UNECE Team of Specialists for PPPs

Introduction to the PPP Model

Presented by: Art Smith Chairman, UNECE TOS-PPP [email protected]

October 9, 2012

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Financing the Infrastructure Gap – an Imperative for GDP Growth

I n f r a s t r u c t u r e F i n a n c i n g G a p = T h e g a p b e t w e e n F u n d i n g R e q u i r e m e n t s f o r I n v e s t m e n t s i n I n f r a s t r u c t u r e ( N e w + O p e r a t i o n s & M a i n t e n a n c e ) a n d a c t u a l i n f r a s t r u c t u r e e x p e n d i t u r e s  T h e I n f r a s t r u c t u r e F i n a n c i n g G a p i s h u g e i n d e v e l o p i n g c o u n t r i e s a m o u n t i n g t o m o r e t h a n U S $ 9 0 0 b i l l i o n / y e a r  A c r o s s t h e d e v e l o p i n g w o r l d , t h i s a m o u n t s t o 6 0 % o f t h e t o t a l i n f r a s t r u c t u r e f i n a n c i n g r e q u i r e m e n t .

T H E W O R L D B A N K

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Private Investment in Infrastructure, 1990-2010 $US Billions* Source: World Bank and PPIAF, PPI Project Database *Adjusted by U.S. CPI

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Private Investment in Infrastructure, 1990-2010, by Region $US Billions* Source: World Bank and PPIAF, PPI Project Database *Adjusted by U.S. CPI

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Definition of Public-Private Partnership (PPP) • A Public-Private Partnership is a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public.

• In addition to the sharing of resources, each party shares in the potential risks and rewards in the delivery of the service and/or facility.

Source: www. ncppp.org

Completed PPP Projects (U.S.)

6 Union Station, Washington, DC JFK International Terminal 4, New York Las Vegas Monorail, Nevada Dulles Greenway, Virginia

Completed PPP Projects (U.S.) cont.

7 James F. Oyster School, Washington, DC New York Avenue Metro Washington, DC Fredericksburg, VA Parking Lot Tolt Water Plant, Seattle, WA

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Potential Economic Objectives of PPPs may include:

 Reduce development risk  Obtain project financing  Reduce public capital investment  Accelerate service availability  Optimize value for money − Access to management expertise − Access to technology  Optimize risk allocation  Mobilize excess or underutilized assets  Foster local capital markets  Indirect economic benefits

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Potential Social Objectives of PPPs may include:

• Achieve legitimate political goals • Improve service to the community, e.g., increased access to drinking water which meets WHO standards • Extend services to remote or marginalized regions or populations • Reduce income inequality • Provide environmental enhancement

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PPP Challenges in the Former Soviet Union • Legal and Regulatory Frameworks • Property Rights • Public and Private Sector Capacity • Political Commitment • Transparency