PPPs Can Help Fill Asia’s Infrastructure Gap — Report

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The FINANCIAL — Leveraging private capital and technical expertise through public-private partnerships (PPPs) can help countries in Asia and the Pacific meet their infrastructure needs, which currently stand at about $1.7 trillion per year, according to a new Asian Development Bank (ADB) report.

The special theme chapter in the Asian Development Outlook (ADO) 2017 Update analyzes PPPs as a vital source of private sector support in the region’s efforts to fill the $500 billion per year infrastructure finance gap. ADO is ADB’s flagship economic publication.

“PPPs, if done right, have the potential to fill the region’s huge infrastructure needs, leveraging the capabilities and resources of the private sector towards the common goal of sustainable development for all,” said Yasuyuki Sawada, ADB Chief Economist.

Asia’s development needs are significant, with over 400 million Asians currently living without electricity, 300 million without safe drinking water, and over 1.5 billion without basic sanitation. Resources of governments and international financial institutions like ADB are not enough to meet these needs—something the private sector through PPPs can help address.

The report notes that PPPs, when properly implemented, can improve both infrastructure as well as public service delivery, making them effective tools in inclusive economic development. The PPP model has been gaining ground in Asia, with project delivery through the scheme in the region growing fourfold in the last 25 years. PPP transactions in the region are currently concentrated in East and South Asia, suggesting untapped opportunities in other subregions. Energy and transport have been the traditional focus for PPP projects, while health and education represent new frontiers in PPP delivery.

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To effectively implement PPP schemes in development projects in Asia and the Pacific, the report notes that governance, legislation, institutional structures, and PPP know-how have to be improved. Along with broad efforts to improve the investment climate and deepen financial markets, governments in the region can increase the chances for successfully implementing PPPs through optimal allocation of risks to stakeholders, implementing the right regulatory policies, choosing the right projects to qualify for PPP, and finding suitable private partners.

 

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