Principles for Private Sector Participation in Infrastructure: What is the Policy Framework for Investment (PFI)?

Transcription

1 2008/SOM3/IEG/SEM2/010 Principles for Private Sector Participation in Infrastructure: What is the Policy Framework for Investment (PFI)? Submitted by: OECD Seminar on Recent Trends on Investment Liberalization and Facilitation in Transport and Telecommunication Infrastructure Lima, Peru August 2008

2 Principles for Private Sector Participation in Infrastructure: What is the PFI? APEC SOM3 Recent Trends on Investment Liberalization and Facilitation in Transport and Telecommunication Infrastructure 13/14 August 2008 Lima, Peru 1

3 The OECD investment mandate 2002: Monterrey Consensus recognised that private investment and FDI are essential for sustainable development. 2007: OECD investment mandate reinforced by G8 declaration. Investment needs are huge and their fruitful undertaking key but benefits do not occur automatically. The OECD has tools to facilitate investment and help optimise private sector participation: Guidelines for Multinational Enterprises (last revised in 2000) Policy Framework for Investment (2006) Principles for Private Sector Participation in Infrastructure (2007) 2

4 Investment Framework International Investment Border Barriers National treatment Ownership restrictions Restrictions on capital transfer Behind the border barriers to investment Cost Infrastructure Taxation Corruption Risk Investment policy Public governance Corporate governance Competition Competition policies Trade Policies Financial markets Inward foreign investment Domestic investment Outward foreign investment 3

5 THE PFI DEVELOPMENT: WHY AND HOW In 2000, the MDGs set development targets. In 2002, the Monterrey Consensus recognised the key role of private investment for achieving these goals. In 2003, OECD initiated work on PFI in response to Monterrey Consensus. Developed as a partnership process involving: A task force of some 60 governments from OECD and non-member economies Input from 8 specialised OECD Committees Business, labour, civil society representatives World Bank, UNCTAD and other international organisations Meetings in five regions Web-based public consultation 4

6 WHAT IS THE PFI? A multilaterally backed instrument to support governments to: Identify the obstacles to investment in a coherent manner Formulate the right policies and governance structures to address the obstacles Enable effective implementation and monitoring of policy reforms It covers 10 policy areas widely recognised as underpinning a healthy environment for all investors Consists of a list of questions for each policy area, supported by annotations to help governments assess whether their policies are likely to encourage beneficial investment Complemented by references to other relevant policy resources 5

7 THE 10 PFI POLICY AREAS 1. Investment policy 2. Investment promotion and facilitation 3. Trade policy 4. Competition policy 5. Tax policy 6. Corporate governance 7. Policies for promoting responsible business conduct 8. Infrastructure and financial sector development 9. Human resource development Public governance

8 EXPECTED BENEFITS FROM USING THE PFI Better informed decision-making Policy guidance and enhanced whole-of-government sensitivity to investment climate issues Adjustments in courses of action Public-private mutual trust More effective policies for investment More effective aid Increased investment (FDI and domestic); growth and development, better integration into the world economy 7

9 WHAT MAKES THE PFI SPECIAL? Non-prescriptive Domestic and foreign investment Direct and indirect obstacles to investment Focus on policy governance Development orientation Policy assessment is process-oriented Benchmark for comparison among countries Tailor-made solutions reflecting good practices 8

10 PFI IS A FLEXIBLE TOOL AVAILABLE TO ALL A wide panoply of PFI uses exist: Self-assessment by governments (Vietnam) Peer review (Egypt, Peru, OECD IPR) Regional, national and sub-national dialogues (SEE, NEPAD, MENA) Public-private dialogue (APEC) Tool for donors Communication of reform efforts PFI can be used at different stages of investment climate reform: Diagnostic stage Designing a policy reform road-map Implementation of reforms and evaluation of progress 9

11 MAKING THE PFI OPERATIONAL: A CONCEPTUAL OVERVIEW Impediments to investment There are many impediments to investment PFI Assessment 10 policy areas (dimensions) that can be analysed using the PFI Initial output from PFI use The output from using the PFI Map PFI output to economic effect through effects on Cost Risk Competition Investment can be mapped to their economic impact to enable reforms to be prioritised Develop policy options Quantitative economy -wide evaluation Implementation Develop policy options for priority areas and appraise costs and benefits to recommend best policies Implement recommendations 10 for policy reform

12 OECD INVESTMENT POLICY REVIEW OF PERU In July 2008 Peru became the 41 st adherent to the OECD Declaration on International Investment and Multinational Enterprises in recognition of its impressive progress in investment policy reform to improve the country s business climate and reduce poverty The analysis of Peru s investment policies based on the PFI, undertaken in co-operation with Peru s authorities, focuses on the PFI chapters dealing with investment policy investment promotion and facilitation trade policy Peru s policies for promoting responsible business conduct (PFI Chapter 7) are reviewed in light of the standards and principles recommended in the OECD Guidelines for MNE. 11

