“THIS HOUSE MUST NOT FALL: PUBLIC PRIVATE PARTNERSHIP (PPP) IN THE AVIATION SECTOR- Prospects and Challenges.”

Being a presentation, at the National Executive Council Meeting & Conference of Air Transport Services Senior Staff Association of Nigeria (6th to 9th Oct,2010), at the Premier Hotel- Ibadan.


What is a PPP?
It is a co-operative venture for the provision of infrastructure or services, built on the expertise of each partner that best meets clearly defined public needs, through the most appropriate allocation of resources, risks, and rewards. The public sector maintains ownership, oversight and quality assessment role, while the private sector is more closely involved in the actual delivery of the service or project.

Concession: refers to a contractual arrangement whereby the project proponent or contractor undertakes the construction, including financing of any infrastructure, facility, the operation and maintenance thereof and includes the supply of any equipment and machinery for any infrastructure and the provision of any services. Infrastructure concession in practice relies principally on the private sector. To ensure that public private partnerships are not abused, the Government's key policy objectives for PPP have to be clearly spelt out in the following terms: " to accelerate investment in new infrastructure and ensure that existing infrastructure is brought up to a satisfactory standard and capable of providing services that meet the needs and aspirations of the public; to improve the availability, quality, and efficiency.

Infrastructure refers to those physical structures that facilitate the production of goods and services, without themselves being part of the production process. Often referred to as the stock of capital goods, they include highways, airports, harbours, utility production and distributive systems.

Infrastructure projects are lumpy, meaning that they are large, immobile, space specific and long lasting, often with life span measures in decades and centuries, and construction often running into years.

The implication for financing is that:
Infrastructure finance tends to have maturities of between 5 years to 40 years.
The initial financial outlay tends to be quite large.
Large amounts of money are typically invested for long period.
Real return on investment usually fixed and as low as near zero, although still positive.


Why Do We Need PPP?
• The economy of every country is broadly divided into the public and the private sectors.
• A major challenge facing policy makers the world over is how to manage role of government in the economy.
• But what happens when government does not have the resources to undertake the various tasks.
• Or where the competition for scarce resources is so high that the demands in a single sub sector alone can decimate a country's available resources?
• This is exactly the situation in most developing countries.
• Nigeria needs to invest in critical areas such as rail, road network, water and electricity to be considered a leading global player.
• Competing demands from education, agriculture, national security, public services and other sectors of the economy.
• Where will these funds come from? This is against the backdrop that the country's external reserves have dipped.

Components of PPP
• Government- federal, state or local.
• Investor – local or foreign individuals or organisations.
• Financial institutions. Domestic, foreign or both consortiums.

PPP Modes
• Lease, Develop, Operate –LDO.
• Build, Own and Transfer –BOT.
• Build, Own and Operate –BOO.
• Management Contract –MC.
• Joint Venture –JV.
• Build, Operate and Transfer –BOT.
• Build, Own, Lease and Transfer –BOLT.

ESSENTIAL ENVIRONMENT FOR PPP
• Legal and Regulatory Framework. (ICRC act of 2005 and others)
• Policy and Institutional Framework. (ICRC,BPP,DPU)
• Availability of long-term and flexible credit.
• Strong competitive market for PPP projects.
• Capacity for project design, implementation and monitoring.

ICRC ACT & KEY ACTIVITIES
• The body was set up to formalise and regulate private sector participation in federal infrastructure.
• Quoting the late President at the at the inauguration of ICRC board, “given the Federal Government's budgetary constraints vis-à-vis the quantum of resources required to rebuild, maintain, upgrade, and expand our critical infrastructure, the concession program as envisaged would leverage effectively on private capital”.
• He added that 'this would necessarily involve the requisite upgrade of government's regulatory and monitoring roles, with the Federal Government focusing on planning and structuring, while the private sector engages in management, investment, construction and finance of infrastructure development.
• The president explained that global demand for basic infrastructure services had grown over the years, quickly outstripping the supply capacity of existing assets. He added that Nigeria's experience is that huge infrastructure deficit has greatly constrained economic growth and development, thus inhibiting the country's ability to improve the quality of life of citizens as envisaged in the Seven- Point Agenda.

