ADB and Public-Private Partnerships

Asia’s infrastructure requirements today are estimated at over $1.7 trillion a year until at least 2030. There is a huge gap between the financing that is required and what governments can afford to pay from their own budgets. This shortfall, along with weak capacity, an underdeveloped enabling environment, poor project preparation, and insufficient project financing, are holding back economic growth and poverty alleviation.

Why PPPs?

PPPs are contractual arrangements where a government partners with the private sector to build and run infrastructure, such as a road or bridge. PPPs can be used to finance and run not only traditional infrastructure, but also railways, ports, water and sewage facilities, and renewable power systems. There also examples of successful PPPs in the education, health, and other social sectors.

The private sector often delivers greater efficiency and lower costs than governments when constructing and managing infrastructure projects and delivering services. The private sector can also bring cutting edge technology and innovation to development projects. Open tendered construction of infrastructure can result in lower construction and operating costs and faster delivery.

The Mactan-Cebu International Passenger Terminal Project was a priority PPP project of the Philippine government. It is the country's second largest airport and serves as the southern hub of its air transportation system. Photo: Ariel Javellana/ADB

But to be successful in a development context, PPPs need to achieve an important balance: they must demonstrate clear public benefit, yet operate on commercial principles and with effective risk sharing. In addition, the PPP must have a sound bankable contract structure that offers value for money over the life of the project, which is often many years.

ADB and PPPs

ADB recognizes that public-private partnerships (PPPs) can play an important role in addressing this huge infrastructure investment shortfall in Asia and the Pacific. To support PPPs in the region, ADB’s Office of Public-Private Partnership (OPPP) offers support over the entire range of activities associated with the development, financing, and placing of PPP projects in the market.

The OPPP’s experienced team helps harness the private sector's efficiency at managing infrastructure projects while delivering quality infrastructure services. To support its developing member countries, the OPPP delivers bankable PPP projects that balance risks and benefits. Working as One-ADB, OPPP also helps ensure workable regulations and frameworks are in place to attract private sector interest in PPPs. ADB has helped broker a number of successful PPP projects.

ADB’s PPP operations are also supported by the Asia Pacific Project Preparation Facility (AP3F) which is managed by OPPP. The AP3F is a multi-donor trust fund supported by generous contributions from the governments of Australia, Canada, and Japan, along with ADB. The trust fund’s role is to help prepare and monitor PPP projects, build government capacity, and create an enabling environment for PPPs.

AP3F assists in preparing commercially feasible projects with private sector engagement and then brings the projects to financing markets. It also provides upstream enabling assistance, such as capacity building and policy reform, as well as ongoing project performance assistance, project monitoring and/or project restructuring.

To support PPPs ADB specifically offers:

• Capacity building, training and knowledge-sharing for governments
• Creating an enabling environment for formulating policy, legal, regulatory, and institutional frameworks for PPPs/li>
• Transaction advisory services, including deal structuring, risk analyses, financial modelling, preparation of bid documents and managing the tender process/li>
• Creating opportunities for financing, in close coordination with ADB’s sovereign and nonsovereign operations.

Transaction Advisory Services (TAS)

ADB's Transaction Advisory Services (TAS) cover the entire range of activities in structuring and placing of PPP projects in the market. ADB’s experienced transaction advisors bring international best practice and cutting-edge skills in the technical, financial, legal, market, environmental and social fields. Getting these aspects right enhances the project's credibility and increases investor confidence.

TAS are most appropriate for:

• Pathfinder or initial transactions, where ADB’s unique knowledge and experience can help resolve financial, legal, or risk issues to create markets.
• Transactions that can benefit from ADB’s reputation for transparency, fairness, and good governance.
• Transactions where ADB’s ability to offer multilateral financing and credit enhancement products would be an advantage.
• Innovative transactions which require bespoke financing, structuring and support.
• Transactions where the perceived country risk is high and there is insufficient local financing.
• Transactions that may benefit from ADB’s ability to catalyze and mobilize financing.

For more information, contact ADB's Office of Public-Private Partnership (OPPP).