Panel: Ms. Makgabo, Mr. Redican, Mr. Barret, Ms. Prescott, Mr. Abde (BNDES), Mr. Feraz
Effectiveness – WB goals.
Abade – PWC:
Multiple points of view. Most important to focus on services, regardless of form. Public Private Partnerships (PPPs) useful because services are contractually agreed. Question of efficiency.
What about capacity on the ground. PPPs vs. regulated industries. Very predictable. Discipline is important. Requires understanding nature of risk and contracts.
Need for capacity building – G20 Knowledge and Cooperation Centre.
Impact on the ground: Alleviation of poverty.
Joao Feraz – BNDES
How can they be effective – requires institutions to design projects. Two elements: Public institutional vision, institutions, actors involved need capacity to implement projects.
Brazil – logistics programme. If it works it will result in 1.5 increase in investment.
EU PPPs widely used – experience. In large degree results sought have been achieved – through regulators.
PPPs is but one element. Private sector and public procurement. No single approach exists. Time to time unsuccessful results.
From the private sector – what is the incentive? Predictability. Whether it alleviates poverty depends on design. Role for Bank, ADB, better commercial contracts. Must ensure commercial sector delivers and is penalised in failure to deliver
BNDES – role of Bank. Good cooperation with IFC – much less on the macro elements than on project development to link with other local initiatives.
Abade: How to fill the gap? Difficult to organise projects as it is a multi-disciplinary endeavour. Difficult to locate all skills in one place. Countries must be define objectives, etc and must be comfortable with outsourcing. Same case as ‘regular’ procurement.
Prescott: Banks must be less directional.
Chief Economy this morning – difference in capacity in public and private sector. Currently instruments of crony capitalism. What can be done?
Richard Abade: Integrated service offerings. PPPs lends itself to corruption? A: by requiring multiply layers one makes corruption more difficult, as opposed to single contractor/ procurement officer relations.
BNDES – public and private is a smoke screen. PPPs require a very good government capacity and institutional development and strong public sector.
Redican – if one has a structure that work, one should keep. E.g. need to ensure risk assessment is not unreasonable.
Q: Former WB economist
Poverty and PPPs are long-term issue. Poor must be viewed not as costumer, as business interests distort interests and processes.
Barrett: not homogeneous caseload. Audit reports demonstrates high rate of success.
Current high-liquidity in private markets and fiscal constraints will likely lead to greater areas of cooperation. That said, it does require public capacity.
Redican – regarding corruption – debt and equity investors don’t want leakage.
O Estado de SP:
Why is the role of PPPs in Brazil today and major challenges in infrastructure in Brazil.
A: PPPs is merely an instrument. Infrastructure is essential for poverty alleviation. Many different types of PPPs. Time cycle of politicians and PPPs are different.
Q: What about PPPs in tourism, and other high-trade areas.
Edican: There is some opening – Nusa Dua in Indonesia. Use in very controlled development plan. Return back to government if a level of return is reached. However potential regional conflicts in allocation of resources.
As investor has mandate for investment in long-term (25) infrastructure projects. Defensive cash flow- PPPs tend to lend themselves to this type of investment.
Other areas such as tourism, tech may be too liable to change.
Mr. Barret – largely question of scale.
Q: Retired WB Economist
Private sector uses PPPs as risk management tool. Presupposes government commitments. What about unsolicited bids vs. international competitive bidding process.
Michael Redican – Need compensation on termination if government commitment is questioned.
There is opportunity for Bank to attract investment through bonds in case of adjudication.
In Italy, lack of competitive bids has led to lower results. Competition leads not necessarily lower prices, but technical innovation.
BNDES – most of the bids in developing countries are of that kind as public sector lacks capacity. Latin America – over 50% (in unnamed country) unsolicited.
Q: How to address capacity development. Is it within Bank’s mandate –
A BNDES – yes, but part of long-term process. Well paid, career advancement, etc – rebuild the state and public structures.
Mr. Barret: Role of MDB is to help developed from best practices. Advisory does not imply giving instruction. It implies engagement. Private sector equally has a role in engaging with public institution.
Q: Who knows what to ask or to identify gaps in knowledge?
A: Julia Prescott – why do countries chose PPPs? Normally lack of capital in public sector. This results from government policies to provide better/ additional infrastructure. That government is therefore responsible to seek support.
Has seen utility of ‘centres of excellent’.
Q: Capital Hill – How does capacity development work?
A: Joao Feraz – first component must come from high-level political vision. Must have systems in place to ensure viability of long-term plan. It therefore varies in across ministries. Not easy and will take time.
Redican – UK is a disaster in energy…
Q: Should private sector assist in capacity development?
A: Barret – no market where more than 10% of procurement is done through PPPs. Institutional development is a public function. Work with MDBs to ensure capacity is fit for purpose.
Q: What about market competition?
A Abade: Most PPP sectors are monopolistic by nature.
Redican – quasi monopolistic structure ensures lower equity and debt prices.
Q: Ongoing monitoring of poverty impact remains a problem, particularly with Bank.
A: Redican – don’t agree – PPPs are meant to build schools not be responsible for outcome of education, for example?
Julia – studies on education have been generally positive. However data are scarce. Governments don’t tend to collect data on long-term costs.
Joao Feraz – PPPs must be designed with the quality of service rendered and not only on the physical component. Shift in conception beyond ‘mere’ building.
Abade: Questions concern not only question of contractual agreement. Specialists are required to monitor implementation phase.
Julia Prescott – investors are also interested in follow-up on project.
Q: What about beneficiaries? After all they are involved in cost-recovery.
A: Joao Feraz – service quality must be included in PPP consideration. Public pressure is always good.
Redican – Bad quality of service will result in failure of the project. There must be a public will to enforce contracts.
Joao Feraz – investment is what is essential and inclusion of efficient actor is welcome, but PPPs require capacity.
Abade – PPPs are a small part of the puzzle of the massive infrastructure needs. Government must deliver on responsibility to monitor and force delivery.
Mr. Barret – Many things that one wants are not commercially viable. Governments must be there to ensure positive social outcomes.
Mr. Redican – PPPs not a panacea. Encourage MDBs to evaluate political risks in order to attract investments into challenging