apiic sez business model

8/2/2019 Apiic Sez Business Model

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Government of Andhra Pradesh

Integrated Special Economic Zone

Presentation on role options for GoAP

January 25, 2001


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Agenda

SEZ ModelGovernments perspective

International examples of development models and

government intervention

Role options for GoAP

Quantifying GoAP support

Next steps / imperatives


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SEZa bundle of Multi-service concessions

Land, land development

Land bank Internal core infrastructure

Industrial CommercialRoads,

Social infra.Power, water,

telecom, utilities

Access infrastructure port, airport, roads, railways

GoAP can play an enabling role across each of these bundles

Residential

Plug-and-Play facilities water, power, telecom, utilities


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Governments have assumed different roles

Governments have intervened through a combination of fund based and non-fund based mechanisms to develop such zones

Governments have offered direct fund based support in developing land,connectivity infrastructure and specific infrastructure components of the zones

Non-fund based supportincludes bankability enhancers such as revenuesupport guarantees, securitisation support and exchange rate protection

Governments have structured private sector participation throughinfrastructure concessions, real estate, residential/commercial developments

A key non-fund based intervention has been through an enabling policy

Governments have shared risks in developing such zones. GoAP will

also have to share specific risks to attract developers for the SEZ


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Some of the international examples for todays

discussion are

China : Suzhou, Zhuhai, Pudong, Shenzhen

Philippines : CIP, Subic Bay, Clarke

Thailand : TS21

Indonesia : Batam

We have examined the development models and the role played bygovernments in successfully developing such zones


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Examples of development strategy - China

Seven connections and one levelling provided by government

Levelled land

Power, water, Telecom, Sewerage, Rain water drainage, Road, Gas

Rolling over model

Developing plots and using the proceeds to develop infrastructure

Facilitating commercialisation of infrastructure i.e.. concessioning out specific

components to make them self financing and bankable

Government funding support (5% to 15% of SEZ development cost)

Preferential policies and incentives

Flexible labour laws

Devolution of economic decision making authority


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Examples of development strategyChina

Bulk power from provincialutility

Bulk water by provincialauthority

External connectivity, accessroads, expressway andtelecom

These works have beenundertaken by variousgovernment agencies

Land development expenses

Initial power (2 X 20 MW DG)

Internal power distribution,steam, LPG supply

Developing and maintainingdrainage and sewerage system

Developing /concessioningindustrial, residential,commercial plots

Social infrastructure

Suzhou Industrial Park (SIP), China (800 Ha)

Role of government Role of private sector


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Examples of development strategy - China

Utilities provided by local

municipal committee

Initial residential & commercial

development and services incurred

by Zhuhai Development Company

Government helped develop

highways linking the SEZ

funding, revenue supportguarantee, foreign exchange

guarantee, securitisation support

through special purpose vehicles

(CITIC, GITIC, Zhuhai Highway

Company)

Port and 2 industrial parks

developed by Gladhover- an

investor

Land reclamation and industrial

park developer by Everbright - an

investor

Zhuhai SEZ, China (121 Ha)



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Examples of development strategy - Philippines

Subic Bay Development and

Management Corporation

(SBDMC) formed as a JVamong Subic Bay Metropolitan

Authority (SBMA), China

Development Corporation (a

private Taiwanese company)

and century Development

Corporation for a 12 Ha Subic

Bay Taiwanese Industrial Park

Water SupplyBiwater

International Limited

Electric PowerEnron Subic

Power Corporation

Telecommunications

Subic

Telecom

Subic Bay Special Economic and Free Port Zone, Philippines (16,200 Ha)



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Land development by Clarke

Development Corporation

(CDC) Basic infrastructure backbone

Social infrastructure base

35 MLD, 50 year Water

concessionClarke Water &

Sewerage Co. Inc (a JV amongCDC, Kemaman Terminal One

Sdn Bhd. (Malaysia) and

Ciriaco Corp. (Philippines)

Clarke Special Economic Zone, Philippines (28,041 Ha)



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Land availability

Policy & procedural facilitation

Captive power generated

through an MoU with a private

investor

Land development expenses

incurred by developer

consortium

Ready Built Factories (RBF)

offered initially by the

developer

Carmelray Industrial Park II, Philippines (145 Ha)



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Examples of development strategy - Indonesia

88 MW electricity supplied by

state power utility

Government (BIDA) along with

international companies has

created drinking water

infrastructure for the zone

Government (BIDA)

responsible for sea access

including ferry terminals

Telecom services provided by 4

concessionaires (Singapore

Telecom, Perumtel (Indonesia)and Telecom Australia

Batam Special Bonded Zone (715 sq Km)



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Examples of development strategy - Thailand

Government (IEAT) guarantees

infrastructure improvements through

a Sinking Fund

IEAT/Government mediation in

formalising contracts between

developers and state run utility

agencies for assured supply and

maintenance of utility supplies

Government guaranteed protection on

rights and benefits, including

assurance on the maintenance and up-

keep of basic utilities and facilities

Development, marketing, operation

and maintenance of the park

Sub-concessioning specific

components

Thailand Singapore 21 (TS 21) (1546 Ha)



