21 january, 2010 the world bank group – ict department rémy fekete, partner
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PPPs in Backbone and Access Networks in developing countries : Benefits and Legal Issues. 21 January, 2010 The World Bank Group – ICT Department Rémy Fekete, Partner. Significant impact of Broadband for Economic Development Economy-wide impacts based on sharing costs and benefits - PowerPoint PPT PresentationTRANSCRIPT
21 January, 2010The World Bank Group – ICT DepartmentRémy Fekete, Partner
PPPs in Backbone and Access Networks in developing countries : Benefits and Legal
Issues
Significant impact of Broadband for Economic Development
Economy-wide impacts based on sharing costs and benefits
Better circulation of information – Ensuring access of the network
Every 10-percentage-point increase in penetration of broadband services triggers a 1.3-percentage-point increase in economic growth
A needed structure to offer a new dynamic
Inadequate technology
Digital divide
Large gaps in geographical coverage
Reinforcement of economic inequalities
Introduction
Introduction
A dead-end situation:
Private initiative alone will not…
National budgets alone cannot…
…fully answer ICT development demand
PPPs have emerged as an effective tool for overcoming this tangled- up situation by combining private sector know-how with public interest aims.
Average yearly PPP investment increased by 118% between 2000 and 2006 in telecommunications.
1.1 Definitions
PPP: any form of partnership between the public authorities and the private sector that aim to ensure the funding, construction, renovation, management or maintenance of infrastructure or to provide a public service.
Build a PPP project on a sector diagnostic
A realistic assessment of the sector constraints must be set up:
1- The legal, regulatory and policy framework.
2- The technical issues.
3- The financial, economic and social issues.
1- What is a PPP ?
1.2 Parties involved
1- What is a PPP ?
Capital
Sponsor
Other shareholders
Concession sphereGuarantee and financing sphere
Corporate sphere
Project Company
RevenuesUsers/ Client
Debt
Banks
MultilateralOrganizations
State/public sector
Constructor Operators
Private sector
1- What is a PPP ?
1.3 Stakeholder interests in PPPs : a balance to reach
Stakeholder Interests
- Maximize revenue- Provide universal access to service- Ensure affordable basic service- Promote fair competition- Attract investors- Improve public welfare
- Ensure fair pricing- Improve quality and
reliability of service- Increase accountability
and responsiveness
- Ensure stable, transparent regulatory process
- Enable organizational restructuring and asset allocations
- Provide trained human resources- Generate more investment opportunities
- Ensure fair treatment of present employees
- Provide career opportunities- Improve productivity, efficiency,
Employees
Government
Consumers
Investors
1- What is a PPP ?
1.4 Three key characteristics of PPP projects
A contractual agreement defining the roles and responsabilities of the parties and in particular the ownership of the infrastructure
Sensible risk sharing among the public and private sector partners
Financial rewards to the private party commensurate with the achievement of pre specified outputs.
2- Different forms of PPPs
Source: ICT Regulation Kit – 16 October 2009
2.1 Forms of cooperation
2- Different forms of PPPs
2.2 Financial options of PPP projects
Loan Agreement / Grant / Subsidy
Key questions:- Which party supports the maximum amount of risk?- Which financial guarantee can be implemented?- Are By Laws in compliance with the scope of the PPP project?
Joint venture / Public party becomes a shareholder of an ad hoc entity
Key questions: - What is the scope of the exit clause?- Is there any Golden share clause?- How is the valuation of the public’s shares made?
