PPP and Regulatory Implementation

in ASEAN

Dr. Fauziah Zen

ASEAN-Korea PPP Forum

Manila, 1 June 2016

Economic Research Institute for ASEAN and East Asia

Overview

How do ASEAN MS view PPP

Regulatory Framework
Implementation
Remarks and Way Forward

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ASEAN PPP Implementation

HOW DO AMS VIEW PPP?

History of APPP Legal Frameworks in ASEAN

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Same needs Mixed views

The demand for infrastructure exceeds the supply

Public funding is not enough
Call for private participation
Financing
Funding
Innovation
Operation/Management asset utilization
Mixed views:
PPP will benefit private sector, risks should be shifted towards it.
PPP is solution, government shall not allocate funding and let private
sector leads the process.
PPP is secondary option after public finance.

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 and Mixed Approach

Liberalization
Limited
Invited but not really welcome

Influenced by
Fiscal condition
Unclear purpose: too many objectives in one policy
SOEs role
Capacity to absorb

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ASEAN PPP Implementation

PPP REGULATORY FRAMEWORK

Traditional vs PPP Procurement

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Regulatory System

Common Law v. Civil Law system

Develop PPP environment requires cross-cutting
approach
Authority level
Implementation: enforcement
Enabling environment: financiers, contractors, off-takers,
and intermediaries.
The size of the market.

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Problems with regulatory

Non Authoritative
Burden
Conflicting
Unclear (discretion,
ambiguity, no assigned
party)
Incomplete
No exit door (dispute
resolution)

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ASEAN PPP Implementation

PPP IMPLEMENTATION
Type of Major Risks and Mitigation Measures in
ASEAN PublicPrivate Partnership

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Recent Projects.
Indonesia:
The Express Railway project connecting Soekarno-Hatta
International Airport and Halim Perdanakusuma Airport PPP
option was unsuccessful, now shifted to SOEs assignment (Railway
Indonesia and Angkasa Pura).
All of new express railway project connecting major airports in
Indonesia are carried out by SOEs.

Vietnam
There are 68 BOT projects formulated under the management of
MOT in the sectors of road, highway, airport, canal, or railway with
fund mobilization of about US$8 billion from the private sector, out of
which most of the projects were procured after 2012.
The MOT is currently studying 62 new BOT projects (36 for road, 10
for highway, 6 for airport, 5 for canal, 4 for railway, and 1 for sea
line).

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Recent Projects.

Myanmar:
Three international airport concessions have recently
been procured under a PPP scheme: the New
Hanthawaddy (a consortium of Yongnam Holdings Ltd,
Changi Airport Planners and Engineers, and JGC
Corporation chosen as the preferred bidder), Mandalay
(awarded to a consortium led by JALUX Inc. and
Mitsubishi Corporation), and Yangon (awarded to a
consortium led by local Pioneer Aerodrome Services).
Other than these sectors, one of the potential and
contentious projects is a special economic zone (SEZ)
development in Dawei.

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Updates and challenges
Changes usually occurred in regulatory and some in institutional
systems.
Regulatory: beyond the existence of regulation

Financing problems were mainly addressed through (i) fiscal support

by government, and (ii) loan and grant from MLA.
fundamental issues: channeling

Number of new projects increased

Not necessary follow good governance and utilize PPP advantage

Challenges in time limitation (assignment to SOEs or public finance)
Challenges in fiscal support
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PPP in social infrastructure
The principles:
Private sector assumes operation, partial risks and financing.
Value for Money
Modern approach (efficiency, technology, performance-based,
technology transfer) utilizing private sector competence.
Contractual engagement

The main goal is to maximize private profit while ensuring that public
interest remains a priority.

Some of challenges in agriculture PPP (FAO):

poor access to predicable and affordable finance for the private sector;
risks that governmental or donor funds are misused to subsidize private
interests, or unfounded perceptions of risk;
inexperience in drawing up contracts leading to ambiguities or clauses
that are too harsh or too lax and distort the contracts objectives
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Poor infrastructure and low agricultural
development: a vicious circle (FAO, 2014)

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 Introducing PPP to Agriculture sector
What is the constraint to private sector
Source of market failure: Agricultural examples Possible PPP solutions
involvement?
1. Lack of enabling Unstable macro-economic environment;
environment
Inadequate physical infrastructure; Rural roads, irrigation Provision and/or maintenance
infrastructure of infrastructure
Weak property rights and/or contract
enforcement;
State as problem (crowding out,
unpredictable policies)
2. Public or Merit goods Market under-provides due to:

-Nonexcludability, nonsubtractability OPV seed research Contracting out service delivery

-Social benefits exceed private benefits Fertilizer (e.g. if food price falls) Voucher schemes
-Lack of effective demand Extension
3. Barriers to entry Lack of access to:

Capital Stockists, Seed companies Loan guarantees

-Technical knowledge
-Market information

High fixed costs/risks Biotechnology research, credit, Risk sharing schemes

smallholder engagement in
high value commodity chains
4. Coordination failures Asymmetric information, no mechanism to Complementary investments in Deliberative fora
enforce commitments; lack of trust service provision to
smallholders or along value
chain
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Source: Poulton & Maccartney, 2012
ASEAN PPP Implementation

REMARKS AND WAY FORWARD

Remarks

PPP can be useful if it is understood and executed

properly
PPP is not limited to only hard and big infrastructure
projects; social and medium size projects can also utilize
the scheme with suitable adjustment to fit its benefit and
cost.
In PPP, the role of public sector is very important
because it should lead the process properly.
Regulatory system should be put right.
Capacity to absorb (understanding, political will,
coordination)

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Way Forward
Finding the area of improvement and defining the
priority.
Strengthening the capacity
Strategic road map
Knowledge Exchange Networks and subnetwork(s)

In Agriculture:
examine the whole stage of the project,
define the areas of the project in which private sector can
participate,
describe the impacted stakeholders and estimate the cost and
benefit,
define the risks, responsible agencies, contracting agencies,
bidding and contract. Economic Research Institute for ASEAN and East Asia 21
 Thank you

fauziah.zen@eria.org

Economic Research Institute for ASEAN and East Asia

Sentral Senayan II, 6th FL., Jalan Asia Afrika No. 8, Gelora Bung Karno,
Senayan, Jakarta Pusat 10270, INDONESIA
Tel: (62-21) 57974460, Fax: (62-21) 57974463
www.eria.org