13 MAKING THE PFI OPERATIONAL: THE PFI USERS TOOLKIT About the Toolkit Overviews purpose, scope, structure and how to use the Toolkit Getting Started Explains the rationale for using the PFI, elucidates ways the PFI can be used and how to choose between these options, outlines the key steps in devising a process for using the PFI Policy Guidance Provides specific policy guidance for each PFI question on issues to address and indicators to examine in responding to PFI question Measuring Progress How to form an overall assessment, benchmark information, establish priorities, develop, initiate and monitor a reform Plan of Action 12

14 FEATURES OF THE TOOLKIT Addressed primarily to governments Incorporates good practices from wide range of country and sectoral experiences Modular approach designed to handle different PFI applications depending on user objectives A living resource: users will be able to offer their own input and provide feedback Builds on existing work and indicators Evolutionary web-based format (other formats available) 13

15 14

16 15

17 16

18 17

19 NEXT STEPS Vet and finalise policy guidance and website Test the Toolkit in different countries for: Completeness User friendliness Effectiveness Global Forum for International Investment OECD outreach OECD Investment Initiatives Complete Toolkit, Version1.0 in

20 Why do we need Principles for Private Sector Participation in Infrastructure? A number of private participation in infrastructure projects in the past have failed Often the main cause was not project specific, but short-comings in investment environments, capacities and attitudes Advice on how to avoid the mistakes of the past Synthesising a large body of analysis and case examples Offering recommendations of best practices, agreed among a variety of experts and policy communities to help governments work with private sector partners to finance and bring to fruition projects in areas of vital economic importance, such as transport, water and power supply and telecommunications 19

21 The OECD Principles for Private Sector Participation in Infrastructure Developed under the aegis of the Investment Committee in co-operation with other OECD bodies Process of consultation with a broad group of public and private sector experts from OECD and non-oecd countries, as well as from NGOs Approved by the OECD Council on 20 March 2007 A specific application to water and sanitation in the context of the OECD horizontal water project. A forthcoming application to the energy sector (in support to the OECD efforts to address climate change challenges). 20

22 The five areas of the Principles Deciding on public or private provision of infrastructure services Informed & calculated choice, project financial sustainability, tailormade model, preserving fiscal discipline Enhancing the enabling institutional environment Enabling environment, corruption, competition, access to financial market Goals, strategies and capacities at all levels Consultation, empowerment of authorities, clear and broadly understood objectives & strategies, cross-jurisdiction cooperation 21

23 Making the public-private co-operation work Communication, disclosure of information, fair & transparent contract awarding, output-based, regulatory bodies, renegotiations, dispute resolution Encouraging responsible business conduct Responsible business conduct, good faith & commitment, corruption, communication, responsibility for social consequences 22

24 The case of water: context and trends Context and trends Water and sanitation is a key sector where much effort is still needed: 1.2bn people w/o drinking water, 2.4bn people w/o sanitation some $30bn/yr needed to reach MDGs. New management issues: resource allocation, quality control, improved maintenance and preservation => promotion of decentralization, local governance, participation and equity, financial viability and environmental sustainability. Partnership with the international private sector since the 1990 s has led to highly politicized debates. Rapid changes in the terms of involvement of private sector: less risky contracts, emergence of new actors, growing recognition of the small-scale private providers. 8/12/

25 A complex sector, with important implications for the cooperation between public & private Monopolistic sector where competition is difficult to introduce: high fixed costs, long-term irreversible investments, inelastic demand and important asymmetry of information Basic need, important externalities on health, gender equality and environment => high political interest Local management, but requires integrated water resource management (externalities, full water cycle) Numerous stakeholders and segmentation Risky sector: contractual risk, foreign-exchange risk, sub-sovereign risk, political interferences and complex pricing policy (cost recovery, economic efficiency, environmental sustainability, equity and affordability) 24

26 Optimising private sector participation in water and sanitation infrastructure development Guidance for private sector participation in water and sanitation building on the OECD Principles Adapting the principles: matrix linking the 24 Principles with the specificities of water and sanitation infrastructure, concrete issues faced by governments and country good practices Review of experiences of some 30 developing and emerging countries Country review: common framework based on seven information dimensions for some 30 countries in Africa, Asia and Latin America 25

27 Engage with existing initiatives and discuss the guidance and country practices at regional level Nov. 2007: Regional roundtable together with NEPAD in Zambia discussion of guidance and practices in Africa Available at: 5 March 2008: Expert meeting co-organised with the Asian development Bank discussion of guidance and practices in Asia. Available at: Additional discussions in MENA and Latin America. 26

28 THANK YOU FOR FURTHER INFORMATION About the Policy Framework for Investment and Toolkit Visit: