Publication: Managing the Fiscal Implications of Public-Private Partnerships in a Sustainable and Resilient Manner: A Compendium of Good Practices and Lessons Learned from the COVID-19 Pandemic
Loading...
Date
2023-03-22
ISSN
Published
2023-03-22
Author(s)
Editor(s)
Abstract
Public-private partnerships (PPPs) can sometimes be perceived as a means for delivering infrastructure for free. A more nuanced but still inexact view is that they are a mechanism to overcome fiscal constraints. Some argue, perhaps rightly, that often governments enter PPP contracts without fully understanding their fiscal implications. These misconceptions lead to several challenges. There is evidence that fiscal sustainability is often overlooked or ignored by countries with PPP programs, with long-term fiscal implications the governments did not understand or manage well. Governments also struggle with perceptions that they are not fully transparent about the real, ultimate costs of PPP projects. This report aims to illustrate how to improve fiscal risk management and treatment of fiscal commitments and contingent liabilities (FCCL) arising from PPP projects, to build better Infrastructure post-COVID-19. It intends to be a resource for World Bank client countries, including low income and fragile economies, to design their fiscal PPP management frameworks in a viable way that helps them develop their PPP programs while maintaining medium-to-long-term fiscal sustainability and resilience. With that in mind, Volume I highlights and contextualizes the main findings from a set of case studies that assessed the PPP fiscal risk management framework in select countries, and synthesizes the observable and qualitative results in managing the impact of crises, in particular the COVID-19 pandemic. Based on that, it also explores how this crisis has affected PPP projects and overall PPP programs, and suggests improvements to FCCL management frameworks in order to strengthen the capacity of countries to continue with their PPP programs in a sustainable fiscal manner. Volume II contains the detailed case studies on which Volume I is based.
Link to Data Set
Citation
“World Bank. 2023. Managing the Fiscal Implications of Public-Private Partnerships in a Sustainable and Resilient Manner: A Compendium of Good Practices and Lessons Learned from the COVID-19 Pandemic. © World Bank. http://hdl.handle.net/10986/39578 License: CC BY-NC 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication How Do Countries Measure, Manage, and Monitor Fiscal Risks Generated by Public-Private Partnerships? Chile, Peru, South Africa, Turkey(World Bank Group, Washington, DC, 2014-09)The topic of managing fiscal risks arising from public-private partnerships is receiving increased attention as more governments turn toward this type of financing for large infrastructure projects. Governments can manage balance sheet exposure to public-private partnerships by quantifying and capturing direct obligations and provisions for potential calls on government guarantees associated with public-private partnership projects in the preparation of the medium term fiscal framework and annual budget. This working paper examines how four countries with active public-private partnership projects manage the costs and risks of financial obligations generated by these investments throughout the lifetime of the contracts. The paper seeks to complement the existing literature with a practitioner's point of view while exploring if and how these countries monitor and evaluate the fiscal risks generated by the portfolio of public-private partnerships (as well as individual projects). The countries covered are Chile, Peru, South Africa, and Turkey, all of which have experience implementing public-private partnership projects. The research finds that countries have tailored fiscal risk management and monitoring frameworks to fit their circumstances and respective budgeting, accounting, and reporting practices. All four countries assess the overall or partial credit exposure to monitor and manage their fiscal commitments from public-private partnerships in a consolidated way. All countries have developed evaluation models to help assess fiscal risks and assess project and portfolio level credit exposure. Further scrutiny could be focused on budgeting and accounting practices, which could be strengthened and brought in line with international standards. Similarly, sharing and standardizing information would improve transparency and accountability.Publication An Operational Framework for Managing Fiscal Commitments from Public-Private Partnerships(Washington, DC: World Bank, 2013-02-09)The National policy on public-private partnerships (PPP) recently approved by the Government of Ghana (GoG) sets out the government's intention to use PPPs to improve the quality, cost-effectiveness, and timely provision of public infrastructure in Ghana. The PPP policy highlights the role of the government's financial support to PPPs, as well as the importance of putting in place a system to manage the associated fiscal commitments (FCs). As noted in the policy, the government's contribution to a PPP may include remuneration to the private party from government budgets, which may be fixed or partially fixed, periodic payments (annuities) and contingent. This report proposes an operational framework for managing fiscal obligations arising from PPPs in Ghana. This framework aims to ensure that PPP FCs are consistently identified and assessed during PPP project preparation, and that these assessments are fed into project