A few figures to illustrate: Strong increase in mobile penetration
eg.: from 2% in 2003 to 33% in 2008 in Africa
Strong increase in web users eg.: yearly growth rate of 30,6% between 2003 and 2008 in
Africa
Installation of intercontinental undersea optic fiber cable systems
3- An attractive structure for ICT in Developing Countries
3- An attractive structure for ICT in Developing Countries
African undersea cables (active and projects)
3- An attractive structure for ICT in Developing Countries
Source: globalcarribean.net
Global Carribean Network (active)
4. Major steps for a successful PPP
Preliminary Stage Project Identification Project Appraisal Design & Agreement Procurement Implementation
• Preparation of National and local legislative and regulatory structures
• Suitability Assessment
• Selection of PPP type• Define PPP
structure
• PPP Design• Procurement
process selection an design• Agreement of
National Authorities and funders
• Tender• Evaluation• Negotiation• Contracting
• Construction• Operation• Monitoring• Contract
management• Evaluation
• Legal contest• Institutional
capacity• National policy• Identification of
funding strategies
• Desired gains• Obstacles and
constraints• Private sector
interest• True cost of
services• Cost and benefits
of PPP
• Needs assessment• Risk allocation• PPP components• Budgeting• Expectations of a
PPP
• Integration of PPP into design• Procurement
procedure selection & design• Funders
requirements• Financial and
socio-economic appraisal
• Open and transparent process• Detailed
recordings
• Effective implementation structures• Effective working
relationship
Requirements
Stages EVALUATION MONITORING
5- Practical considerations : contractual toolkit
PPP Agreement Concession Agreement Design & Construction - The procedure for the review and approval of
construction plans- The right for the other party to monitor the
construction and acceptance process upon delivery
- The calendar of the construction must be established by both parties
- Aim is to avoid: cost overrun & failure to deliver
Project site, assets & easements
- Specify the nature/ownership of the assets- Indicate if there is any transfer of assets
upon expiration of the contract- Public party usually assists the private one to
obtain appropriate rights for the project
- Respect of the environment- Access to the land- Access to the highest point- Sharing of the infrastructure
Choice of the subcontractors
- Private party is free to hire subcontractors through tendering / possibility to request the public party’s approval
- Sometimes the selection has to be made before entering into the PPP contract
- private party entirely free but will be held responsible before the public party for any defect
- The aim is to avoid conflicts of interest
5- Practical considerations : contractual toolkit
PPP Agreement Concession Agreement Delivery and acceptance of the infrastructure
- A strict calendar of the deliveries. A specific acceptance process must be implemented
- Minutes signed by both parties - even subcontracting
- Penalties if delay of the delivery - the grant of subsidy (if applicable) after
acceptance of each stage of the infrastructure
- The aim is to mitigate the financial risk supported by the public party.
Financial and legalGuarantees
- Financial viability of the entity in charge of the construction and exploitation
- Forms, duration and amounts of guaranteesex: Bank guarantee until complete deliveryex: Guarantee period upon completion
- Insurance policies to be maintained- Potential compensation (change of
legislation)- Remedies in the event of default by the other
party- Limitation of liabilities for failure or delay of
execution due to circumstances beyond reasonable control
Operations of the infrastructure
- Network coverage- Continuity and quality of the service- Availability of the service under mainly the
same conditions to all users- Fair competition should be respected
(including towards the public party)
- Network coverage- Continuity of the service- Quality of the service- Meet the expected technical standards- Equal treatment of customers/users
5- Practical considerations : contractual toolkit
PPP Agreement Concession Agreement Interconnections and access to the networks
- Obligation to provide access on a fair and non-discriminatory basis
- Interconnection conditions must be approved by the Regulatory Authority- Direct access to international capacities- Fair and non-discriminatory conditions
Disclosure requirements - Create a special committee in charge of following the construction and exploitation of the facilities
- Reporting: design process and status
technical reportsfinancial reports
- Cost Accounting- Auditing- Commercial and marketing information
(statistics on the clients, types of services etc…)
- Disclose to the Regulatory Authority all documents and information that can establish:
- Fair competition of the market- All financial, commercial and technical
information (traffic data, tariffs, cost accounting)
Tariffs during operation phase
- Limitation on free set up of the tariffs- Obligation to allow open access
- Tariffs and fees are subject to the control of the Regulatory Authority
- Tariffs adjustments formulas should be agreed
- Payment of the license fees
Conclusion
New verbal designation for a pre-existing but evolving legal structure. Moving responsibilities from the public to the private sector, creating a new dynamic.
Wide coverage in telecommunications requires this PPP structure to enhance the networks.
Key role to play in ensuring a successful economic and social development of poor and fragile populations.
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