Public Investment and Public-Private Partnerships: Addressing Infrastructure Challenges and Managing Fiscal Risks

335 Pages·2008·1.04 MB·English

by  Gerd Schwartz

Public Investment and
Public-Private Partnerships
Addressing Infrastructure Challenges
and Managing Fiscal Risks
Edited by
Gerd Schwartz, Ana Corbacho
and Katja Funke
Public Investment and Public-Private Partnerships
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This page intentionally left blank
Public Investment and
Public-Private Partnerships
Addressing Infrastructure Challenges
and Managing Fiscal Risks
Edited by
Gerd Schwartz, Ana Corbacho, and Katja Funke
00223300__220011333344__0000__pprreeiivv iiiiii 2200//55//0088 1155::1155::5577
© International Monetary Fund 2008
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Library of Congress Cataloging-in-Publication Data
Public investment and public-private partnerships : addressing
infrastructure challenges and managing fiscal risks / edited by
Gerd Schwartz, Ana Corbacho, and Katja Funke.
p. cm.
Includes bibliographical references and index.
ISBN 0–230–20133–4 (alk. paper)
1. Public investments. 2. Public-private sector cooperation. 3. Infrastructure
(Economics) I. Schwartz, Gerd. II. Corbacho, Ana. III. Funke, Katja.
HC79.P83P828 2008
332.67'252—dc22
2008015893
10 9 8 7 6 5 4 3 2 1
17 16 15 14 13 12 11 10 09 08
Printed and bound in Great Britain by
Antony Rowe Ltd, Chippenham and Eastbourne
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Contents
List of Figures, Tables, and Boxes vii
List of Abbreviations x
Notes on the Contributors xiii
Preface xxiv
Foreword by Teresa Ter-Minassian xxvi
Introduction by Gerd Schwartz, Ana Corbacho and Katja Funke 1
Part One. Public Investment and Fiscal Policy in Europe
1. Public Capital and Economic Growth: Key Issues for Europe 11
Jakob de Haan, Ward Romp, and Jan-Egbert Sturm
2. A Primer on Public Investment in Europe 21
Eric Perée and Timo Välilä
3. Challenges for Public Investment in New EU Member States 36
Anton Jevcák and Filip Keereman
4. Budgeting of Public Investments 61
Eivind Tandberg
Comments on Part One 77
Christophe Kamps
Comments on Part One 80
Christoph Rosenberg
Part Two. Fiscal Risks from PPPs
5. PPPs and Fiscal Risks: Should Governments Worry? 85
Ana Corbacho and Gerd Schwartz
6. Controlling Spending Commitments in PPPs 105
Timothy Irwin
7. PPPs and Fiscal Risks: Experience of Portugal 118
Rui S. Monteiro
Comments on Part Two 132
Gábor P. Kiss
Comments on Part Two 136
Marko Mršnik
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vi Public Investment and Public-Private Partnerships
Part Three. The Institutional Environment for PPPs
8. The OECD Principles for Private Sector Participation in Infrastructure 143
Hans Christiansen
9. Legal Regimes for PPPs in Central and Eastern Europe 162
Alexei Zverev
10. Combining PPP with EU Grants 173
Hugh Goldsmith
11. Managing PFI Projects in the United Kingdom 187
Edward Farquharson
12. Negotiating and Renegotiating PPPs and Concessions 197
Luis A. Andres and J. Luis Guasch
Comments on Part Three 228
Daniel Bergvall
Part Four. PPP Accounting, Reporting, and Auditing
13. PPPs: Some Accounting and Reporting Issues 235
Richard Hemming
14. IPSASB: Service Concession Arrangements 245
Mike Hathorn
15. Accounting for PPPs: The Eurostat Approach 256
Philippe de Rougemont
16. Framework for PPP Audits in the United Kingdom 269
Patricia Leahy
17. PPP Audits in Portugal 279
Francisco Machado
18. Hungary’s Audit Experience with PPPs 285
Gusztáv Báger
Comments on Part Four 295
Kálmán Seregélyes
Comments on Part Four 297
Juan Ramallo Massanet
Index 299
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List of Figures, Tables, and Boxes
List of fi gures
1.1 Share of government net capital stock in total net capital stock 14
1.2 Government gross fi xed capital formation in the EU25 15
2.1 Gross fi xed capital formation by the general government in EU
countries (GDP-weighted averages), 1970–2005 22
2.2 Gross fi xed capital formation of the general government: less
volatile EU8 countries 24
2.3 Gross fi xed capital formation of the general government: more
volatile EU8 countries 25
2.4 Public capital less public debt 27
2.5 Signed value of PPP contracts (stock) and public investment (fl ow),
period averages 29
2.6 Public investment with and without PPPs in the UK 30
2.7 Composition of public investment in groups of EU countries
(GDP-weighted), average 2000–05 32
2.8 Composition of public investment in EU8, average 2000–05 33
3.1 Road infrastructure, 2002 40
3.2 Total gross fi xed capital formation, average 2002–06 41
