It may be a slightly tired saying, but the one about the glass being either half empty or half full nonetheless seemed to apply particularly well to the views being expressed about emerging market public-private partnerships (PPPs) at a recent European Bank for Reconstruction and Development (EBRD) seminar in London.
Those whose mood was perhaps boosted by the warmth of the summer sun streaming through the windows were keen to make the case that knowledge sharing could help budding PPP markets to flourish. By pooling experiences and providing evidence of what works best in practice, everyone would stand to benefit.
Handily, then, the gathering coincided with the launch of the PPP Knowledge Lab – a “curated, comprehensive and easy-to-use online resource on public-private partnerships” which the EBRD helped to develop.
Even among apologists for emerging market PPPs, there was no attempt to gloss over the difficulties of developing the market. However, their outlook was marked by a willingness to tackle any obstacles head-on:
Worried about bankability? Nothing that good project preparation and the development of expertise and leadership within the public sector won’t solve. Bangladesh was held up as an example of what low-income nations can achieve in this respect.
Concerned about country ratings? Don’t obsess about them. Careful risk management is key and you also have tools such as credit enhancement at your disposal.
In fear of host communities taking to social media to express their concerns over social and employment issues related to projects? You should be. But that’s why comprehensive community engagement is critical. There’s nowhere to hide these days, and your strategy should reflect that.
Vexed by political risk? Well yes, aren’t we all? First, accept it as a fact of life. Second, make sure you have committees in place that will facilitate discussion of eventualities that could not have been predicted. Remember that the third P in PPP refers to partnership.
And then you had the case put forward by the sceptics.
Individual arguments included:
*Too many projects are ill-conceived, badly structured and end up being cancelled. A lot of the talk about emerging markets PPPs relates to financing, but the first and foremost priority is genuine commitment to build projects and support them every step of the way.
*Many emerging markets make the mistake of focusing on highly ambitious projects that are too large for the country in question rather than building a track record of delivering modestly sized projects.
*Too many seek private sector involvement either too early in the process or when the private sector should not be involved at all. Some governments have developed an unfortunate reputation for keeping the easy projects for themselves and handing only the difficult ones to the private sector.
*Inconsistent deal flow causes headaches for market participants who, having committed resource, are forced to retreat when a promising initial burst of activity is followed by months or years of relative drought.
Collectively, what the points made above add up to is the sense that emerging market PPPs may simply be more trouble than they’re worth. Yes, you may be able to find ways of circumventing, or at least diluting, some of the more challenging features but – to put it in the most succinct manner possible – why bother?
To ask this question is the cue for a further (rhetorical) question: when will the infrastructure asset class finally get its act together when it comes to performance benchmarking? Therein may lie the key to assessing whether emerging market PPPs really are worth the trouble.