ACT: MDAs may enter into a contract with or grant concession to any duly pre-qualified private sector proponent for the financing, construction, operation, and maintenance of any infrastructure that is financially viable or any development facility of the Federal Government. (Section1.1).
Section 19 of ICRC act.
o Provides general policy guidelines, rules and regulations.
o Take custody of every concession agreement.
o Ensure efficient execution of any concession agreement or contract entered by the federal Government.
• Streamline and standardize the process involving PPPs.
• Draft policies, guidelines and procedures to ensure that PPP transactions are carried out in an eminently controlled manner by all MDAs.
• ICRC will ensure all MDAs comply with these procedures before approval is given.
• Review of all projects identified by the MDAs and their structure before presentation to the FEC for approval.
• Review of contract documents before they are signed.
• Coordinate PPP activities across the country and manage the timing and flow of projects to the market.
• Provide technical expertise to MDAs and state governments in their procurement transactions, also they will provide support during negotiations, contract drafting, and financial mediation.
• Ensure that adequate capacity for entering and carrying out PPP projects on the basis of best practices exists both in the MDAs and the Commission itself.
• Review and monitor the tendering process;
• Harmonize the PPP process with other agencies such as the Ministry of Finance, National Planning Commission, and Budget Office e.t.c.
• Take custody of every concession agreement, maintain a project register and ensure that they are implemented in accordance with the law.


The Challenges of PPP-
• New PPPs. (quickie contraption)
• Cash flows and viability of existing PPPs.
• Refinancing of existing PPPs.
• NAF annexation of FAAN properties.
• Transparency.
• Unions reactive not proactive.
• State finances needed not participation.
• Lack of co-ordination between the MDA’s, ICRC, DPU and BPP.

Lessons from India’s PPP -
• to build world class airports with modern technology and management efficiency.
• to make airport user friendly with higher level of customer satisfaction.
• to provide airport capacity ahead of demand.
• to provide multi-modal linkages.
• also state government support agreement(SGSA) was initiated.
• SG to provide support to JVC.
• To remove all encroachment.
• To provide additional land for development.
• Removal of all obstructions outside the airport boundary to ensure safe and efficient air traffic movement.
• To provide improved surface access to the airport.
• To provide all utilities water, power e.t.c.
• To aid the JVC’s in procuring all necessary clearances.

• Completion of Phase-I work of IGI Airport a new integrated Terminal-3 has now become operational. The terminal has 34 million passengers handling capacity per annum covering both international domestic passengers, 168 check-in counters, 24 remote check-in counters, most modern 5 level in-line baggage system, 98 immigration counters, 78 aero bridges, multi-level car parking (4300 cars capacity), 3000 CCTV, 352 screening machines etc.
• This marks a new beginning in creating world-class infrastructure with public private partnership (PPP) in the aviation sector in India.
• The cost of the terminal is estimated at approximately US$ 2.7 billion. Terminal 3 at New Delhi – IGI Airport will be dedicated to the Commonwealth Games for which Air India has been recognised as the official carrier.
• The country has 454 airports and airstrips, of which 16 are designated as international airports
• Opportunities: Investment opportunities of US$ 110 billion are being envisaged up to 2020 with US$ 80 billion towards new aircraft and US$ 30 billion towards the development of airport infrastructure, according to the Investment Commission of India.
• The Vision 2020 statement announced by the Ministry of Civil Aviation, envisages creating infrastructure to handle 280 million passengers by 2020.
• The Planning Commission of India in a recently released report, 'Monitor able Targets & Milestones for 2010-11', has indicated several opportunities in the infrastructure sector consisting of ample scope for investment and growth. For example, in the civil aviation sector a target of US$ 562.20 million for investment for 2010-11 into public private partnerships (PPP) airport projects such as CSI Airport, Mumbai, IGI Airport Delhi, Hyderabad Airport and Bengaluru Airport have been planned.
• In-principle approval has already been given to Greenfield airports such as Gulbarga and Bijapur, Shimoga and Hassan airports in Karnataka, Kannur International Airport in Kerala etc. by the Secretary, Civil Aviation, according to the Planning Commission brief on civil aviation in the report.
• India's expanding aviation sector has almost dozen carriers, which are looking to add to their fleet as the booming economy revives the market for air travel.
• Further, according to Airbus Industrie's global market forecast, India needs 1,032 aircraft by 2028 to serve strong demand for passenger air travel and freight, and to replace ageing fleets. Out of these, 993 are new passenger aircraft valued at US$ 131 billion and 39 are new freighters valued at US$ 9 billion.
• Boeing, which competes with Airbus to sell planes in India, estimates the country will buy 1,150 commercial jets valued at US$ 130 billion over the next 20 years.


