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International Lessons on Industrial Zone Development: p
Public Private Partnerships
PPP Workshop Ain Sokhna, Egypt
Private Sector Participation on Industrial
Sub-Component E.6: Facilitating Services to the Private Sector
Parks and Special Economic Zones
May 26-27, 2008
1a
Services to the Private Sector
Jose M. Ceron
Overview
Genesis of Industrial Zone (IZ) Development
Menu of private participation in IZ developmentMenu of private participation in IZ development
IZ PPPs stages, project preparation and roles
Lessons learnedLessons learned
2
Genesis of Industrial Zone (IZ) DevelopmentGenesis of Industrial Zone (IZ) Development
Menu of private participation in IZ development
IZ PPPs stages project preparation and rolesIZ PPPs stages, project preparation and roles
Lessons learned
3a
Types of Zones
All ZonesAll Zones
Industrial Parks Free Zones Special EconomicIndustrial Parks Free Zones Special Economic Zones (SEZ)
Export Processing Zones (EPZ)
Free Trade Zones (FTZ)
Service Free Zones (SFZ)
Specialized Free Zones
Other Free ZonesZones (EPZ) ( ) ( )
Common DenominatorsCommon Denominators Geographically delineated areas Common infrastructure Single administration
4
Single administration Pre-built, built-to-suit or build-your-own facilities Value added services
Many Government-run IZs failed or under-performed
Weak t
Too many approvals No single authority
Bureaucraticd &
management Physical
development not phased
Tax holidays
Poor operating& mgmt
Uncompetitivepolicies &
procedures & controls
not phased Subsidized
land and facilities
Rigid eligibility requirements
Poor labor policiesgframework
pinstitutions
Lack of anintegrated approach
Poor locations, bad design
Lack of funding
policies Too many
bodies involvedapproach(maintenance,
services, promotion, crowded
involved Weak
regulatory authorities
Poor offsite infrastructure
5
crowded facilities)
Poor offsite infrastructure planning
Lack of partnership approaches
New Framework for Zone Development
Current international experience shows that the new worldwide framework for zone management tends to rely more heavily on the private sector
Old FrameworkZone Authority would develop, own,
d l h
Old FrameworkZone Authority would develop, own,
d l h
New Framework Zone Authority only regulates
New Framework Zone Authority only regulates
sector
operate and regulate the zoneZone Authority has little power over other government bodiesZone funded by government;
operate and regulate the zoneZone Authority has little power over other government bodiesZone funded by government;
Zone Authority only regulates activities within the zone
Private developer develops, owns and operates the zone on a cost-
Zone Authority only regulates activities within the zone
Private developer develops, owns and operates the zone on a cost-y g
typically subsidized services & facilitiesPublic sector development and operation of zones
y gtypically subsidized services & facilitiesPublic sector development and operation of zones
recovery basis Outsourcing of core functions to
private sectorZ t i d i ti
recovery basis Outsourcing of core functions to
private sectorZ t i d i ti Zone enterprise designation extended to developers and service intermediaries
Zone enterprise designation extended to developers and service intermediaries
6The primary leading practice trends in the World are to utilize the private sector to create additional value and speed up growth
Growth of Modern Zones
1970s30 countries
1970s30 countries
Today 100+ countries
Today 100+ countries30 countries
80 free zone projectsNo private zonesT t l t d $10 billi
30 countries80 free zone projectsNo private zonesT t l t d $10 billi
100+ countries 1000+ free zone projects 80% private zones
$
100+ countries 1000+ free zone projects 80% private zones
$Total trade: $10 billionTotal jobs: 1 millionTotal trade: $10 billionTotal jobs: 1 million
Total trade: $400 billion Total jobs: 50 million Total trade: $400 billion Total jobs: 50 million
C titi S i B di Fl ibilit7
Competition: Service, Branding, Flexibility
Traditional Zones Organization Structures
Many Zones were developed, operated and regulated by the same y p , p g ybody. Examples include:
UAE: Jebel Ali Free Zone and other zones China: provincial governments
