What standards for Public-Private Partnerships (PPPs)? Analysing the role of the World Bank Group

Sponsor: Center of Concern

Panelists:

• Aldo Caliari, Director, Rethinking Bretton Woods Project, Center of Concern
• Nancy Alexander, Director, Economic Governance Program, Heinrich Boell Foundation
• Motoko Aizawa, Managing Director for USA, Institute for Human Rights and Business
• Laurence Carter, Senior Director, Public-Private Partnerships Group, The World Bank Group
• Vanessa Torres, Coordinator, Sustainability in Infrastructure and Energy, Ambiente y Sociedad, Colombia

The WBG has been an active player in the area of PPPs for many years, by providing finance and advice to projects. Its leadership is often followed by regional and other development banks. The WBG has also been the G20’s go-to agency on PPPs by producing reports on the issue to inform the G20’s plan to scale up PPPs. This session followed up on a discussion held in October 2015 and provide an opportunity to present CSOs’ inputs submitted to the consultation on the Framework for Disclosure in PPPs, and addressed the report on recommended PPP contractual provisions and other documents developed by the WBG.

Aldo Caliari

• WB received requests from G20, asked to develop standards, incl disclosure framework, checklist for PPPs
• Looked at disclosure framework as it was open for consultation
• Two CSO submissions raising issues (Spanish, English), as well as that the consultation should have happened before the G20 agreed – not sure how much the board were able to consider the themes also
• Not just small operational tool, also another tool not open for consultation, dealing with good practice for contracts – some aspects are very troubling for us
• Whenever there is a strike that causes a profit loss in the country, the government should compensate the company – what would the implications be, many governments are already cracking down on civil society, if they know they have to compensate how will they react to this pressure
• Not small things, can be critical for implementation and the reputation of the WB, recent evaluation of involuntary resettlement, no tool to account for the compensation etc properly, how it had been done – many problems could rise from this
• Also substance of disclosure framework, I the period after the dealing but before the contract is signed doesn’t have any clear recommendation on this
• Missing piece on procurement stage, when the decision is being made to carry it forward, should be done through traditional procurement
• Potential conflict of interest between officials in charge, and the beneficiaries of the PPPs, what are the relationships
• Lack of clarity on how the WB would be dealing with when they are issues of disclosure, how they engage with the governments
• Minimum threshold as part of international standards that are not voluntary (?) – when governments have low or limited capacity to implement, WB being more forgiving, but if they can’t do this, how can they monitor PPPs in that country
• Some things in the disclosure framework are positive, not mentioning these here due to time, appreciate that there is a tool – looking at what is omitted

Motoko Aizawa

• this new framework came out to provide guidance of PPPs and disclosure, a welcome effort, but it can go much farther
• last year three big milestones for FfD – importance of infrastructure was very clear – SDGs, importance of resilience infrastructure, Paris Agreement – importance of green infrastructure, now countries need to implement
• question about the role the private sector will play, is it realistic or not
• WB passion for transformative, big cross-border, mega projects, the country by country approach won’t serve well
• Multiple jurisdictions need to be coordinated, better to have a harmonised approach
• WB is putting out a toolkit, which is helpful when there are controversial issues, allowing countries to learn by experimenting
• Can’t wait for countries to experiment, need something far more standardised – not necessarily a standard, but WB can help us derive principles out of the framework and think about a clear statement in terms of transparency, rather than working on technical exceptions
• Would like to remind that there is ample experience from the extractive sector, transparency initiatives, etc – should learn from this
• Encourage the breakdown of institutional silos – learn there are 63 infra development facilities around the world, could create a platform on disclosure
• Most important the WB, OECD focusing on the financial side, important, but not necessarily address the wider spectrum of communities and so on, so those located close to project sites can be subject to multiple negative impacts – must include non financial risks, environmental, social, human rights, this is largely missing from the framework
• Its about the citizen’s right to services too, need to go beyond the framework, looking at incentives, etc, need more bold thinking

Laurence Carter

• although the WBG set up a unit for PPPs 18 months ago, not pushing PPPS, but pushing or advocating an informed view on decision making, regarding infrastructure services – need to plan, PPPs is one option
• fundamental reason for using alt delivery methods is about management, sometimes government, private sector, NGO
• care about the services being delivered well, PPPs one policy option
• lot of talk and hype and emotions about PPPs, we have been advocating the use of tools, toolkits, data, consultation, capacity building etc – that’s the philosophy
• as tools get developed and tested out, sometimes under G20, when we feel they are ready we put them out for consultation
• we have put out for consultation or information eg on the role of gender, as it had not been adequately tackled, put out for comment and consultation, think suggestions have now been incorporated
• first draft of disclosure six months ago, earlier this week the fiscal tool, in consultation with IMF – PFRAM, on PPP Knowledge Lab, site set up by the MDBs to facilitate access to information – no date on process yet, just been put up
• not done a good job in putting all these things in one place, and about process, what will happen next – we will need to improve on that
• on disclosure framework, a wide range of standards, comprehensive in some countries to virtually no or no disclosure in some countries – not just the contracts, but the whole process, and the supervision process as they will be around for 5-20 years
• studied countries, G20 asked for some suggestions, so first draft was given to the G20, doesn’t mean it becomes a global standard – been clear we want to collect input, and not a standard, a framework – we want to encourage countries to implement framework
• want to make the tools useful for the governments
• have collected the comments, will be put online in early May, with a response what we have done with it
• updated version of the framework in June
• don’t expect that will be the end of the process, probably some more comments, but there is a big socialisation work to be done with governments, have started but not finished
• exploring working with other partners, such as the OECD to get further input and in their interest in socialising this topic with some of their member countries

