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Public-Private Partnerships in Financing and Providing Infrastructure

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  1. Public-Private Partnerships in Financing and Providing Infrastructure Philippe Maystadt President, European Investment Bank Presentation at the Bridge Forum Dialogue Luxembourg, 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 % of GDP EU US Source: OECD

  4. Public Investment in Large EU Countries % of GDP Source: OECD

  5. Public Investment in Smaller EU Countries % of GDP Source: OECD

  6. Public Investment in Cohesion Countries % of GDP Source: OECD

  7. Public Capital Stock in Large EU Countries 1970 = 100 Source: Kamps (2004)

  8. Public Capital Stock in Smaller EU Countries 1970 = 100 Source: Kamps (2004)

  9. Public Capital Stock in Cohesion Countries 1970 = 100 Source: Kamps (2004)

  10. “Net Worth”of Governments 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 Signed value of PPP contracts (stock) to public investment (flow), average 1995-2003 (%) Source: ProjectWare, HM Treasury, OECD

  13. Geographical Distribution of PPPs Signed value of PPP contracts, 1995-2003 Source:ProjectWare, HM Treasury

  14. Sectoral Distribution of PPPs, Non-UK Signed value of PPP contracts, 1995-2003 Source:ProjectWare

  15. Sectoral Distribution of PPPs, UK Signed value of PPP contracts, 1987-2004 Source:HM Treasury

  16. Size Distribution of PPP Projects Number of projects by size (mill €) 494 Source: ProjectWare, HM Treasury

  17. Pros: higher cost efficiency from... Economic Pros and Cons of PPPs • Private ownership of infrastructure asset • Bundling and life-cycle planning • Sharing of risks and rewards

  18. Cons of PPPs: Economic Pros and Cons of PPPs • Cost savings may reduce service quality • Transaction costs • Institutional and administrative capacity requirements

  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 process • Appropriateness of risk sharing • Public sector’s capacity to manage

  21. EIB and PPPs Sectoral distribution of EIB’s PPP portfolio Source:EIB

  22. EIB and PPPs Geographical distribution of EIB’s PPP portfolio Source:EIB

  23. Public-Private Partnerships in Financing and Providing Infrastructure Philippe Maystadt President, European Investment Bank Presentation at the Bridge Forum Dialogue Luxembourg, 20 January 2005