By Jyoti Bisbey
One might think there’s a magic pathway to public-private partnership (PPP) program success in developing economies. This mystical roadmap doesn’t exist. As a PPP specialist I often sit across from policy makers and try to demystify some of the conundrums they face as the road to success is not always clear nor easy.
PPPs are complex and require the right and conducive ecosystem to succeed. Evolving from one successful PPP project to a sustainable program requires several factors to be in place. This ecosystem includes several critical components, such as macroeconomic and political stability, sound policy and regulatory frameworks, government commitment, mature financial markets, institutional capacity, effective risk allocation, stakeholder engagement, effective performance monitoring, a transparent process, and a long-term vision.
Each sector has its own set of challenges that must be addressed in parallel, such as sector reform, market competition, tariff adjustment, and project sizing to attract private investments. Support from development financial institutions (DFIs) on policy and program development to project implementation has also proven to be critical.
Using the latest World Bank report on Benchmarking Infrastructure Development I endeavored to better understand the defining factors through three case studies that have followed different paths to establishing waves of PPP projects.
The PPP programs in Colombia, Kenya, and the Philippines offer a good representation as they are in different geographical regions and present different levels of economic development. Each case is unique in its evolution, illustrating there’s no one-size-fits-all solution in establishing a PPP program.
Kenya and the Philippines are examples of countries that started with PPPs in energy generation. This has been the case in many countries that started with small renewable energy projects and built the experience to evolve into larger, more complex projects.
Colombia was one of the few countries that was able to develop PPPs in the transport sector from a very early stage. The Colombia case shows how to develop a comprehensive PPP program through reforms that involve adapting regulations and building strong institutions like the National Infrastructure Agency (ANI), advancing financial sector reform to overcome limitations, and using DFI support to enable commercial financing.
Kenya’s PPP journey started with various sectoral reforms supported by DFIs. Those sectoral reforms were accompanied by PPP legislation and policies and the use of risk mitigation instruments that unlocked private sector participation. While Kenya managed to have PPPs in several sectors, most of the success of its PPP program focuses on energy generation projects with a growing emphasis on renewables.
The evolution of the PPPs in the Philippines reflects a journey of policy and regulatory reforms from a build-own-transfer (BOT) law to the PPP Act, institutional strengthening of the PPP center, and the creation of funds to ensure a continuous pipeline of projects and reduce project risks. The shift to a programmatic approach has supplied the market with a continuous pipeline of PPP projects, enhancing the local financial and private sector development.
So how can PPP programs take us from the present to the future? PPP programs are not static, but rather adapt continuously to market changes from institutional, broader regulatory, and financial sector milestones. I believe successful PPP programs are those working cross-generationally by incorporating the future that is to come in today’s projects. These can include climate vulnerabilities, socioeconomic changes, and demographic shifts.
PPP successes don’t happen because of one project but over a sustained long-term reform period of over 30 years. By nurturing an ecosystem and future-proofing dynamic shifts in the PPP strategy, governments can create an enabling environment conducive to the transition from individual PPP projects to sustainable programs.
Related Posts:
- The secret to infrastructure success? Strong PPP frameworks
- Benchmarking infrastructure development data now at your fingertips!
- What gets measured gets done: 50 countries reform their PPP regulations
- Future-Proofing Resilient PPPs