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Other forms of intervention by governments

Turkey

Free Trade Zones Establishment andDevelopment Fund

Mobilised through fees from operating permits

and licenses

To establish, develop and maintain FTZs Construction of social infrastructure

Mauritius EPZ Labour Welfare Fund


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Examples of government investments

Over US$ 2.7 billion investment by government for capitalconstruction in Shenzhen SEZ (327 Sq Km) till 1993

Pudong Bonds by Shanghai Municipality for developing Pudong

New Area (350 Sq Km)

20 year plan of Zhuhai Municipality to spend Rmb 60 billion todevelop Zhuhai SEZ (121 Sq Km)

Investment of fixed assets of Rmb 8.752 billion by Xiamen Municipal

Government to develop Xiamen SEZ (131 Sq Km)

Clearly, infrastructure led development has been the underlying theme in

developing these zones and governments have taken the lead byinvesting in infrastructure


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To summarise, governments have played differentroles as follows

Government

Fund based

Non Fundbased

Developing land, connectivityinfrastructure and specific infrastructure

components of the zones

Bankability enhancers such as

revenue support guarantees,

securitisation support and exchange

rate protection; enabling policies

Private sectorInfrastructure concessions, real estateand residential / commercial

developments

sharing risks and rewards with the private sector


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And governments efforts have yielded significant

results

Contribution to GDP

Increase in industrial output

Exports and international trade

Employment generation

Foreign exchange earnings

Direct and indirect economic multiplier effect

International competitiveness


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Govt. ownership JV BOT/BOOT BOO

GoAPIntervention

Structuring involvement of other keystakeholders e.g. tenants industries

Degreeofinvestme

nt,risksharing

an

downershipby

privatesector

LOW

HIGH

PPP Options Multi-service concessions

Policy support,external infrastructure

non-fund based support

Entirely fund based intervention


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Key considerations in evaluating role options

Scope/possibility of concessioning out specific components on userpays basis or through annual revenue charges

Acceptability and attractiveness to potential stakeholders - co-developers,

lenders, investors

Funds to be infused by GoAP/GoAP

Any contingent liability on GoAP/GoAP

Lock-in period of investment for GoAP

Finally, GoAPs intervention has to be in a manner as to enhance the

attractiveness and bankability for private developers


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Fund based

across different components and of various types will have to be

examined to make the proposition attractive to investors

Non-fund based

Policy & other

interventions


Land & Landdevelopment

Core

infrastructurewithin the zone

External access /

connectivityinfrastructure


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Fund based



Non-fund based

Policy & otherinterventions



Core


External access /


Land for equity Fund coreinfrastructurecomponents

Develop allcritical access /plug-in

infrastructure Land acquisition

Clearances

Approvals

Third partyConcessions

Bankability

enhancers


Bankability

enhancers

As per the current and proposed SEZ Policy ofGovernment of India


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Fund based



Non-fund based




Core


External access /





Clearances

Approvals


Bankability

enhancers


Bankability

enhancers



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Undertake specific components of the SEZ e.g.Power, water transmission

Provide soft loans, subordinate debt, raiseproject specific bonds for funding

infrastructure development

Set up social infrastructure and amenities -non-paying components

Would reduce development cost and

development risk for promoters

Could also demonstrate governmentcommitment to the project

Jebel Ali, SAIF, Suzhou, CIP, Batam

Developmentrisk mitigation


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Time-bound completion of all criticalaccess and connectivity infrastructureleading up to the zone power, roads,railways, water transmission, gas

pipelines, telecom

Can significantly reduce thedevelopment risks to private investors

The underlying logic - Developers

should not be burdened with with therisks of external connectivity

Suzhou, Shenzhen, Batam, Zhuhai, Kulim



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Take-or-Pay guarantee for utilitiessuch as power e.g.. guaranteed off-takeof any surplus power by APTRANSCOin the initial years

Wheeling & banking arrangement for

surplus power with APTRANSCO /APDISCO

Take-or-pay arrangement for water(VCMC) and other such utilitiesproduced within the zone

Permit third party sale (outside thezone) of surplus power, water and suchservices without any additional duties

TS21, Batam, Shenzhen, Zhuhai,

Partial demand

risk mitigation,especially in the

initial years


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Partial revenue shortfall support

State government guarantee for take-or-pay commitments

Exchange rate protection

Government guarantee for debtrepayment

Securitisation of future receivables

from specific projects within the zone.Repayment from state sales tax / stamp

duty receipts

Creating an SEZ Fund through cess orother such levy for contingency andcredit enhancement of specific projectswithin the SEZTurkey, Mauritius, Suzhou

Creditenhancementmeasures


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Time bound parallel

concessioning of critical

external infrastructure

projects

Provide credit enhancementsupport necessary to helpbankability of these projects

Suzhou, Shenzhen, Zhuhai, Kulim



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Fund based



Non-fund based


Role options for GoAP - Recap


Core


External access /





Clearances

Approvals


Bankability

enhancers


Bankability

enhancers


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