3.3 Investment by general government, average 2002–06 43
3.4 Functional composition of public investment, average 2001–05 44
3.5 Knowledge economy readiness, 2004–05 45
3.6 Public expenditure on education, average 1999–2003 45
3.7 Public expenditure on R&D, average 2001–05 46
3.8 Stylized debt dynamics with a golden rule 50
3.9 Public investment in new member states between 2001
and 2006 51
3.10 General government defi cit and public investment,
average 2002–06 52
3.11 Cross-country relationship between public and private
investment in the new member states 54
3.12 EU transfers to the 12 new member states under the 2004–06
and 2007–13 fi nancial perspectives 55
3.13 Absorption rate of structural funds, 2000(4)–07(6) 56
3.14 Cross-country relationship between net infl ows of EU transfers
and public investment in the EU15, country averages 1986–2005 57
5.1 Procurement options and private sector participation 86
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viii Public Investment and Public-Private Partnerships
5.2 Contracts under traditional public procurement and PPPs: a
comparison 87
6.1 Comparing public and private fi nance 108
9.1 Compliance/conformity with international concessions standards
and principles 164
9.2 Quality of concessions laws: levels of compliance in core areas of
concessions legislation in Estonia, Latvia, and Lithuania, 2005 165
9.3 Effectiveness of concessions laws in the EBRD’s countries of
operations 169
9.4 Effectiveness of concessions laws in Hungary and Montenegro 170
10.1 PPP-grant support models 179
11.1 Deal pipeline by department 188
11.2 Did the last user satisfaction assessment fi nd that services were
being delivered to an acceptable standard? 190
12.1a Evolution of private participation in electricity distribution 201
12.1b Evolution of private participation in fi xed telecommunications 202
12.1c Evolution of private participation in water distribution 203
12.2 Controlling for time trends: an illustration 206
12.3 Fiscal capture of benefi ts, in 1999 US$ billions 210
12.4a Increase in household earnings from access to infrastructure
public services 211
12.4b Increase in household earnings from access to market through
rehabilitated rural roads, in annual US$ 212
12.5 Percentage who disagree with the privatizations 223
14.1 Design-build-fi nance-operate PPP arrangement 246
14.2 Examples of PPP arrangements 247
16.1 Life cycle of PPP deals 270
16.2 Length of tendering for PFI projects unrelated to project size 273
16.3 Typical organizational structure of a project highlighting
services subject to market testing 275
List of tables
3.1 Average total gross fi xed capital formation by asset type
(percent of GDP) 42
4.1 Integrated budget management and investment planning
processes 69
5.1 Essential and non-essential features of different procurement
options 86
5.2 The gateway process in South Africa 96
10.1 Drivers of value for money in PPPs 177
10.2 Potential impact of EU grants 181
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List of Figures, Tables, and Boxes ix
12.1 Summary of impacts on performance variables 209
12.2 Renegotiation incidence and average time until renegotiation,
1988–2001 214
12.3 Contract award processes for concessions in Latin America and
the Caribbean by sector, mid-1980s to 2000 215
12.4 Percentage of concessions renegotiated according to competitive
or non-competitive process excluding the telecommunications
sector, by type of process 216
12.5 Who initiated the renegotiation? (percentage of total requests) 216
12.6 Who initiated the renegotiation conditioned on regulatory
regime? (percentage of total requests) 216
12.7 Contract features and the incidence of renegotiated concessions
in Latin America and the Caribbean, mid-1980s to 2000 217
12.8 Common outcomes of the renegotiation process 220
14.1 Anticipated schedule for IPSASB project on PPPs 254
16.1 Issues in using the matrix approach 271
16.2 Results of the projects that value tested services 277
18.1 Main data of PPP projects, 2007–10 289
18.2 Assessment of motorway projects 292
List of boxes
3.1 Lessons from Irish and Portuguese convergence for public
investment 47
5.1 Examples of fi scal risks and PPPs: country experiences 90
5.2 Examples of the institutional setup for PPPs in selected countries 95
5.3 Disclosure requirements for PPPs and guarantees 98
8.1 The OECD principles for private sector participation in
infrastructure 145
11.1 PFI Operational Taskforce 192
13.1 Disclosure requirements for PPPs 240
13.2 Disclosure requirements for guarantees 242
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