The views expressed in this presentation are the views of the authors and do not necessarily reflect the views or policies of any of the institutions named above, specifically the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), the World Bank Institute, the World Bank, the Multilateral Investment Fund, and the Inter-American Development Bank, nor the Board of Directors of each of these institutions, nor the governments they separately represent. These institutions do not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with official terms used by these institutions.

PPPs for Infrastructure: PPPs for Infrastructure: Global OpportunitiesGlobal Opportunities& Emerging Market & Emerging Market

PotentialPotential

Elaine GlennieSenior Capacity Building SpecialistAsian Development Bank Institute

Govindan NairLead Economist

World Bank Institute

David BloomgardenProject Specialist

Multilateral Investment Fund –Inter-American Development Bank

Global TrendsGlobal TrendsPre-Financial CrisisPre-Financial Crisis

PPI Investment by Region, US$ MillionPPI Investment by Region, US$ Million

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1990 1992 1994 1996 1998 2000 2002 2004 2006

Sub-SaharanAfrica

South Asia

Middle Eastand N. Africa

Latin Americanand theCaribbean

Europe andCentral Asia

East Asia andPacific

Source: World Bank PPIAF Database

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1990 1992 1994 1996 1998 2000 2002 2004 2006

Telecom

Energy

Transport

Water andSewerage

Source: World Bank PPIAF Database

Global TrendsGlobal TrendsPre-Financial CrisisPre-Financial Crisis

PPI Investment by Sector, US$ MillionPPI Investment by Sector, US$ Million

BRICs Emerged as Top BRICs Emerged as Top PPPI Recipients in 2007PPPI Recipients in 2007

CountryShare of total

investment (%)Investment in US$ billions*

Share of total

projects (%)

India 14.2 % 22.5 17.4 %

Russian Federation 12 % 19 4.9 %

Brazil 10.1 % 15.9 3.1 %

Mexico 6.3 % 9.9 4.9 %

China 4.7 % 7.5 28.1 %

Flows from Emerging Flows from Emerging Economies to Africa Grew Economies to Africa Grew

SignificantlySignificantly In 2006, emerging

financiers – including China, India and Arab states – committed more than $8 billion to infrastructure in Africa.

Chinese investment in Africa was at least $7 billion in 2006 and estimated $4.5 billion in 2007.

In June 2006, Premier Wen Jiabao said China has offered more than $44 billion over past 50 years to finance 900 infrastructure projects.

Annual Commitments to Infrastructure Projects in Sub-Saharan Africa by

Emerging Market Financiers, 2001-2007

And then...the Financial And then...the Financial Crisis:Crisis:

Impact on Short-term Economic Impact on Short-term Economic HealthHealth

Source: Morgan Stanley Research, December 2008

Asia (Ex-Japan)Real GDP (%)

Latin AmericaReal GDP (%)

9.3 9.5

7.6

5.36.8

2006 2007 2008E 2009E 2010E

5.4 5.74.3

(0.4)

2.6

2006 2007 2008 2009E 2010E

Global Economic OutlookReal GDP (%)

5.1 5.03.6

0.9

3.32.8 2.40.9

(1.4)

1.4

7.7 7.86.3

3.15.1

2006 2007 2008E 2009E 2010E

Global Economy Industrial World Developing World

6.6

4.8

1.3

3.4

7.0

2006 2007 2008E 2009E 2010E

CEEMEAReal GDP (%)

Growth Growth Growth

GFC Impact:GFC Impact:Emerging Market Spreads Increased Emerging Market Spreads Increased

DramaticallyDramatically

0

3

6

9

12

15

18

21

J an-07 Apr-07 J ul-07 Oct-07 J an-08 Apr-08 J ul-08 Oct-08

Asia CEMBI

Emerging Europe CEMBI

Latin America CEMBI

1

2

3

4

5

6

7

8

9

10

11

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08

Latin America EMBI

Asia EMBI

ECA EMBI

Emerging-market Sovereign Bond Spreads: EMBI January 2007 – December 5, 2008

Emerging-market Corporate Bond (CEMBI) Spreads: January 2007 – December 1, 2008

Source: World Bank PPIAF Database

GFC Impact:GFC Impact:Constrained Access to CapitalConstrained Access to Capital

For new PPP projects : Reduced access to lending particularly from foreign banks, requirements for greater sponsor equity, shorter underwriting periods, more stringent conditions, and greater financing costs for long-term concessions