The Vietnamese -
• Thomas E Kern, CEO of the Zurich Airport, said the PPP model could be carried out successfully in the development of Viet Nam’s aviation infrastructure with participation from partners in Ha Noi. He expressed is hope that the model would result in high quality aviation infrastructure projects and that Viet Nam’s economy would develop strongly towards the greater use of the PPP model.

• To successfully implement this model Viet Nam would face many difficulties, including creation of a legal framework, a comprehensive policy on PPP, and administrative procedures barriers would need to be lifted in order to ensure a competitive edge for both domestic and foreign investors, said deputy general director of the Bank for Investment and Development of Viet Nam Tran Thanh Van.

• Transparency in the choice of investors would be a prerequisite for successful implementation of the PPP model, he said.


Dear Comrades, this house did not fall under the brutish military era; therefore it cannot fall in a democratic era, but it will rather thrive and support a PPP environment for the well being of its competent members.

Hi Soweto=Hi Apomi should be concessioned to NURTW while Hi Soweto= Hi efficiency should be the Maxim in ATSSSAN.

ACI CONFERENCE: Unenviable Absence of Nigerian Operators

Our dear country, hosted delegates and other invited guests to the 19th annual conference and exhibition of airport council international (ACI) Africa region, from Sunday, 12th to Saturday, 19th September 2010. On Thursday, the 16th, the conference was opened to the public and formally declared open by the Honourable Minister for Aviation, with the usual Nigerian protocol of having too many welcome and opening remarks by different individuals on the high table. The conference kicked off two hours and thirty minutes behind schedule due to the late arrival of the Minister which culminated in time reduction for speakers and robbed participants the beauty of interaction through questions and answers. This was corrected the next day because they started on schedule without waiting for ceremonial remarks.

The conference attracted speakers from reputable international bodies and organisations with translation made easy courtesy of the facilities provided by the International Conference Centre. Mr. N. Fadugba fired the first salvo with a warning that without airlines, airports will not exist; he reiterated the need for African airlines to start a consolidation process to keep them alive and competitive. Deon Coete, GM Cape Town International Airport, took delegates through the process that prepared South African airports for the last World Cup. He said coordination of all stakeholders, partners and relevant agencies was the driving force, while airport management and administration personnel were redeployed to operational areas to reduce the use of casual staff and improve professionalism. Also, cranes for aircraft recovery and asphalt plants were placed on stand-by at the designated airports with staff wearing bold name badges not floppy tags or pass at all times for easy identification and communication.

IATA and SITA continued preaching their passenger facilitation homily, which is simplifying the travel or business process, using designated pillars and strategy, with the usual ambitious targets based on survey conducted within the industry which very often does not take cognisance of technological and infrastructural hindrance in Africa. The new orientation is having airport agents or handlers sell airline products not taking care of passengers who are now expected to check themselves in using the self service kiosk. To achieve this objective, equipment is being developed to facilitate the process with emphasis on the use of mobile phones.

ICAO as usual gave us frightening news, starting with Africa’s poor safety record embellished with our unenviable lead in air accidents when compared to other regions. It was observed that runway excursion was the highest contributor and a Runway Excursion Risk Reduction (RERR) kit is being introduced to mitigate this. The gap analysis, which is an evaluation that compares existing situation to the desired one, was performed in 47 African states. Not surprisingly, most member states lack the capability and the resources to recertify authorisation holders and have been unable to establish structures or framework necessary for effective and sustainable safety and oversight system.

