years on documents describing the way to
select, prepare and implement good projects
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THE VARIOUS ASPECTS OF PPP’S
• Financial : the most evident and the most spoken of.
• Accounting : difficult, changing and conditioning the very existence
of the PPP
• Legal : the most complicated, and often the main issue
• Technical : assumed to be easily solved by contractors
• Economical : supposed to be solved previously by the grantor, but
never really discussed and checked
• Political : has always been managed as a matter of feeling and
seldom with a scientific approach
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TOO MUCH IS TOO MUCH
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PPP’S DEFINITION AND EVALUATION
• « PPP » does not cover any legal reality.
• Existence of 2 families of contracts (typology):
• Concessions:
• More (concession contract) or less (lease, affermage or service
contracts) investment is made by the private party
• The private operator bears demand and industrial risks
• PFIs
• Investment is made by the private party
• But he does not bear the demand risk. It bears only an availability risk
for which he receives a guaranteed revenue.
• In fact, families are not entirely separate. There is a
Continuum of contractual provisions.
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PPP’S DEFINITION AND EVALUATION
The vertical and horizontal continuum of PPPs
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STAKEHOLDERS
AND NOTION OF NON WRITTEN AGREEMENTS
POPULATION
FINAL CUSTOMER/END
USER
CONCESSIONGRANTING
AUTHORITY
(State, regional/local
authority)
(Motorists, truckers, airlines
companies, railway companies,
airline passengers)
1
2
TAXES
SHAREHOLDERS
Concessionaire
Ministry of Finance
3
7
Purely-financial investors
Project builders investors
4
LENDERS
Allocation of funds
5
CONTRACTOR
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Construction company
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OPERATOR
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WHO PAYS, UNDER WHICH STRUCTURE?
Administrative and Contractual
Structure
14
Funding
Toll only (higher
rate)
Taxes only
Taxes + Toll
Public Authority operates by
itself
Traditional
procurement
Traditional
procurement
Contracted out to a public
company
Traditional
procurement
Concession
Concession
Contracted out to a private
company
PFI, Contrat de
Partenariat
Concession or PFI or C.
de partenariat
Concession
REVENUES FROM SOCIO-ECONOMICS
• Revenue generated by the utility of the project
• An economically viable construction will generate activity and
therefore fund flows. Such flows will be split between the privatesector actors, commercial or industrial companies, and the publicsector actors.
• Recent research, notably that directed by Professor Rémy
Prud’homme have shown it to be possible to estimate budget
revenue for the State, which collects taxes and social contributions,
at 20% of the annual surplus.
• In the case of local government in France this percentage falls to
approximately 3%.
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ROLE OF A REAL TOLL POLICY
• On a real tolled infrastructure there is a strong interaction between
utility and financing : the toll policy
• Maximizing socio economic benefits is achieved by a low toll level
• This eases the political problem created by the real toll
• But the optimum of revenues for the concessionaire is reached with a
rather high toll level
• This minimizes the grant that is requested from the authorities but
decreases the socio economic benefits and makes more difficult the
political acceptability of the toll
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HOUSEHOLD INCOME
Distribution of household income Whole of France
(1994 figures)
100
90
Distribution
80
70
Distribution
60
Accumulative total (log
normal model)
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Cumulated total (INSEE
figures)
40
30
20
10
0
0
100
200
300
400
500
600
700
800
Annual income in FF. (x 1000) for 1994
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COST / VOLUME RELATIONSHIP
Relation entre Trafic et Coût généralisé
30
Generalized costs in euros
Coût généralisé en euros
25
20
Surplus
Ci
A
15
10
Série1
Cp
B
Bitterness
Cp'
B'
M
5
Toll proceeds
Cg
D
E
0
Ti
0
5
C
Tp
10
15
Tp'
20
Tg
25
30
35
Trafic journalier en milliers
Daily traffic in thousands
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ACTIONS BY CICA
• Developing with UNECE a methodology to prepare and
implement efficient projects
• Create a « center of excellence » for training decision
makers to these rather complicated process of project
evaluation, selection, tender and implementation
• Studies with economists about the link between socioeconomic development linked to a new project and
budgetary resources
• Consider how to developing maintenance of the works
already build(main part of the activity now).
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EXCELLENCE CENTER
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