Sri Lanka: Board of Investments Sri Lanka: Board of Investments Jordan: Industrial Estates Authority
Other countries separated the development and operation of zones p p pfrom regulation, putting these in separate government bodies. Examples include:
Taiwan: operation by EPZA, regulation through the Industrial Development Bureau
Korea: operation by KEPZA, regulation through an inter-ministerial committee
Central America/Caribbean: Autonomous entities regulate & assign regime to private entities
8
p
Traditional Organization Structures are Changing
Traditional approaches to zone development/management and regulation are changing because:
Drawbacks of government management and regulation of zones Rise in local and multinational private companies for development and/or management of zonesp p p g Increasingly sophisticated demands from users and tenants
Drawbacks of government management and regulation of zones includeLarge government expenditures on infrastructure development and operation (especially if these Large government expenditures on infrastructure development and operation (especially if these are subsidized)
Difficulty in recruiting staff with required skills and experience Lack of autonomy and too much red tape (due to civil service regulations on salaries, staffing
structures, procurement, budget approvals, etc) Conflicts of interests: ownership vs. regulation
9
New IZ players accelerating changes
Changes are also driven by the emergence of private developers and operators. These are typically:
Construction companies- Kajima, Balfour, Turner, Hyundai
Construction companies- Kajima, Balfour, Turner, Hyundai
Engineering, Construction and , Project Management Companies (EMCs)
- Bechtel, Dragados, Fluor Daniel,
Engineering, Construction and , Project Management Companies (EMCs)
- Bechtel, Dragados, Fluor Daniel,
p yp y
Property developers- SembCorp, Trammel Crow,
Portman Amata Lippo
Property developers- SembCorp, Trammel Crow,
Portman Amata Lippo
Bechtel, Dragados, Fluor Daniel, Bouygues, Groupe Vinci
Government-linked companies
Bechtel, Dragados, Fluor Daniel, Bouygues, Groupe Vinci
Government-linked companies Portman, Amata, Lippo, Hillwood, National Real Estate Company (Kuwait)
Portman, Amata, Lippo, Hillwood, National Real Estate Company (Kuwait)
- JTC-Ascendas, Singapore- Central Trading, Taiwan- Jebel Ali, UAE
- JTC-Ascendas, Singapore- Central Trading, Taiwan- Jebel Ali, UAE
Management consultants- BearingPoint, Chemonics, IDI
Management consultants- BearingPoint, Chemonics, IDI
- Qatari Diar. Qatar
Trading & financial groups
- Qatari Diar. Qatar
Trading & financial groups
10
g g p- Marubeni, Sumitomo, Mitsubishi,
Itochu, Nomura Securities, AIG
g g p- Marubeni, Sumitomo, Mitsubishi,
Itochu, Nomura Securities, AIG
Genesis of Industrial Zone (IZ) DevelopmentGenesis of Industrial Zone (IZ) Development
Menu of private participation in IZ development
IZ PPPs stages project preparation and rolesIZ PPPs stages, project preparation and roles
Lessons learned
11a
From old to New: IZ Models for Development and
Service Provision
Government configures the roles of developer and service provider in a variety of ways based on a variety of public and private
Egypts New Generation IZ Program: Quick positioning within best
Private SectorPublic Sector
ways, based on a variety of public and private sector-driven models.
p gpractices
Design-Build
Design-Bid-Build
Traditional Public Sector
Design-Build-Operate-Xfer
Build-Operate-Xfer
Operating Contract
Concession
Lease-Develop-Operate
Concession Framework
Joint Venture
Asset Capitalization
Partial Divestiture
Partial Public Sector Procurement
Contract FrameworkPrivatization
Public Owned, Public-Private
Developed ,Operated, Financed
Operator
Developer/ Financier
Developed, Financed
Toward Best Practice
12Contractor Engineer Contractor Operator
Engineer
Options for Greater Private Sector Involvement
Outsourcing of other functions
Private zone development and
Joint infrastructure Management other functions
and services: Inventory control for Customs purposes
I t t ti
development and operation
Most common approach worldwide, especially in East Asia
infrastructure development
Typically onsite (private) and offsite (government)
Support Programs
Assist management to achieve vision and objectives using a l & l Investment promotion
an
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