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A Tale of Two Sisters: Bangladesh and Philippine PPP Programs 26 November 2014 Presented at the UNESCAP PPP Workshop on Public-Private Partnerships for Infrastructure Development in Myanmar
A Tale of Two Sisters:
Bangladesh and Philippine PPP Programs
26 November 2014
Presented at the UNESCAP PPP Workshop on
Public-Private Partnerships for Infrastructure Development in Myanmar
Background
• In early 2010, the governments of Bangladesh and Philippines
both recognized a need to completely overhaul their approach to
private participation in public infrastructure
• ADB, responding to this need, embarked on two Technical
Assistance programs for national PPP framework development:
– Bangladesh – December 2010
– Philippines – February 2011
• ADB staff worked jointly to design the programs, drawing on
– Outline national policies generated by each government
– Each country’s prior experience with PPPs – both successes and failures
• Both countries had initially successful attempts at PPP in the late 1990s
• Neither repeated these successes for about 10 years at the time of the TA
– Drew on ADB’s state-of-the-art knowledge of what elements were
required for a workable, robust PPP program
Common principles, common design
• The following slides present the common elements of the
Bangladesh and Philippine PPP programs
• The elements of these programs are now the standard by which
successful national PPP programs are measured
– The World Economic Forum and the G-20 have both recognized the
Philippine PPP program and its structures as the recommended
approach for countries pursuing PPP
G-20 Development Working Group
“Assessment of the Effectiveness of Project Preparation Facilities in Asia and Africa”
September 2014
https://www.g20.org/sites/default/files/g20_resources/library/
World Economic Forum
“Accelerating Infrastructure Delivery: new evidence from international financial institutions”
September 2014
http://www.weforum.org/reports/
– Why aren’t we hearing the same things about the Bangladesh program?
Common elements of the PPP programs
• Central PPP Office
– A professionalized team led by a CEO with private sector experience
– Office sits above sector line ministries, serving all
– Empowered by the President/Prime Minister under both political and
bureaucratic mandate to take control of the national development of PPP
• Enhanced Project Identification
– Objectively screen proposed projects from sector ministries/depts
– Use common criteria
– Assure they are viable as PPP
• Enhanced Project Preparation
– Use professional external advisors/consultants to prepare projects
– Preparation criteria in line with international project finance standards
– Development of robust project-level contracts that protect the interests of
government, assure reasonable risk allocation, and are bankable
– Assure all preparatory work is done before letting out for tender
Common elements of the PPP programs
• Dedicated Project Development Funding
– Establish a fund that is used solely for PPP project preparation
– Allows coverage of the higher costs of professional advisors outside
ordinary government operating budgets
– Fixed, objective criteria for consultant procurement and access to funds
• Transparent Tendering Process
– Standardized tendering process, outside ordinary govt procurement law
– Focused on achieving high quality output performance from projects (versus specifying inputs and quantities, like ordinary public sector procurement)
– Standardized prequalification documents – to assure bidders have
proper experience with building, financing and operating PPP projects
– Standardized request for proposal documents – to assure bidders have
all the information they need to lodge a firm proposal on an equal basis
Common elements of the PPP programs
• Consideration of PPP Project financial viability
– Seek to limit subsidies and rely on user fees wherever possible
– Seek to limit financial risk exposure of the government to PPP contracts,
subject to the principle of fair risk allocation (party gets a risk who is
best able to manage the risk)
– Subject to strict criteria, where a project is economically beneficial but
commercially challenged, provide subsidies or ‘viability gap financing’
from government, but limited to a maximum amount
• Public Financial Management
– Seek to quantify budget impacts and long-term liabilities that arise from
PPP contracts
– Report on these metrics to Finance Ministry/Dept
– Track cumulative impacts of PPP program
– Monitor and manage exposures, currency
– Use as lever for driving future reforms at sector level
Bangladesh PPP structure
Ministry of Finance
PPPO
7
PPP
Project
Line
Ministry
PPP
Office
Dept of Environment
Law Ministry
Cabinet Committee
on Economic Affairs
MOF
PPP Unit
Skills: Advisor Pool
Devel Money: PPP TA Fund
VGF
Budgeted Subsidies
Guarantees
Compliance with
environmental
laws, approvals
Contract vetting
+
PPPU reviews project proposals
prepared by PPPO for financial
