The Philippines received the largest funding from the Asian Development Bank (ADB) for Public Private Partnership (PPP) projects, according to its Independent Evaluation Department (IED).
In the report titled ADB’s Support to Public–Private Partnerships 2009 to 2018, the IED said the ADB approved $22.1 billion of PPP interventions during the review period. These interventions were composed of the following: $10.8 billion public loans; $11.1 billion in private sector facilities; and, $223 million in 126 technical assistance with significant PPP elements.
Five countries accounted for 65 percent of total PPP-related project approvals during 2009 to 2018. These countries are: India, which accounted for 21.4 percent; Indonesia, 14.3 percent; China, 13.8; Bangladesh, 7.9 percent; and, the Philippines, 7.8 percent.
“The overall investment climate appears to have improved in Indonesia, Lao PDR, Malaysia, and the Philippines since 2010 although the PPP environment has probably only improved in Indonesia and Malaysia according to the trends in index rankings,” the report stated.
“By contrast, the investment climate appears to have become less attractive in Thailand and Viet Nam. Indonesia, Malaysia, the Philippines and Thailand have investment-grade ratings,” it added.
The report also stated that by region, two regions accounted for the bulk of the Manila-based multilateral development bank’s financing. These are Southeast Asia with 33.6 percent and South Asia with 31.1 percent.
The shares by sector were: energy, which accounted for 41 percent followed by finance at 14 percent; water and other urban infrastructure and services, 14 percent; public sector management, nine percent; and, transport, eight percent.
The IED said that while it finds ADB’s PPP financing in the Philippines as “satisfactory,” the data showed that private sector investment in infrastructure could decline.
The report noted that current private and future private investment is estimated to be $12 billion in 2015 prices. The annual average private sector participation in infrastructure is only $2.6 billion in current prices between 2016 and 2018.
“Even allowing for pricing discrepancies, there is evidence of potential for a substantial shortfall in the expected private sector investment,” the report stated.
The IED said that while ADB’s support for PPPs has delivered positive developmental outcomes, the support for the long-term enabling environment for PPPs was not able to achieve the much-needed change to the crowd in the private sector and was not well coordinated with downstream project development and financing activities.
In a statement, the IED said the lack of value-for-money analysis, high costs compared to benefits, high associated risk of projects, and minimal advocacy for linked sectoral and state-owned enterprise reform have undermined ADB’s contributions.
“To be fully responsive to the needs of governments or private sector, ADB needs to proactively engage with governments at an early stage of infrastructure planning for the development of local capacity to screen and select projects using cost-benefit and value-for-money analyses,” IED Director General Marvin Taylor-Dormond was quoted in a statement as saying. “It needs to provide a strong and concerted institutional response to address the scale and urgency of the infrastructure and social services provision gaps in Asia and the Pacific.”
The report also recommended ADB to prepare a PPP directional guidance paper, strategically engage with governments at an early stage of project development, and seek to expand the use and scale of available risk mitigation products.
The IED also said ADB needs to provide political risk and partial credit guarantees to facilitate private sector investment in PPP infrastructure projects, and improve its monitoring and evaluation systems for PPP transactions.
The report also recommends ADB to separate its PPP Thematic Group Secretariat from the Office of PPP and assign the management of the Asia Pacific project preparation facility and other key donor and institutional relationships in support of PPPs to the newly created PPP thematic group secretariat to improve the coordination of ADB’s engagement with PPPs for delivering quality infrastructure outcomes.