Critical Success Factors in the Delivery of PPPs in Southeast Asia CARL WATSON Registered Foreign Lawyer (England & Wales) 16 November 2011
Pinsent Masons Who are we? PM is a full service international commercial law firm. Total legal team of over 1,100 and more than 1,700 staff globally. Global HQ in London (with UK network); offices in Gulf, Singapore, Hong Kong, Shanghai and Beijing. 30yrs in Asia: PM opened in Asia Pacific region in 1982. Our knowledge of the region and involvement in some of its most high-profileh and important tprojects underscores our commitment to assisting clients throughout Asia. E t bli h d l ti hi ith l di Phili i l F i Established relationship with leading Philippine counsel, Feria Tantoco Robeniol Law Offices (who we are working closely with on the PSALM transactions)
Pinsent Masons Global PPP Specialists Over 60 PPP specialist lawyers and well in excess of 200 infrastructure lawyers and advising on all forms of projects involving public and private sector participation. We have advised and continue to advise Governments, procuring entities, sponsors, IFIs and lenders globally on a range of PPP initiatives, focused on infrastructure projects (including transport, t power and healthcare). Globally, we have closed over 200 PPP projects, including several award-winning winning PPPs (for example, SA s Gautrain PPP)
PPP: The Basics (1) Drivers for infrastructure investment? A sign of economic growth & progress A sign of ability to compete A sign of development / quality of life (economic and social) Demands of population growth and higher living standards Demands of increasing urbanisation Necessity drivers legacy of under-investment, need to renew and replace (and create)
PPP: The Basics (2) PPP Distinguishing Features Conventional Public Procurement vs PPP Public Procurement Short term contract Funded by public sector Risk shared between public and private sectors Delivery of infrastructure asset = end of contract Payment by public sector for duration of construction period PPP Long term contract (20+years) Funded wholly or largely by private sector Risk allocated to party best t suited to manage the risk Delivery of infrastructure asset is usually integrated with ongoing maintenance/operating services Payment by public sector when asset is delivered and operational ( unitary charge )
PPP: Success Factors See Pinsent Masons 10 Implementation Considerations guidance paper (on our AP webpages) Based on our experience of having closed over 200 PPP schemes globally Practical lessons learned specifically from recently closed complex, multi-stakeholder t ld PPP procurements Focus on delivery and maintaining momentum
PPP: Success Factors (1) Select the right process Unsolicited Proposal +ve: can identify an unknown opportunity; save time & cost -ve: lack of transparency; collusion risk; no competition Competitive Negotiations +ve: identify small group; competitive pressure; aim to get best price; quicker & less expensive than full competition -ve: bidder selection often not transparent; corruption risk; no guarantee on best bidders participating Competitive Bidding +ve: competitive tension; transparency; IFI/funders happy; best value promoted -ve: time-consuming; process driven; labour-intensive; costly on both sides ( opportunity cost )
PPP: Success Factors (2) Momentum Building Country Risk Perception Considerations: transparency, level l playing field, domestic legal system (inc. PPP regime), financial stability of the country, level of government support offered, query if awards are made at national or state level Government flexibility and willingness Considerations: government s willingness to see that the project is completed will it recognise that events may not run according to plan and that some compromise may be needed between the parties? KEY = PIPELINE & THEN PROJECT MOMENTUM
PPP: Success Factors (3) Resourcing & Adviser Team Day Job versus Project Conflict Significant retained commitments Secondments? Clarity on project role(s) from outset Project Co-ordinator is key Adviser team are central not peripheral p Crucial on large, multi-stakeholder schemes Seamless and joined up, worked together Add value, a 2 way street
PPP: Success Factors (4) Communication Internal Project Co-ordinator role key Detailed communications plan Approval process: Executive -Project Director link- Project Team -Project Co-ordinator link- Sub Groups External Consistent and Transparent Clear lines of communication and a strategy Clarifications and responses, needs organisation Bidder Open Day / soft market test Use of websites and e-procurement tools
PPP: Success Factors (5) PPP Agency/Central Government Friend not Foe Project Director and Project Co-ordinator must proactively work closely on relationship with centre Will a transactor / representative be assigned? Communication and dialogue throughout Key to understand parameters for negotiation/approval Ensures consistency and continuity from inception to final approval no surprises
PPP: Success Factors (6) Role of international funding institutions Remit of IFIs = consistent with implementation of PPP For example: International Finance Corporation (part of 'World Bank Group'): "[to] further economic development by encouraging the growth of productive private enterprise in member countries, particularly in the less developed areas" Asian Development Bank (ADB) in Strategy 2020: [target to] scale up private sector development and private sector operations in all operational areas, reaching 50% of annual operations by 2020;"
PPP: Success Factors (6 cont d) Role of international funding institutions IFIs: investing in PPP projects Direct investment and financing (direct loans some grant funding) of PPP projects are considered to be a strategic priority For example, to date: ADB has invested US$17.5 billion in approved financing IFC has invested US$5 billion in PPP projects EBRD has invested 9.6 billion in PPP projects Develop international standards and guidelines for achieving fairer and better quality procurement
PPP: Success Factors In Summary Pipeline of Feasible; Well-structured projects PLUS Clear and transparent procurement process PLUS Equitable and pragmatic approach to risk = DELIVERS BEST CHANCE FOR MOMENTUM TO BUILD AND SUCCESS TO FOLLOW
Thank you for listening! Carl Watson Registered Foreign Lawyer (England & Wales) Pinsent Masons T + 852 2294 3309 E carl.watson@pinsentmasons.com
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