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Edward Farquharson - How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets

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There is increasing interest in the use of public-private partnerships in emerging markets. But what does this actually require governments to do if they are to establish successful long term partnerships with private partners and ensure that public partner has the right information, on the right projects, for the right partners at the right time. This book takes the reader through the steps in the life of a PPP to provide a realistic overview of what is required successfully to engage and manage such a partnership from the early stages. Drawing on experience from both mature and developing PPP markets across the world, the book assesses the policies, processes and institutions that are needed to select the right projects and manage the preparation of projects for market and their subsequent operation. It also looks at the role of advisers, and how they should be selected and used. Particularly in light of the recent financial crisis, the various approaches used to finance...

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How to Engage with the Private Sector in Public-Private Partnerships in - photo 1

How to Engage with
the Private Sector in
Public-Private
Partnerships in
Emerging Markets

How to Engage with
the Private Sector in
Public-Private
Partnerships in
Emerging Markets

Edward Farquharson
Clemencia Torres de Mstle
and E. R. Yescombe
with Javier Encinas

2011 The International Bank for Reconstruction and Development The World Bank - photo 2

2011 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW
Washington DC 20433
Telephone: 202-473-1000
Internet: www.worldbank.org

All rights reserved

1 2 3 4 14 13 12 11

This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent.

The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

Rights and Permissions

The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly.
For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com.
All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org.

ISBN: 978-0-8213-7863-2

eISBN: 978-0-8213-8552-4

DOI: 10.1596/978-0-8213-7863-2

Library of Congress Cataloging-in-Publication Data
Farquharson, Edward, 1962
How to engage with the private sector in public-private partnerships in emerging markets / Edward Farquharson, Clemencia Torres de Mstle, and E.R. Yescombe; with Javier Encinas.
p. cm.
Includes bibliographical references.
ISBN 978-0-8213-7863-2 ISBN 978-0-8213-8552-4 (electronic)
1. Public-private sector cooperation. 2. Infrastructure (Economics)Finance. 3. Public worksFinance. I. Torres de Mstle, Clemencia, 1962 II. Yescombe, E. R. III. Title.
HD3871.F37 2010
352.29dc22

2010044905

Cover photos: World Bank.
Cover design: Naylor Design, Inc.

CONTENTS
ACKNOWLEDGMENTS
ABOUT THE AUTHORS
ABBREVIATIONS
1.INTRODUCTION
Role of Public-Private Partnerships
Scope of the Guide
Limits to the Guide
DEFINING PUBLIC-PRIVATE PARTNERSHIPS
Privatization and Management Contracts
Small Private Providers of Infrastructure Services
User-Fee and Availability-Based Public-Private Partnerships
SETTING THE FRAMEWORK
Policy Rationale
Legal and Regulatory Framework
Investment Framework
Implementation Framework
Summary
Case Study: Water and Electricity Services Provision in Gabon
SELECTING PROJECTS
Project Scope and Requirements
Can the Project Be Delivered as a Public-Private Partnership?
Should the Project Be Delivered as a Public-Private Partnership?
Initial Market Assessment
Lessons from Experience: How the Private Sector Has Addressed Key Risks in Projects
Case Study: Hospital Regional de Alta Especialidad del Bajo, Guanajuato State, Mexico
FINANCING PPP PROJECTS
Lenders and Risk: Bankability
Contract Terms: Bankability
Equity Investment
Contractual Relationships
Refinancing
Risk Mitigation and Other Sources of Project Funding
Output-Based Aid
Case Study: So Paulo Metro Line 4, Brazil
Case Study: Improved Access to Water Services in the East Zone of Metro Manila, the Philippines
PREPARING PROJECTS FOR MARKET
Management of the Process
Funding for Project Preparation
Unsolicited Proposals
Project Assessment
Case Study: PPP Program in the National Highways Sector, India
PROJECT ADVISERS
Role of Advisers
When to Use Advisers
Appointment of Advisers
Role of Public-Private Partnership Units
Management of Advisers
Case Study: Queen Alia Airport Expansion, Amman, Jordan
MANAGING THE INITIAL INTERFACE WITH THE PRIVATE SECTOR
Preparation for Market Sounding
Before the Launch
Perception of the Project
Role of Development Finance Institutions and Donors
Transition to the Procurement Phase
MANAGING PROCUREMENT
Outcome of the Procurement Phase
Role of Advisers
Role of Development Finance Institutions
Bid Stages
Project Launch
Prequalification
Request for Proposals
Preferred Bidder and Financial Close
Case Study: Inkosi Albert Luthuli Central Hospital, South Africa
AFTER SIGNING
Managing Contracts
Evaluating PPP Projects and Programs
Case Study: Sofia Water, Bulgaria
CONCLUSION
APPENDIXES
AWorld Bank and PPIAF Private Participation in Infrastructure Project Database
BSample Extract of a Risk Management Register for Managing the PPP Project Process
CList of PPP Web Sites
REFERENCES
INDEX
BOXES
1.1Port Concessioning and Competition in Colombia
3.1Lessons
4.1Liverpool Direct
4.2Regional Projects
5.1Major Concerns of Project Lenders
5.2Major Concerns of Contractors and Investors
6.1Common Problems in Project Governance
6.2Common Mistakes in Project Preparation
8.1Top 10 Tips for a Successful Market-Sounding Exercise
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