The United States sponsored Safe Skies for Africa (SSFA) initiative team was also in Abuja. They will send air traffic/navigation experts to some African countries to complement officials of NTSB, FAA, TSA and related agencies stationed in the region for SSFA initiative. They are also considering moving from the FAA category certification process to the universally acceptable ICAO standard and recommended practices. It is good news that Americans are now thinking in global terms, while NAMA should endeavour to key into the navigation programme, since it is a win-win situation.

The American FAA introduced some safety equipment such as Tarsier camera and Qunetic Q which is used for detecting foreign object debris (FOD). When we remember the last Air France Concorde crash, we will appreciate the importance of this equipment. Also, new fire fighting equipment and techniques were on hand. A device made from crushable concrete and other materials, which stops aircraft from overshooting the runway, thereby reducing injuries and fatalities, called the Engineered Material Arresting System (EMAS) was shown to participants. It is very expensive, but very effective considering that it saved a loaded 747 cargo flight of Folar Air Cargo and some other aircraft from going off the runway.

ACI in their presentation is looking forward to a regional standardization of training programmes and policies. The training expert working group has been saddled with this responsibility. They hope to improve professionalism at the airports with a positive succession and replacement policy. They corroborated the earlier assertion of ICAO and IATA on runway safety, that 70% of African states have not implemented runway safety programme while 62% have no established organizational structures for certification and surveillance of the aerodrome. It was also generally observed that airlines are investing in cost reduction processes, while airport investment is in safety and security. This must have compelled the board of ACI to ask members to invest in infrastructure, rather than new airports.

The DG NCAA provided a graphic description of the movement of the underwear bomber, Mr. Abdul-Muttallab showing the effectiveness of our safety equipment, processes and plans put in place by FAAN, before, during and after the botched bombing. He was able to beautify MMIA beyond the usual bad media blitz, same with FAAN MD and Director Aviation Security, in their respective presentation.

Boeing did not hide its de-marketing of the A380 aircraft, while eulogizing the new B747-800, which will be competing with the A380. The NCAA and some other African countries have given approval for the aircraft to come to selected airports. Lufthansa, the German airline that was given a waiver from paying commercial royalties and equally happily saddled with the task of developing Abuja as a hub by the former Aviation Minister, will be the first airline to operate that aircraft into Nigeria by November this year. Whose hub are they developing? Is it for German or Nigerian airlines? The MD, FAAN further advertised Lufthansa at the expense of local carriers in his presentation when he showed a Lufthansa refurbished check-in counter at the MMIA. I honestly hope that was not the intention.

Participants were made to understand that airport certification is not enough to say an airport is safe, if the owners do not monitor regularly for unsafe items and movement, while ensuring that safety policies are made known to users with appropriate signs and colours. Mr. Anga, founder and president of Aviation Law Society ended the paper presentation with a warning to all government agencies to ensure they are conversant with the laws guarding the establishment of the Due Process Unit, Bureau of Public Procurement and Infrastructure Concession & Regulatory Commission, so they do not get caught on the wrong side of the law. He was empathic that the government should urgently come up with a new policy thrust for our airports.

Our carriers were completely absent at the conference and exhibition, while important players like Bi-Courtney, SAHCOL, LANDOVER etc, did not take a stand at the exhibition. Surprisingly, LANDOVER was part of the organizers. Sister aviation agencies, NTDC, foreign airlines and organizations, and other Nigerian companies should be commended for supporting FAAN before and during the conference, while Maevis sent their first eleven to the conference, which was complemented with an excellent stand during the exhibition. It may have necessitated the new rapprochement with SITA, an indirect rival in the past. The maxim no permanent enemy but permanent interest is real after all. I will also not forget the eventful Gala night sponsored by the NCAA; it was good compensation for the lunch served earlier that day.

Miss Temitope Coker, winner of the maiden National Travel Essay competition organized by Travel & Business News, got a standing ovation from the delegates for her closing speech which was really touchy. It is commendable that FAAN successfully hosted a conference that was bungled by Zimbabwe last year; FAAN delegates were also mainly operational staff, for whom the conference was relevant. For the Nigerian companies that missed the programme, I have this African proverb for them, ‘If you will not pick the mangoes that fall on the ground, then you should be strong enough to pluck those on the tree.’ We therefore expect them to be in Cairo in 2011 for the next ACI conference.