AID EFFECTIVENESS AND PUBLIC- PRIVATE PARTNERSHIP: THAILANDS DEVELOPMENT ASSISTANCE IN LAO PDR AND CAMBODIA SIRIPORN WAJJWALKU THAMMASAT UNIVERSITY 2014.

AID EFFECTIVENESS AND PUBLIC-PRIVATE PARTNERSHIP: THAILAND’S DEVELOPMENT ASSISTANCE IN LAO PDR AND CAMBODIA

SIRIPORN WAJJWALKU

THAMMASAT UNIVERSITY

2014 AUSTRALASIAN AID AND

INTERNATIONAL DEVELOPMENT POLICY WORKSHOP

13-14 FEBRUARY, 2014

CANBERRA, AUSTRALIA

THAILAND’S INTERNATIONAL DEVELOPMENT COOPERATION POLICY AND INSTITUTIONS

Thailand as an emerging donor

1. Policy of being donor since 2003

2. Institutions

- Thailand International Development Cooperation Agency (TICA)

- The Neighboring Countries Economic Development

Agency (NEDA)

OUTLINE OF THE PRESENTATION

1. Introduction

2. NEDA’s projects in Lao PDR and Cambodia: Some observations

3. NEDA and involvement of private sector in aid process

4. NEDA and PPPs: The possibility?

INTRODUCTION

The research project titled “Institutional Arrangement and Aid Effectiveness: The relations between government agency and private sector”

• to examine NEDA’s existing aid process in Lao PDR and Cambodia focusing on the involvement of for-profit private sector

• to explore the possibility to promote PPPs as a tool to involve for-profit private sector in aid process

NEDA’S PROJECTS IN LAO PDR AND CAMBODIA

1. Amount of projects

1. Lao PDR: 6 projects

2. Cambodia: 1 project

2. Sector : infrastructure

1. Road

2. Railway

3. Airport

4. Drainage pipeline

3. Type of aid: tied loan

4. Modality : bilateral and demand driven

NEDA PROJECTS IN LAOS (1) Projects Consulting Companies and

their nationality Construction Companies and their nationality

Responsible institutions in the recipient countries

Drainage pipeline construction and T2 road improvement Projects in Vientiane, Laos PDR

TEAM Consulting Engineering and Management Co., Ltd. (Thai)

Thaiwat Engineering Co., Ltd. (Thai)

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Railroad construction project from Nong Khai Province, Northeastern Thailand, to Ban Thanaleng in Laos, PDR

SPL Consultant Group1. STS Engineering Consultant

Co., Ltd.2. Pacific Consultant

International (Thailand) Co., Ltd. and

3. Lao Transport Engineering Consult Company

STS Engineering Consultant Co., Ltd. Is the main company.

Sermsageung Construction Co., Ltd. (Thai)

Lao Railway Authority: LRA

The Road construction project from Chiang Rai Province-Kunming, through Laos PDR (R3)

Southeast Asia Technology Co., Ltd. (SEATEC) in association with Pacific Consultant International (Thailand) Co., Ltd. (PCIT)

Phrae Thamrongwit Co., Ltd. (Thai) and Namtha Road and Bridge Construction Co., Ltd.

Ministry of Public Works and Transportation (Laos) 

NEDA PROJECTS IN LAOS (2)

Projects Consulting Companies and their nationality

Construction Companies and their nationality

Responsible institutions in the recipient countries

Pakse Airport Improvement Project

Department of Civil Aviation (Thailand)

Italian-Thai Development Public Company Limited (Thai)

Department of Civil Aviation (Laos)

The Road construction project from Houi Kon / Muang Nguen to Pak Beng in Laos

Asian Engineering Consultants Cooperation Limited (AEC) (Thai)

Phrae Thamrongwit Co., Ltd. (Thai) and Namtha Road and Bridge Construction Co., Ltd.

Ministry of Finance (Laos) and Ministry of Public Works and Transportation (Department of Highways) (Laos)

The Road improvement project in Vientiane Capital to serve the 9th ASEAM Summit

TEAM Consulting Engineering and Management Co., Ltd. (Thai)

Thaiwat Engineering Co., Ltd. (Thai)

Ministry of Finance (Laos) and Vientiane Capital

NEDA PROJECT IN CAMBODIAProjects Consulting Companies and

their nationalityConstruction Companies and their nationality

Responsible institutions in the recipient countries

Koh Kong – Sre Ambel Road Improvement Project (R48)

TEAM Consulting Engineering and Management Co., Ltd. (Thai)And Planning and Research Consultant Co., Ltd. (Thai)

Sahakarn Wisavakorn Co., Ltd. (Thai)

Ministry of Public Works and Transportation (Cambodia)

NEDA’S PROJECT IN LAO PDR AND CAMBODIA: BUDGET

The name of the projects The amount of budget for consultancy

The amount of budget for construction

The total amount of budget

Drainage pipeline construction and T2 road improvement Projects in Vientiane, Laos PDR

THB 7,489,700 THB 150,510,300 THB 158 million

Railroad construction project from Nong Khai Province, Northeastern Thailand, to Ban Thanaleng in Laos, PDR

THB 9 million THB 186 million THB 195 million

The Road construction project from Chiang Rai Province-Kunming, through Laos PDR (R3)

THB 110 million THB 910 million THB 1,020 million

Pakse Airport Improvement Project THB 8 million THB 292 million THB 300 million

The Road construction project from Houi Kon / Muang Nguen to Pak Beng in Laos

THB 30 million THB 740 million THB 770 million

The Road improvement project in Vientiane Capital to serve the 9th ASEAM Summit

THB 3.7 million THB 185 million THB 188.7 million

Koh Kong – Sre Ambel Road Improvement Project (R48)

THB 17 million THB 485 million THB 502 million

Note: The exchange rate is $ 1 = 33.0 Bht (as of 10/02/14)

NEDA’S PROJECTS: PROPORTION OF BUDGET SPENT FOR THAI GOODS AND SERVICES (CONTRACTOR FOR CONSTRUCTION)

Projects Proportion of budget (%)Drainage pipeline construction and T2 road improvement Projects in Vientiane, Laos PDR

80.63%

Railroad construction project from Nong Khai Province, Northeastern Thailand, to Ban Thanaleng in Laos, PDR 65%The Road construction project from Chiang Rai Province-Kunming, through Laos PDR (R3) 93%Pakse Airport Improvement Project 84.80%The Road construction project from Houi Kon / Muang Nguen to Pak Beng in Laos 76%The Road improvement project in Vientiane Capital to serve the 9th ASEAM Summit 65.04%Koh Kong – Sre Ambel Road Improvement Project (R48) 58%

NEDA’S PROJECTS: PROPORTION OF BUDGET SPENT FOR THAI GOODS AND SERVICES (CONTRACTOR FOR CONSULTANCY)

Projects Proportion of budget (%)Drainage pipeline construction and T2 road improvement Projects in Vientiane, Laos PDR

70%

Railroad construction project from Nong Khai Province, Northeastern Thailand, to Ban Thanaleng in Laos, PDR Unavailable The Road construction project from Chiang Rai Province-Kunming, through Laos PDR (R3) 90%Pakse Airport Improvement Project 100%The Road construction project from Houi Kon / Muang Nguen to Pak Beng in Laos 61%The Road improvement project in Vientiane Capital to serve the 9th ASEAM Summit 71%Koh Kong – Sre Ambel Road Improvement Project (R48) 100%

NEDA’S PROJECTS AND OBSERVATIONS

1. Purposes: economic cooperation, mutual benefits, and cordial relations

2. Size: small-scale in terms of budget and project size

3. Sector: infrastructure (not public services)

4. Highly concentration in terms of private sector (company) involvement

5. Highly economic beneficial to donor in terms of consultancy and construction

6. Highly dependence on donor in terms of consultancy and construction

NEDA’S AID PROCESS AND CHALLENGES

1. Unbalance between demand and supply bigger demand

2. Not enough incentive for private sector due to non-economic scale of project in terms of budget and size

3. Lack of coordination between public-private sectors in aid process

4. Limited capacity of private sector in developing partners, particularly the procurement

PROPOSED ALTERNATIVE

NEDA’s main challenges

1. Budget size

2. Efficiency and Transparency

Proposed alternative

- the involvement of for-profit private sector

- the promotion of PPPs

“PPP” DEFINED BY INTERNATIONAL ORGANIZATION(A POLICY GUIDELINE)

Organization for Economic Co-operation and Development (OECD)

Public-Private Partnerships (PPPs) are long term agreements between the government and a private partner whereby the private partner delivers and funds public services using a capital asset, sharing the associated risks. PPPs may deliver public services both with regards to infrastructure assets (such as bridges, roads) and social assets (such as hospitals, utilities, prisons). 

The interest in PPPs has been growing in recent years and the need for fiscal restraint in most OECD Member countries is expected to further increase their usage. This presents policy makers with particular challenges that should be met with prudent institutional answers.

“PPP” DEFINED BY A MULTILATERAL DONOR

Asian Development Bank (ADB)

The term “public-private partnership” describes a range of possible relationships among public and private entities in the context of infrastructure and other services. Other terms used for this type of activity include private sector participation (PSP) and privatization. While the three terms have often been used interchangeably, there are differences. PPPs can follow a variety of structures and contractual formats. However, all PPPs incorporate three key characteristics:

• A contractual agreement defining the roles and responsibilities of the parties

• Sensible risk-sharing among the public and the private sector partner, and

• Financial rewards to the private party commensurate with the achievement of pre-specified outputs.

“PPP” DEFINED BY BILATERAL DONOR

Japan International Cooperation Agency (JICA)

Utilizing the private sector for the provision of public services, PPP is a method of implementing programs through the coordination of the public and private sectors. It includes a wide range of schemes which are tailored to the level of participation of the private business, ranging from a simple consignment of a project to build-operate-transfer (BOT) and full privatization. “PPP infrastructure project” refers to infrastructure projects implemented through PPP.

“PPP” DEFINED BY BILATERAL DONOR

 AusAID

The term describes a range of possible relationships among public and private entities in the context of infrastructure and other services. The public partners in a public-private partnership are government entities, including ministries, departments, municipalities, or state-owned enterprises. The private partners can be local or international and may include businesses or investors with technical or financial expertise relevant to the project. The government’s contribution to a public-private partnership may take the form of capital for investment (available through tax revenue), a transfer of assets, or other commitments or in-kind contributions that support the partnership. The government also provides social responsibility, environmental awareness, local knowledge, and an ability to mobilize political support. The private sector’s role in the partnership is to make use of its expertise in commerce, management, operations, and innovation to run the business efficiently. The private partner may also contribute investment capital depending on the form of contact.

MERITS OF PPP

1. Utilization of the private sector for the provision of public services enlargement of budget size

2. For-profit private sector’s contribution to aid process

1. Providers of goods and services

2. Implementers or contractors of aid projects

3. Co-investors of aid projects

Private Sector = Partner for development

CONDITIONS FOR FOR-PROFIT PRIVATE SECTOR INVOLVEMENT

1. Environment that makes private sector to engage in aid process

1. Rule of law

2. Effective public sector

3. Tax system

4. Open market and fair competition

2. Incentives for for-profit private sector to engage in aid process

1. Business opportunities

2. Tapping into emerging markets

NEDA AND PPP: THE POSSIBILITY ?

NEDA’s Strategy

NEDA’s strategic plan 2012-2014

1. Integration between public – private sectors within the country, and with those of the recipient countries

2. Promotion of private sector (for-profit private sector and private organization-civil society) involvement

3. Less dependence on national budget

4. Alternative sources of budget

THANK YOU