For existing PPP projects : Increased refinancing risk for long-term concessions, potential delays in refinancing with risk of cancellation and market disruption

GFC Impact: GFC Impact: Project Closures Down 26%Project Closures Down 26%

By Income Group: upper middle income countries reporting lower

investments lower middle income countries attracting higher

investments low income countries seeing stable investmentsBy Region: Eastern Europe/Central Asia, Latin

America/Caribbean hardest hit Sub-Saharan Africa stable Asia and the Pacific, and the Middle East and

North Africa attracting higher investment By Sector: Transport, energy and water reporting lower

investments

But PPP Remains an But PPP Remains an Actively Pursued OptionActively Pursued Option

Increasing public infrastructure demands worldwide

Fiscal constraints place more importance on private sector engagement

Fiscal stimulus responses to global financial crisis focus on infrastructure

… Countries continue to tender/award new PPP projects and/or prepare new project pipelines

Asia Pacific PPPs: A Asia Pacific PPPs: A Diverse Diverse Picture of “Stars and Black Picture of “Stars and Black

Holes”Holes”Total 2007 PPP Investment, US$ MillionTotal 2007 PPP Investment, US$ Million

India22,485

China7,456

Philippines4,386Viet Nam

1,332

Indonesia1,441

Cambodia816

Pakistan4,487

Thailand1,050

Sri Lanka387

Malaysia1,057

Source: World Bank PPIAF Database

Afghanistan240

Papua New Guinea150

Kazakhstan833

Recent Asia PPP Recent Asia PPP Trends:Trends:

Enormous infrastructure demand

(Annual infrastructure needs, 2005-2010)

0 50000 100000 150000 200000 250000 300000

East Asia and Pacific

South Asia

Central Asia

Asia Total

Road Railway Electricity Generation Water Sanitation Telephone

In US$ Million

Source: World Bank Policy Research Working Paper

India: World’s Biggest PPP India: World’s Biggest PPP Market?Market?

Average Project Size Reaching Financial Close, US$ Average Project Size Reaching Financial Close, US$ MillionMillion

0

200

400

600

800

1000

1200

1400

1600

Water andSewage

Transport

Telecom

Energy

India: PPP LandscapeIndia: PPP Landscape

Value and Average Size of Projects(Total Value USD15.8 billion)

Airports

Ports

Power Transmission

Railways

Roads & Bridges

Water Supply

Power DistributionSolid Waste Management

(100.00)

-

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

0 2 4 6 8 10Sector

Ave

rage

Siz

e U

SD

Mill

ion

Asia Pacific Asia Pacific RegionRegion: : PPP Country ReadinessPPP Country Readiness

31 ?

8 ?

2 ?

2 ?

1 ?

0 ?

A few IPPs or nothing much at all

Mainly IPPs, trying others

Extensive but limited sectors

Extensive but very domestic

Extensive, established, largely domestic, mainly physical infrastructure

Complete buy-in, institutionalized, open, international, physical & social infrastructure

Latin America: PPP MarketLatin America: PPP MarketPrivate-Sector Commitments to Infrastructure Private-Sector Commitments to Infrastructure

Investment, US$ MillionInvestment, US$ Million

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

55000

1997* 1998* 1999* 2000* 2001* 2002* 2003* 2004* 2005* 2006* 2007*

Year

Inv

es

tme

nt

(US

D M

illi

on

s)

Emerging Market PPPs: Emerging Market PPPs: Capacity and Knowledge Capacity and Knowledge Gaps are Key BottlenecksGaps are Key Bottlenecks

Public Sector: PPPs a “new procurement approach” that requires “new PPP skills”

Private Sector: A new market opportunity that requires market intelligence to evaluate “emerging country” opportunities

MP3IC: Global PPP Learning MP3IC: Global PPP Learning ProgramProgram

Cutting edge learning modules to enable PPP institution building and development of PPP practitioner skills