approval. The report outlines roles and responsibilities, concepts, and processes for managing PPP FCs, drawing on international standards and practices, bearing in mind existing institutions and capacities in Ghana. The report also suggests legislative additions and capacity building needed to establish this framework in practice. This report focuses primarily on managing long-term FCs to PPPs, including regular payments or contingent liabilities (CL) that typically last throughout a project's lifetime. This report is structured as follows: chapter 1 is introduction; chapter; 2 introduces the concept of FCs from PPPs: how and why PPPs create FCs, why managing them is important, and an overview of what it entails; chapter 3 presents institutional roles and responsibilities; chapter 4 describes how FC management should be incorporated in the PPP development and approval process; chapter 5 describes how FCs can be managed during PPP implementation by monitoring, reporting, and budgeting adequately; and chapter 6 sets out the steps needed to begin to implement this PPP framework-to build its core requirements into the forthcoming PPP Law, and to build capacity in the relevant entities to carry out those requirements in practice.Publication Public-Private Partnerships in Europe and Central Asia : Designing Crisis-Resilient Strategies and Bankable Projects(World Bank, 2011-02-24)This study aims to help governments design sustainable Public-Private Partnership (PPP) strategies and projects in the context of the changed circumstances brought on by the global financial and economic crisis that began in the fall of 2008. The study analyses the impact and implication of the crisis on PPP infrastructure projects across the Europe and Central Asia (ECA) region. In the research undertaken for this study, it appears that most crisis-specific issues are cross-sectoral, therefore requiring cross-sectoral responses. The intended audience for this report includes national government stakeholders involved in infrastructure financing, including Ministries in charge of infrastructure, especially transport, energy, and water; state-owned enterprises with operational responsibilities, such as road directorates; and Ministries of Finance and development banks involved in PPP. This report reviewed the region's experience in PPPs in infrastructure before and during the financial crisis period (from late 2006 to 2010). Since not all ECA countries have had successful or ongoing PPP projects during this time, the report draws on lessons from Brazil, India, Spain, and the United Kingdom, countries with established PPP project pipelines to draw on cross-sectoral lessons. The findings can be used by countries wishing to start or re-start their PPP program following the impact of the recent crisis. However, beyond the crisis and its effects, the report can also guide future development of sustainable and crisis-resilient PPP programs. Most of the analysis supporting the report recommendations was undertaken for the highway sector and was financed through from a grant from the transport research support program. Initially, the highway sector was the focus of this study but the scope was later widened to include all infrastructure sectors because most issues facing highway PPP projects are common to other sectors requiring a cross-sectoral approach to PPP. Sector-specific strategies for highways have been documented in a recent World Bank study.Publication Financing the Boom in Public-Private Partnerships in Indian Infrastructure : Trends and Policy Implications(World Bank, Washington, DC, 2008-12)India has seen rapid growth in recent years in its program of infrastructure public-private partnerships (PPPs). Despite the surge in demand for finance, local financial markets coped well over the period to 2007 and even offered better terms as they became more used to the PPP model. But areas of possible concern have developed. Gearing has increased significantly, and financing terms mean that PPPs are more exposed to interest rate volatility causes for concern in a period of rising rates and reduced liquidity. Further growth in PPPs will likely require a broadening of the sources of financing once the present financial market turmoil has lessened. Addressing these concerns will call for policy reforms to capital markets and concession frameworks.Publication Implementing a Framework for Managing Fiscal Commitments from Public Private Partnerships(World Bank, Washington, DC, 2014)This note presents practical guidance on how to implement a framework for managing fiscal commitments from Public-Private Partnerships (PPPs). It draws on specific regional operational experience and on World Bank Institute (WBI)'s wider thematic engagement with different partners worldwide. The note provides practical advice on how to: consistently identify and assess fiscal commitments arising from PPPs during project preparation and implementation; incorporate these into the project approval process, including budgeting for these appropriately; and strengthen the monitoring and reporting of fiscal commitments over the lifetime of the project. It explains the fiscal commitments that can arise from PPP projects; why governments may find it difficult to assess and manage these fiscal commitments and incorporate them into project selection; and the key components of an institutional framework to manage fiscal commitments at both the development and implementation stages of a project, including the roles, responsibilities, and processes for managing PPP fiscal commitments.
