9 January 2019: A publication released by the Asian Development Bank (ADB) and the Korea Development Institute (KDA) focuses on risks and benefits of public-private partnerships (PPPs) for infrastructure development in Asia. Drawing heavily on the Republic of Korea’s experiences, the report notes that PPPs’ risk-sharing characteristics make them a more attractive option than traditional public procurement processes, but their complexity is an obstacle to implementation.
The report titled, ‘Realizing the Potential of Public-Private Partnerships to Advance Asia’s Infrastructure Development,’ identifies optimal ways of sharing risk in PPPs, proposes financial instruments that can promote private financing for PPPs, and suggests roles that multilateral development banks (MDBs) can play in mobilizing finance for PPPs.
Although rapid growth in developing Asia’s infrastructure has been a key factor in the region’s economic progress, the authors flag continued deficits in infrastructure for electricity, transportation, and water and sanitation. The report highlights that annual investments of USD 1.7 trillion are needed through 2030 in order to maintain momentum and meet the ambitions of the SDGs. However, the foreword underscores, limited public finance constrains growth, and “policymakers are increasingly looking to partnerships with the private sector to help close infrastructure gaps.”
PPPs are being increasingly used in Asia, but the level is still low when compared to developed countries.
The publication is divided into three parts, considering:
- How economic benefits can be derived from the use of PPPs to develop, build, and upgrade public infrastructure, as well as the risks and challenges that accompany these partnerships;
- Financing mechanisms that can be used to attract “hard-to-budge” private investment in public infrastructure; and
- Procurement modalities for PPPs in the Republic of Korea, and how better regulation can improve the performance of PPPs in developing Asia.
Inputs from experts on PPPs for infrastructure in Asia note best practices – as well as pitfalls to avoid – for ensuring that PPPs are effective, implemented efficiently, and deliver intended results. PPPs are being increasingly used in Asia, but the level is still low when compared to developed countries.
The report notes that key factors behind successful PPP projects include well-designed contracts, a stable economy, good governance and strong regulations, and a high level of institutional capacity to handle such partnerships. Conversely, examples of barriers to attracting private investments in infrastructure are weak governance that render PPPs less palatable, legal gaps and redundant contracting processes, and unpredictable regulatory environments or political instability. [Publication: Realizing the Potential of Public-Private Partnerships to Advance Asia’s Infrastructure Development] [Publication Landing Page] [News on ADB’s Work on Infrastructure]