vetting, quantifies and applies for
financial supports
PPPO determines which projects
can access /need skills and
financial support for project
development
CCEA provides:
• In-Principle Approval to
proceed with project
development
• Approves final project
Line Ministry:
• Originates projects
• Prelim studies
• Technical resources
• Ultimate project
ownership,
regulatory oversight
Sanctions funding
and supports
Reviews
and
Approvals
Project
proposal
Development
coordination
led by PPPO
Planning Commission
Sanctions Line Ministry
development program
= PPP-specific functions
= Other Govt functions
Philippine PPP Office Structure
Policy Formulation
& Evaluation
Service
Capacity Building &
Knowledge Mgt
Service
Administrative
Service
Policy Formulation
Division Project Development
Division
Mgt Information Svcs
Division Finance Division
Policy Evaluation &
Monitoring Division Project Management
Division
Knowledge Mgt
Division
Human Resources
Division
Capacity Building
Division
General Services
Division
Project
Development and
Monitoring Facility
Independent Fund
Manager NEDA
Hires and manages
external advisors
Bulk of staff and
services from this unit
Office of the Exec Director
Project
Development
Service
Legal Service PDMF Mgt Service
Actions taken
Bangladesh • Location
– Moved PPP functions from Board
of Investment to under the Prime
Minister’s Office
• Staffing
– Established office with 6 govt
administrative staff – govt office
– Hired professionally experienced
“CEO”
– Hired 6 staff professionally-
oriented staff from govt cadre
• Fiscal oversight by MOF PPP unit
– Administers subsidies and
support funds, against criteria
• Support funding from government
– PDF: $12m
– VGF: $325m
– Infra Fund: $200m
Philippines • Location
– Moved PPP Center from Dept of
Trade & Industry to National
Economic Development Authority
• Staffing
– Hired professionally experienced
“CEO”
– Hired 20 professional staff initially
– Quickly began adding staff with
growth in work load
• Fiscal oversight responsibility of
PPP Center, initially
• Support funding from government
– Established PDMF:
• Initially, $13m
• Increased in increments to $90m
– Contingent Liabilities Fund:
$200m
Outcomes to date (2011-2014)
* Project awarded before PPP framework and
procedures completed; project currently stalled due to
deficiencies in project preparation and contracts.
Metric Bangladesh Philippines
Office staffing:
Initially (2Q2011)
Now (4Q2014)
(Professional/Total)
1/6
7/19
(Professional/Total)
16/20
75/100
Sectors being covered 7 8
Projects screened > 200 > 200
Projects identified 42 51
Projects at concept stage 9 11
Projects procuring advisors 11 9
Projects under preparation 8 11
Projects tendered 4 15
Projects awarded 1* 8
Challenges encountered – both countries
• Project identification: First round is a ‘battle’ with sector line
ministries/departments
– Typically initially throw weak, non-viable or ‘leftover’ projects at PPP unit
– Not used to having someone else vet their projects – and have the full
authority to do so
– Haven’t had to think about performance outcomes previously, mostly
focus on inputs and quantities
– Lack of understanding of ‘commerciality’, ‘bankability’, risk allocation
• Consultants/Advisors
– Procurement of transaction advisors requires material amounts of PPP
staff time and effort and must be factored into development timeline
– Traditional national procurement standards may not be appropriate for
advisors; focus is on quality and experience, less on cost
– Consultants/advisors need oversight, require PPP units to obtain key
decisions from government ministries, both in sector and with ‘umbrella’
level rules/policies
Challenges encountered – both countries
• Project management in development
– PPP unit staff must have hands-on management of all aspects of the
PPP project development process
– There must be sufficient staff of appropriate quality to manage projects
– Need to liaison with govt ministries on sector-based inputs, integration
with other existing programs/infrastructure
– Need to support garnering of approvals, permissions from other govt
bodies for the projects
• Tendering
– PPP units face tremendous pressure from government to ‘get projects
out the door’, often before they are fully ready
– Evaluation of projects based on technical competency on a pass/fail
basis worries technocrats
– Government ministries try to avoid key sector issues that impact project
economics or ability to implement; this leads to challenges in developing
fully-formed project contracts
• Staffing
– Never enough! Need procurement, legal, financial, and tech staff
Next steps in evolution
Bangladesh
• Petitioning govt for more staff,
outside of govt pay scale
– Greatly needed to accelerate
consultant procurement,
administer to projects under
development/bidding, consult
with govt ministries
• Exhausting PPPTAF monies;
petitioning for top-up
• Nearing first success in 1Q15
– Govt in need of proof of
concept ahead of additional
funding; will that be too late?