Users also downloaded
Showing related downloaded files
Publication Poverty, Prosperity, and Planet Report 2024(Washington, DC: World Bank, 2024-10-15)The Poverty, Prosperity, and Planet Report 2024 is the latest edition of the series formerly known as Poverty and Shared Prosperity. The report emphasizes that reducing poverty and increasing shared prosperity must be achieved in ways that do not come at unacceptably high costs to the environment. The current “polycrisis”—where the multiple crises of slow economic growth, increased fragility, climate risks, and heightened uncertainty have come together at the same time—makes national development strategies and international cooperation difficult. Offering the first post-Coronavirus (COVID)-19 pandemic assessment of global progress on this interlinked agenda, the report finds that global poverty reduction has resumed but at a pace slower than before the COVID-19 crisis. Nearly 700 million people worldwide live in extreme poverty with less than US$2.15 per person per day. Progress has essentially plateaued amid lower economic growth and the impacts of COVID-19 and other crises. Today, extreme poverty is concentrated mostly in Sub-Saharan Africa and fragile settings. At a higher standard more typical of upper-middle-income countries—US$6.85 per person per day—almost one-half of the world is living in poverty. The report also provides evidence that the number of countries that have high levels of income inequality has declined considerably during the past two decades, but the pace of improvements in shared prosperity has slowed, and that inequality remains high in Latin America and the Caribbean and Sub-Saharan Africa. Worldwide, people’s incomes today would need to increase fivefold on average to reach a minimum prosperity threshold of US$25 per person per day. Where there has been progress in poverty reduction and shared prosperity, there is evidence of an increasing ability of countries to manage natural hazards, but climate risks are significantly higher in the poorest settings. Nearly one in five people globally is at risk of experiencing welfare losses due to an extreme weather event from which they will struggle to recover. The interconnected issues of climate change and poverty call for a united and inclusive effort from the global community. Development cooperation stakeholders—from governments, nongovernmental organizations, and the private sector to communities and citizens acting locally in every corner of the globe—hold pivotal roles in promoting fair and sustainable transitions. By emphasizing strategies that yield multiple benefits and diligently monitoring and addressing trade-offs, we can strive toward a future that is prosperous, equitable, and resilient.Publication Economic Mobility and the Rise of the Latin American Middle Class(Washington, DC: World Bank, 2013)After decades of stagnation, the size of Latin America's middle class recently expanded to the point where, for the first time ever, the number of people in poverty is equal to the size of the middle class. This volume investigates the nature, determinants and possible consequences of this remarkable process of social transformation. We propose an original definition of the middle class, tailor-made for Latin America, centered on the concept of economic security and thus a low probability of falling into poverty. Given our definition of the middle class, there are four, not three, classes in Latin America. Sandwiched between the poor and the middle class there lies a large group of people who appear to make ends meet well enough, but do not enjoy the economic security that would be required for membership of the middle class. We call this group the 'vulnerable'. In an almost mechanical sense, these transformations in Latin America reflect both economic growth and declining inequality in over the period. We adopt a measure of mobility that decomposes the 'gainers' and 'losers' in society by social class of each household. The continent has experienced a large amount of churning over the last 15 years, at least 43% of all Latin Americans changed social classes between the mid 1990s and the end of the 2000s. Despite the upward mobility trend, intergenerational mobility, a better proxy for inequality of opportunity, remains stagnant. Educational achievement and attainment remain to be strongly dependent upon parental education levels. Despite the recent growth in pro-poor programs, the middle class has benefited disproportionally from social security transfers and are increasingly opting out from government services. Central to the region's prospects of continued progress will