Recent Development on PPP in ASEAN and East Asia

Fauziah Zen

PPP Conference sponsored by JETRO Dusit Thani Manila, 17 February 2012

Various models of PPP

High Profitability Privatization

SelfSustaining Concession

Strong

Affermage JointVenture

Weak Need of Public- Sector Involvement

Traditional Public Sector Operation Outsourcing

ServiceProvision

Low/Nil UK-based PFI can be applied to projects, which had been traditionally served by the 2 public sector, due to low profitability and need of public sector involvement Adopted from Nikkei and other sources

PPP Types
State Provision
Service improvement

Private Ownership of Assets

Wider market initiatives

State Ownership of Assets

Privatization

Franchise
Concession

Privately financed project

Retention of minority share

Market testing

Market Provision

Source: Modified from UK National Audit Office

PPP in Asian style

Indonesia refers PPP to certain infrastructure types, even though the partnership between government and private sectors do exist in various forms (services, contracting out, etc.). Philippines and Thailand maintain wide range of definition and characteristics of projects under PPP Malaysia also maintain wide range of PPP coverage; it is driven not by limited fiscal space but to promote private participation (maximizing national resources) and gain the benefit from private sector efficiency and innovation. Vietnam is still developing her PPP regulatory framework. The rest of ASEAN countries with exception of Singapore (Brunei, Cambodia, Laos, Myanmar) are not yet placing PPP in significant role in the country development.

The following section is benefited from PPIAF Database

Private Participation in Infrastructure in East Asia and Pacific Area

Investment in Infrastructure
Total Investment Commitment: East Asia and Pacific (US$ million)
12000

10000

8000

6000

4000

2000

0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Energy

Transport

2 per. Mov. Avg. (Energy)

2 per. Mov. Avg. (Transport)

Investment commitments to infrastructure projects with private participation in developing countries, by sector or region, 200010 (2010 US$ billions)

Note: Includes annual investment commitments to projects reaching closure in 1990-2010. Source: World Bank and PPIAF, PPI Project Database.

Private Participation in Infrastructure (PPI): Global Update

The top five recipient countries of investment in PPI projects: Brazil, China, India, Russian Federation and Turkey. In 2010 PPP was highly concentrated only in India. India has been: a top recipient of PPI activity since 2006, implemented 95 new projects and attracted total investment of US$74.4 billion in 2010, doubling its level of activity from 2009. the largest market for PPI in the developing world in 2010. Private activity outside India was less vibrant. Excluding India, total PPI investment to developing countries would have fallen by 18% in 2010 compared with 2009. In terms of the number of countries with new PPI projects, the lowest number since 1990s is 41, happened in 2009 In East Asia and Pacific (EAP), investment declined by 9% compared with 2009. The slowdown was driven by lower investment in both new projects and previously implemented projects. Energy had 18 projects in six countries and investment of US$10.3 billion in 2010. This represents a 26% increase from the level in 2009. Energy accounted for 68% of regional investment in 2010

PPI in East Asia & Pacific (1)

Between 2000 and 2010, 17 countries out of the 23 in EAP have implemented 908 PPI projects with investment of US$154 billion and with additional investment in existing projects brought the total in the region to US$209 billion. With this, East Asia and Pacific accounted for 33% of the activity in developing countries by number of projects and 16% by investment. PPI in the EAP region was concentrated on four countries: China, (37% of regional investment and 692 projects), Indonesia (14% of investment and 35 projects), Malaysia (15% of investment and 37 projects), and the Philippines (14% of investment and 51 projects). Annual investment in the region was in the range of US$21-23 billion in 200507, but fell to a range of US$15-17 billion in 200810.