Philippines
• Moved fiscal oversight unit out
of PPP Center to Dept of
Finance, creating ‘adversarial’
review process
– Will manage quantify, track,
and manage contingent
liabilities arising from PPPs
• Near term prospects to get
‘recycling’ of PDMF funds from
awarded projects
– Govt is not topping up the
PDMF as a result (not
necessarily negative!)
Lessons learned
• Political will and leadership is of paramount importance
• Empowerment and independence of PPP unit is essential
• PPP unit leadership must be of highest professional quality
• Staffing quantity and quality of high importance; has material
impact on speed, efficiency and quality of outcomes
• Clear, consistent, reliable rules, processes and institutional
application is key to attracting investors and lenders
• Sustained commitment of government funds and resources
required
• Adequate TA funding required upfront with external support
from development partners ($1.725m in BAN vs $7.20m in PHI)
• Projects take longer to prepare and tender than initially
anticipated: PDF monies need to be sized to account for this
• Once initial projects are through the process, it gets easier
• Outcomes from transparent competitive tendering have yielded
– High quality participants
– Value for money proposals
PPP, done correctly, can deliver too for Myanmar
• Public-Private Partnerships can be a key component of national development – Creates additional sources of investment
– Can deliver higher efficiency and performance
– Complements public sector/sovereign investments
– Better manages national finances, and contingent liability exposures
• But getting it right is important
– There is a proven formula for success in PPP
• Grounded in the principles of international project finance
– Evidence shows that varying from this formula usually results in sub-optimal outcomes
• Structuring and tendering PPPs correctly requires
– Skills – technical, legal, financial/commercial
– Project development capital – to hire skills, conduct studies
– Informed management – to drive outcomes, manage results
– National oversight of financial impacts – for sustainability
PPP holds potential for Government to achieve significant development investments at lowest cost and highest quality
ADB Contacts
J. Grant Hauber PPP TA Project Manager and
Principal Public-Private Partnership Specialist
Public Management, Financial Sector and
Trade Division
Southeast Asia Department
T: +632 683 1707
M: +63 917 888 0702
M: +95 9 259 627 681
Thatha Hla Financial Sector Economist
Public Management, Financial Sector
and Trade Division
Myanmar Resident Mission, Naypyitaw
T: +95 67 810 6066
M: +95 9 450 005 639
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Bangladesh PPP structure
PPP
Office (PMO)
Prime
Minister
Line
Ministries Line
Ministries Line
Ministries Line
Ministries
PPP Advisory
Committee
Cabinet Committee
on Economic Affairs
PPP
Unit (MOF)
Finance
Division (MOF)
In-Principle and Final
Project Approvals
Policy
Consultation
Planning
Commission
Sanctions and Administers
Budgets for:
• Annual Development Plan
(capital expenditure
budget)
• Non-plan Budget
(annual operating
budgets)
• Special allocations for
funds, such as PPPTAF,
VGF, BIFF
• Assesses fiscal viability
and risk of PPP Projects
• Sanctions VGF, Subsidies
• Monitors Contingent
Liabilities
Creates and
sanctions Annual
Development Plan
(ADP), which
includes
identification of
specific
development
projects and
associated capital
budget allocation.
Responsible for
development of
Five-year Plans
Proposed
development
program
Budget
Allocation
Fund
Allocations
Fiscal
Sanctioning
of
Individual
PPP
Projects
Central point of PPP coordination for internal
government, external investor, lender and civil society
stakeholders.
Screens, supports development of PPP projects,
administers tendering, negotiates, and supports
financing process on behalf of Government, specifically
sector line ministries
Sanctioned Projects and Expenditures in ADP
PPP
Project
Proposals Core of PPP Program
CEO