Vanessa Torres

• legal framework for PPPs in Colombia
• no specific institution to monitor PPP in the development sector, on infrastructure, National Planning Dept and Finance Ministry
• implementation of PPPs in Colombia – the capacity to monitor, based on a national law and financial projections
• different characteristic about the PPP regulation, doesn’t differentiate between types of contracts, can be made by a concession, easing or other, is an indeterminate legal concept to expand the figure to all the infrastructure sector, not just transportation
• PPPs isn’t a contract type, designed to structure payment mechanisms of government
• Implementation maximum 30 years
• 2015 shows a rapid growth
• many commercial risks are assumed by the state, sharing of risks speculative
• participation of WB, PPIAF and Ruta del Sol Project
• WB has an agenda for technical assistance for PPPs, but need to improve the implementation of environmental regulation, can the mechanisms improve national regulation

Nancy Alexander

• consensus of a lot of think tanks involved in the G20 and infrastructure issues, G20 is failing in building leadership in monitoring fiscal policies, fourth pillar where it could be successful
• G20 is moving towards developing its own version of the SDGs, draft plan now has 14 sections – first part, principles sustainable development, second will identify 3-4 issues with G20 leadership, incl infrastructure, but can change by Sept meeting
• 70-80 countries in the world with PPP units, China working with 17-18 institutions around the world to standardise approaches
• WEF coming up in Africa, has a model PPP, project prep from 7 yrs to 3
• IFC going from retail to whole sale with this infra model, will announce their plans at the Global Infrastructure Forum
• PPPs can be situated in six other policies, important to conceptualise
• Will frequently be infrastructure project, but has atrocious record, not against mega projects, but the G20 is biased
• Investment regime, including land acquisition process, guarantees to investors
• Master plans, every region has a master plan in water, transportation, energy, ICT – G20 is pushing these four sectors globally
• Project preparation facilities
• Domestic resource mobilisation
• Financialisation, infra an asset class in OECD, to attract pension funds and other long term inst investors
• Have publication on WB approach to PPPs
• Bottom line, PPPS are really not ready for prime time, especially in sectors such as water and electricity, no evidence of lessons and warnings on PPPs
• Investment, IHRB looking at OECD documents, asking how well are the principles of responsible business conduct and env and soc conduct taken into account in advise

Q&A

Q from Egypt, definition of the private sector, should protect at least the small firms and other forms of PPPs

Q fiscal impact tool, see a lot of selling of these ideas, at IFC pushing and used by governments

Q WB has capacity to expose itself to quite a bit of risk, in the public eye and in member countries, could have an impact on WB’s work. If your WB unit doesn’t take responsibility, where does it sit

LC

• message that we want to engage with all parties and improve these draft tools, the WB framework for PPPs is not how we would characterise this
• we have looked at 9 parts of PPP contracts, would be possible to have standard clauses that could be used, with these as starting points would save a lot of time and money
• nothing favours small over large firms, a government can decide to do that, most successful PPPs tend to be smaller projects
• trying to mitigate the sometime misplaced optimism, have a table of risk too
• risk management for the WBG, we are still reviewing comments, over next six month will make decision if standard or not – in that case would like to work with other MDBs
• already a successful as we are discussing this now
• departments at WB assessing risks, including PPPs
• WB are not financing hundreds of PPPs, 5-10% of WB, IFC activity
• Even though the rhetoric is significant, the level of activity is not going up

NA

• was talking about the G20 consensus, not WB policy, including the master plans for regions with maps, which shows bias towards mega projects
• look at the Economist Intelligence Unit for more research, including infrascopes for the world, looking at capacity in different regions of the world to implement PPPs

Q the issue of competition, too much looking at the project side, but also on the macro fiscal level – IMF is also on our side, ringing bells eg on Ghana

Q concerned about fiscal space, in part extractive industry countries – FfD says private sector and PPPs will be part of solution, welcome transparency and timely information, will the project go beyond the SDG and implementation of PPPs – will people get the benefit of the projects in the end. Question re debt, is the tool able to project contingent liabilities, part of IMF debt sustainability analysis

Q Tunisia how will PPPs guarantee more development and employment, when we don’t have governance and accountability, how will it help as it is a pillar in our CPF in the next five year

Q GIF question, how the WB is going to continue investment in very complex financial structures, including PPPs and links to accountability and towards communities

LC

• GIF just a financing vehicle, focused on project preparation, does nothing by itself, works with technical partners – whichever MDB is in the lead, its standards applies
• Contingent liabilities, developing tool with IMF
• Links with SDGs, not the tool itself, but with help with measurement of SDGs
• IMF is interested in fiscal responsibilities, and have expressed concerns re some countries
• PPPs won’t solve Tunisia’s employment problems, need to set out plan and then make decisions on where to use PPPs – but in no way a panacea

AC

• contingent liabilities is critical, PPPs may save some money in the short term
• the extent of monitoring you need to do in places such as Tunisia, you need capacity – what are the costs in the long term
• re standards, re GIF, this will be preparing projects for the private sector – if implemented by the PS MDB standards won’t apply, communities will have to chase these
• not about terminology, whether you call it a standard or not, that WB beta need to be at a high level – seem to be a vacuum of knowledge, countries don’t know what a good model would look like

LC

• GIF is not financing random projects, only through an MDB which proposes a project – they will impose their standards
• There is a certain formality when you sign up to standards, therefore not calling it standards, called a framework as it is more like a ladder
• There is global competition for financing, trying to show examples, then have discussion if it should become a standard – not there yet