General Knowledge
Michel Noel, W. Jan Brzeski
The World Bank
Published in
Submitted by
Olim Latipov
Related theme(s)
Finances & Economics
Eastern Europe, Caucasus, and Central Asia (EECCA)

Mobilizing Private Finance for Local Infrastructure in Europe and Central Asia: An Alternative Public Private Partnership Framework

In recent years, the countries of Europe and Central Asia (ECA) have experienced a marked decline in investments by international private operators/investors in local infrastructure—much in line with the trend observed in other emerging markets. This decline has been particularly significant in the local water and energy sectors. Private equity funds have generally not stepped in to fill the growing investment gap and, in the cases in which they have, they have tended to concentrate on a small number of large transactions, in particular in the telecom sector at the national level.

The lack of sufficient public and private sector investments in local infrastructure in ECA is unsustainable for central and local governments given the peculiar nature of local utility services. In a political economic perspective, these are considered “life supporting services” and every government has to treat their provision as imperative. This political necessity means that there is a prevalent need to identify solutions and develop approaches that can improve the quality and efficiency of local infrastructure services for the population at large.

The programmatic approach would be initiated through a PPI assessment. The PPI assessment would take as a point of departure an in-depth survey of investors’ past experiences and expectations regarding PPI in the country. The survey would encompass traditional operators/investors, private equity investors, and institutional investors (insurance companies, pension funds, and mutual funds), both domestic and international. Based on the results of the investor survey, the assessment would identify the key impediments to private investor participation in local infrastructure transactions in the country, and would identify the instruments that are on the critical path to remove these impediments within the particular macroeconomic, fiscal, contract enforcement/dispute resolution framework, institutional and poverty incidence characteristics of the country. Based on this analysis, the PPI assessment would propose a strategy for the development of the alternative PPP framework in the country.

Following up on the PPI assessment, the Government would establish a coordination unit to manage the development and monitoring of the various components of the program. A range of public and private entities would implement each program component. Private sponsors and fund managers would implement the LIIT, with possible minority participation by the Government. The PRI/PRG would be implemented by the Ministry of Finance. The OBS schemes would be implemented by Technical Ministries under the guidance of the Ministry of Finance. Finally, the COTAM would be implemented by an independent entity with representation from various PPP stakeholders.