PPI in East Asia & Pacific (2)

Private activity in infrastructure in East Asia and Pacific declined for third consecutive year in 2010:
36 PPI projects reached financial or contractual closing in seven low and middle-income countries, involving investment commitments of US$10.9 billion. Infrastructure projects implemented in the 19902009 period attracted new investment of US$4.3 billion, bringing total investment commitments to infrastructure in the region to US$15.2 billion in 2010. The activity in 2010 represents a 9% decline by investment and 45% drop by number of projects compared with 2009. China was the major contributor of the large decline in activity by number of projects (60% drop). Investments in new projects fell by 9% and in projects implemented in previous years by 10% compared with 2009. Investment in the region was concentrated in the 1,470 MW Hongsa coal-fired power plant, which will export electricity from Lao PDR to Thailand (24% of regional investment in 2010), as well as in Indonesia (22%) and the Philippines (19%). China saw private activity decline significantly in 2010, accounting for just 6% of regional investment and 47% of the projects. By type of private participation, activity was concentrated on greenfield projects (BOT and BOO), which attracted 87% of regional investment and 30 of the 36 new projects. Concessions followed with 3% of investment and five projects. Divestitures accounted for the remaining 10% of the investment and one new project.

Investment in PPI projects in East Asia and Pacific, by type of PPI, 19902010

PPP Development in ASEAN state members

12

Malaysia
Line Ministry UKAS Cabinet Process

PPP achievement 1983-2010

Total projects signed
Existing projects as at 31st December 2010 New projects as at 31st December 2010 Jobs eliminated from government payroll Savings Capital expenditure (RM billion) Operating expenditure (RM billion) Proceeds from sales of government equity and assets (RM billion) Market capitalization as at 31st December 2010 (RM billion) % of total Bursa Malaysia Capitalization (Malaysia Stock Market) Source: Malaysian Economic Report 2011/12 163.8 9.0 6.5 208.3 16.3

513
348 165 113,487

Malaysia (2)

Total Investment in Projects by Type and Primary Sector (US$ million)

Water and sewerage

Transport

Telecom

Energy

0 Concession Divestiture Greenfield project Management and lease contract

5000 Energy 0 3,805 10,689 0

10000 Telecom 0 3,184 8,608 3,805

15000

20000 Transport 3,626 383 12,796 10,689

25000

30000

Water and sewerage 9,422 16 706 0

14

Philippines
Take into account the SNGs authority, only projects amounted above PhP 200 million (USD4.8millions) belong to NEDAs approval. Total Investment in Projects by Type and Primary Sector (US$ million)
Water and sewerage

Transport

Telecom

Energy

0 Concession Divestiture

5,000 Energy 3,974 7,924 13,236 0

10,000 Telecom 0 923 15,176 0

15,000

20,000 Transport 2,080 0 1,852 0

25,000

30,000

Water and sewerage 8,096 0 0 2

Greenfield project
Management and lease contract

Vietnam (1)
Relatively new comer in formalizing PPP (2009: the regulation, 2010: pilot project) MPI set inter-branch WG to help PPP implementation in each ministry Closed list of PPP in the beginning of fiscal year. No room for unsolicited projects. Total projects: 2 projects in the beginning of implementation. Continuing amendments to improve the implementation.

Vietnam (2)
Total Investment in Projects by Type and Primary Sector (US$ million)
Water and sewerage

Transport

Telecom

Energy

0 Concession Divestiture Greenfield project Management and lease contract

500 Energy 205 340 2,467 0

1000

1500 Telecom 456 0 1,824 0

2000 Transport 0 0 1,235 0

2500

3000

3500

Water and sewerage 0 0 305 0

17

Indonesia
Good macroeconomic condition: high growth, controlled inflation, stable exchange rate. Narrow fiscal space, lacking infrastructure spending call for private participation. Need to smooth and improve inter-agency coordination. Increasing committed spending for infrastructure, direct and indirect. Setting up institutions to push the process.

Unclear link between national targets and prioritized projects.