Benchmarking tools to identify gaps and remedy PPP institutional and policy frameworks which deter investors

MP3IC: Global PPP Learning MP3IC: Global PPP Learning ProgramProgram

Strategic DesignStrategic Design Designed as a global learning product with

features to adapt to country circumstances Customized to multiple audiences – policy

makers, managers, professional and technical staff

Based on multiple global comparative analyses and tools– MP3IC Country and Project Case Studies– Law and Infrastructure website– Global PPP Readiness Index

MP3IC Global ComparisonsMP3IC Global Comparisons: : Infrastructure & Law WebsiteInfrastructure & Law Website

www.worldbank.org/inflawwww.worldbank.org/inflaw

Takes users through the PPP project development process - starting with Government Objectives, then moving on to Legal and Regulatory Frameworks and Agreements

MP3IC Global Comparisons: MP3IC Global Comparisons: Infrascope Readiness ScorecardInfrascope Readiness Scorecard

1. Legal and regulatory framework1.1 Consistency and quality of PPP regulations1.2 Effective PPP selection and decision making1.3 Fairness/openness of bids, contract changes1.4 Dispute resolution mechanisms

2. Institutional framework2.1 Quality of institutional design2.2 PPP contract, hold-up and expropriation risk

3. Operational maturity3.1 Public capacity to plan and oversee PPPs3.2 Methods and criteria for awarding projects3.3 Regulators’ risk allocation record3.4 Experience in transport & water concessions3.5 Quality of transport and water concessions

4. Investment climate4.1 Political distortion4.2 Business environment4.3 Social attitudes towards privatization

5. Financial facilities5.1 Government payment risk 5.2 Capital market: private infrastructure finance5.3 Marketable debt5.4 Government support for low income users

MP3IC Global Comparisons: MP3IC Global Comparisons: PPPI ApproachesPPPI Approaches

Public Sector Comparing PPP

Attractiveness Identifying what it

takes to improve PPP attractiveness

Prioritizing actions to improve PPP attractiveness

Private Sector Identifying

Opportunities Evaluating

Conditions Predicting

Bottlenecks

PPPI Days 2009PPPI Days 20099-13 November 2009, Manila 9-13 November 2009, Manila

PhilippinesPhilippines

ADB Business Forum

PPPI Knowledge Sharing - Comparing PPP Programs, Projects, and Country Readiness

PPPI Days Conference

PPPI Knowledge Sharing – Frontier Issues in Global PPP Development

9-10 November

10 November

11-12 November

13 November

PPPI Days 2009:PPPI Days 2009:PPPs in a Changing Global PPPs in a Changing Global

EnvironmentEnvironment

Revisiting Risk in the Aftermath of Global Financial Crisis

Megacities and Rise of Urban PPPs Climate Change and Greening of

PPPs Escalating Demand for Social

Services Globalization and Increasing Need

for Harmonization

PPPI Days 2009:PPPI Days 2009:New PPP FrontiersNew PPP Frontiers

Social Sectors – Unlocking PPP Potential for Human Capital Development

Bundled Service Delivery and Multisectoral PPP Approaches

Harmonization and Cross Border PPPs Challenges for PPPs in Fragile and

Small Island States

MDBs Role in Changing MDBs Role in Changing LandscapeLandscape

Strengthening policy guidance and Bringing additional financial and technical expertise

Expanding lending programs to assist in rapid delivery of infrastructure projects

Offering innovative range of credit enhancements and risk mitigation measures

MDBs Role in Changing MDBs Role in Changing LandscapeLandscape

Investment

Economic Growth

Entrepreneurship

Poverty

Alleviation

Enabling

Environment

Catalytic Transactions

MDBs

The views expressed in this presentation are the views of the authors and do not necessarily reflect the views or policies of any of the institutions named above, specifically the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), the World Bank Institute, the World Bank, the Multilateral Investment Fund, and the Inter-American Development Bank, nor the Board of Directors of each of these institutions, nor the governments they separately represent. These institutions do not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with official terms used by these institutions.

Thank youThank you