Private participation in infrastructure

Transcript:Private participation in infrastructure:
Private participation in infrastructure Bratislava, June 2016 Dejan Makovšek, Economist/OECD-ITF The main reasons come from the mitigation of the failures of traditional (public) model: prevention of time inconsistent behaviour of governments (budgeting/hidden expropriation) There is no national balance sheets, no current cost accounting => “saving” on infrastructure maintenance is never immediately visible To counter the above infrastructure managers pursue cash-flow protection strategies (excess employment, union power…), which hurts operational efficiency Limited incentives for efficient delivery of infrastructure Public project managers need to follow multiple objectives (union pressures; tendency to cut as many ribbons as possible, also leads to ex-post scope changes and cost overruns) difficult to ensure accountability (multi-year construction - in a couple years a project will be somebody else's problem) In summary – these are public governance challenges! There are plenty of reasons to consider PSPI … and there are many forms of it 4 The two main vehicles of PSPI The PPP (Project Finance) Model The ultimate cost of service gets determined through competition! The RAB Model (I) The “RAB” by itself is a set of principles, which require that the assets in the RAB are maintained in line with financial capital maintenance. Normally used for existing assets, but can be extended to deliver new assets as well. It’s transparency and approach prevent hidden expropriation. For the investor the regulated revenue must recover: depreciation (investments to preserve the value of the RAB), new investments into new infrastructure (expansion of the RAB), operating costs, financing cost (the cost of equity and debt, which involve an appropriate reward or return). The recovery of operating cost (and thus also the returns) is put at risk – subject to efficiency targets set by the regulator. The RAB Model (II) The cost of service gets determined by the regulator! Value for Money Dimensions 8 Theoretical expectations Competition = 1st best Regulation = 2st best What is the comparative performance of PPPs and the RAB model There is no comprehensive comparative performance research of PPPs vs other forms of infrastructure provision and management available! Value for Money Dimensions in Infrastructure 10 Empirical evidence Productive efficiency evidence exists, but it is not clear, whether the price is fair for a given service level PPP challenges Three prerequisites to achieve VfM in competition for the contract Information on risk/returns Competition Credible commitment to the contract. (massive renegotiation problems in many geographies) 11 Inefficient risk pricing