Indonesia (2)

Total Investment in Projects by Type and Primary Sector (US$ million)

Water and sewerage Transport Telecom Energy 0 5000 Energy 0 719 16,227 0 10000 Telecom 4,825 12,438 10,650 0 15000 20000 Transport 2,150 372 1,519 0 25000 30000

Concession
Divestiture Greenfield project Management and lease contract

Water and sewerage 897 0 123 0

19

Thailand (1)
Rigid procedure to prevent corruption. Total Investment in Projects by Primary Sector (US$ million)
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 2000 Energy 859 Telecom 511 Transport 0 Water and sewage 9 0 2001 890 1,672 455 240 2002 0 1,198 0 0 2003 1,336 664 45 34 2004 0 613 439 0 2005 1,609 945 0 242 2006 197 1,130 0 19 2007 0 1,031 0 0 2008 2,341 406 0 0 2009 0 539 0 0 2010 4,300 420 0 0 2011 192 0 0 0

Source: Modified from http://ppi.worldbank.org

Thailand (2)
Total Investment in Projects by Type and Primary Sector (US$ million)

Water and sewerage

Transport

Telecom

Energy

5000 Energy

10000 Telecom 0 0 16,650 0

15000 Transport 77 439 3,060 0

20000

25000 Water and sewerage 104 61 658 7

Concession Divestiture Greenfield project Management and lease contract

0 2,176 16,901 0

Source: Modified from http://ppi.worldbank.org 21

Cambodia
Total Investment in Projects by Type and Primary Sector (US$ million)

Water and sewerage

Transport

Telecom

Energy

500 Energy

1000 Telecom 70 0 813 0

1500

2000 Transport 272 0 13 0

2500 Water and sewerage 0 0 0 0

3000

Concession Divestiture Greenfield project Management and lease contract

67 0 2,610 0

Source: Modified from http://ppi.worldbank.org

Lao PDR
Total Investment in Projects by Type and Primary Sector (US$ million)

Water and sewerage

Transport

Telecom

Energy

1000 Energy

2000

3000 Telecom 216 0 106 0

4000

5000 Transport 0 0 0 3

6000

7000 Water and sewerage 0 0 0 0

8000

Concession Divestiture Greenfield project Management and lease contract

0 0 7,512 0

Source: Modified from http://ppi.worldbank.org

Myanmar
Total Investment in Projects by Type and Primary Sector (US$ million)

Water and sewerage

Transport

Telecom

Energy

0 Energy Concession Divestiture Greenfield project Management and lease contract 0 0 4 0

2 Telecom 0 0 0 0

3 Transport 0 0 1 0

4 Water and sewerage 0 0 0 0

Source: Modified from http://ppi.worldbank.org

ERIA Support for PPP development

Working Group: study of 5 countries on PPP in general and 3 infrastructure sectors EAIC Advisory Team: updating the progress of (potential) PPP projects in Asia. Project Meister Program: specialized in Project Manager for infrastructure project under PPP. To pursue Deepening Economic Integration and Narrowing DevelopmentGaps, ERIA with ADB and ASEAN Sec has completed the CADP (Comprehensive Asia Development Plan) and support the Study on MPAC (Master Plan on ASEAN Connectivity) in 2010. Both studies provide insights and estimations of economic impact of new developed corridor connecting parts of East Asia, and how ASEAN shall be connected each other.

Trend of PPP
Increasing attention from governments in Asia. Increasing attention from private and financial sector around the world: Half of Australian private investment in infrastructure during the period of 1995-2010 is located in East Asia and Pacific, dominated by energy and transport sectors. 17% of UK sponsor investment is located in East Asia, dominated by telecom and energy sectors. 78% of Korean sponsor investment is located in East Asia, dominated by energy sector. Since infrastructure projects are usually big and PPP scheme is complex, the speed of implementation is rather slow. Small scale projects are usually less complex but also less pursued by the government in PPP. Governments prefer to use tax money and adopt traditional model.

Issues and Challenges

Large projects: requires complex arrangement and costly pre-FS. Small projects: doable but less attractive. Leadership is a key factor. Land acquisition and resettlement are critical issues. Risk allocation (guarantee): different interpretation in few areas. Needs to resolve case by case. Transparency: public know the consequences of the PPP Project.