be its ability to harness the new middle class into a new, more inclusive social contract, where the better-off pay their fair share of taxes, and demand improved public services.Publication Poverty and Shared Prosperity 2022(Washington, DC : World Bank, 2022)Poverty and Shared Prosperity 2022: Correcting Course provides the first comprehensive analysis of the pandemic’s toll on poverty in developing countries. It identifies how governments can optimize fiscal policy to help correct course. Fiscal policies offset the impact of COVID-19 on poverty in many high-income countries, but those policies offset barely one quarter of the pandemic’s impact in low-income countries and lower-middle-income countries. Improving support to households as crises continue will require reorienting protective spending away from generally regressive and inefficient subsidies and toward a direct transfer support system—a first key priority. Reorienting fiscal spending toward supporting growth is a second key priority identified by the report. Some of the highest-value public spending often pays out decades later. Amid crises, it is difficult to protect such investments, but it is essential to do so. Finally, it is not enough just to spend wisely - when additional revenue does need to be mobilized, it must be done in a way that minimizes reductions in poor people’s incomes. The report highlights how exploring underused forms of progressive taxation and increasing the efficiency of tax collection can help in this regard. Poverty and Shared Prosperity is a biennial series that reports on global trends in poverty and shared prosperity. Each report also explores a central challenge to poverty reduction and boosting shared prosperity, assessing what works well and what does not in different settings. By bringing together the latest evidence, this corporate flagship report provides a foundation for informed advocacy around ending extreme poverty and improving the lives of the poorest in every country in the world. For more information, please visit worldbank.org/poverty-and-shared-prosperity.Publication World Development Report 2023: Migrants, Refugees, and Societies(Washington, DC : World Bank, 2023-04-25)Migration is a development challenge. About 184 million people—2.3 percent of the world’s population—live outside of their country of nationality. Almost half of them are in low- and middle-income countries. But what lies ahead? As the world struggles to cope with global economic imbalances, diverging demographic trends, and climate change, migration will become a necessity in the decades to come for countries at all levels of income. If managed well, migration can be a force for prosperity and can help achieve the United Nations’ Sustainable Development Goals. World Development Report 2023 proposes an innovative approach to maximize the development impacts of cross-border movements on both destination and origin countries and on migrants and refugees themselves. The framework it offers, drawn from labor economics and international law, rests on a “Match and Motive Matrix” that focuses on two factors: how closely migrants’ skills and attributes match the needs of destination countries and what motives underlie their movements. This approach enables policy makers to distinguish between different types of movements and to design migration policies for each. International cooperation will be critical to the effective management of migration.Publication Increasing Female Labor Force Participation(World Bank, Washington, DC, 2023-01)Gender gaps in labor force participation persist worldwide. Closing this gap can lead to sizeable gains for economies—a 20 percent increase in GDP per capita, on average. Female labor force participation (FLFP) remains low due to lack of skills, assets and networks, time-based constraints, limited mobility, gender discrimination in hiring and promotion, and restrictive gender norms. Effective evidence-backed policy options can increase FLFP. They include providing childcare services, disseminating information on work opportunities and returns to employment, training in socio-emotional skills, addressing norms by engaging partners and family members, and targeting women via social protection, safety net, and public-works programs. The World Bank Group actively supports countries in boosting FLFP through development policy lending, advisory and analytical work, and supporting reforms to address constraining contextual factors, including legal barriers, social norms, and gender-based violence. This note sheds light on an array of policy options that are effective or show promise in improving FLFP.