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.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment