Public-Private Partnerships in Financing and Providing ...

EuropeanInvestmentBank

Public-Private Partnerships in Financing and Providing Infrastructure

Philippe MaystadtPresident, European Investment Bank

Presentation at the Bridge Forum DialogueLuxembourg, 20 January 2005

2

Contents

How much has public investment declined?

Have public capital stocks been eroded?

Has lower public investment been offset by PPPs?

Economic pros and cons of PPPs

3

Public Investment in EU and US

2

3

4

5

1971 1981 1991 2001

% of GDP

Source: OECD

EU

US

4

Public Investment in Large EU Countries

1

2

3

4

5

6

1970 1980 1990 2000

France Germany Italy UK

% of GDP

Source: OECD

5

Public Investment in Smaller EU Countries

1

2

3

4

5

6

1970 1980 1990 2000

Austria BelgiumDenmark FinlandNetherlands Sweden

% of GDP

Source: OECD

6

Public Investment in Cohesion Countries

1

2

3

4

5

6

1970 1980 1990 2000

Greece IrelandPortugal Spain

% of GDP

Source: OECD

7

Public Capital Stock in Large EU Countries

100

120

140

160

180

200

220

240

1970 1980 1990 2000

France Germany Italy UK

1970 = 100

Source: Kamps (2004)

8

Public Capital Stock in Smaller EU Countries

100

150

200

250

300

350

1970 1980 1990 2000

Austria BelgiumDenmark FinlandNetherlands Sweden

1970 = 100

Source: Kamps (2004)

9

Public Capital Stock in Cohesion Countries

100150200250300350400450500550

1970 1980 1990 2000

Greece IrelandPortugal Spain

1970 = 100

Source: Kamps (2004)

10

“Net Worth”of Governments

-80

-60

-40

-20

0

20

40

60

AT BE DK FI FR DE GR IR IT NL PT SP SW UK

1981 2001

Public capital less public debt (% of GDP)

Source:Kamps (2004), OECD

11

Characteristics of PPPs

Serves a public policy objective

Long-term arrangement

Private finance and ownership of asset

Risk and rewards shared

12

PPPs in Relation to Public Investment

0

5

10

15

20

25

30

35

LA GR IR IT NL PT SP UK

Signed value of PPP contracts (stock) to public investment (flow), average 1995-2003 (%)

Source: ProjectWare, HM Treasury, OECD

13

Geographical Distribution of PPPs

23%

48%

UK othersUK (LU)PortugalItalyGreeceSpainNetherlandsOthers

Signed value of PPP contracts, 1995-2003

Source:ProjectWare, HM Treasury

14

Sectoral Distribution of PPPs, Non-UK

Transport Water and SewageDefenceEducationHospitalOthers

Signed value of PPP contracts, 1995-2003

Source:ProjectWare

15

Sectoral Distribution of PPPs, UK

8%

11%

9%

7%

37%

12%

CTRLLondon Undergroundother transporthealthdefenceeducationpolice and prisonsothers

Signed value of PPP contracts, 1987-2004

Source:HM Treasury

16

Size Distribution of PPP Projects

0

20

40

60

80

100

0-75 75-150 150-750 750-1500 >1500

Non-UK UK

Number of projects by size (mill €)

Source: ProjectWare, HM Treasury

494

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Pros: higher cost efficiency from...

Private ownership of infrastructure asset

Bundling and life-cycle planning

Sharing of risks and rewards

Economic Pros and Cons of PPPs

18

Cost savings may reduce service quality

Transaction costs

Institutional and administrative capacity requirements

Economic Pros and Cons of PPPs

Cons of PPPs:

19

Macroeconomics of PPPs

Accounting treatment

Do PPPs boost economic growth?

20

Experience with PPPs

Construction on-time and on-budget

High and underestimated bidding and negotiation costs

Key success factors:Competitiveness of bidding processAppropriateness of risk sharingPublic sector’s capacity to manage

21

EIB and PPPs

6%

7%

17%

39%

22%

RoadsTunnels, bridgesUrban trans., devel.AirportsRailwaySociasl infrastructureWaterEnergy

Source:EIB

Sectoral distribution of EIB’s PPP portfolio

22

EIB and PPPs

24%

19%

UKPortugalSpainGreeceDenmarkGermanyNetherlandsPolandSwedenIrelandAustria

Source:EIB

Geographical distribution of EIB’s PPP portfolio

EuropeanInvestmentBank

Public-Private Partnerships in Financing and Providing Infrastructure

Philippe MaystadtPresident, European Investment Bank

Presentation at the Bridge Forum DialogueLuxembourg, 20 January 2005