BUILDING SUSTAINABILITY: PARTNERSHIPS AND FINANCE by S. Adrian Ross Senior Programme Officer PEMSEA.
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Transcript of BUILDING SUSTAINABILITY: PARTNERSHIPS AND FINANCE by S. Adrian Ross Senior Programme Officer PEMSEA.
BUILDING BUILDING SUSTAINABILITY: SUSTAINABILITY: PARTNERSHIPS AND PARTNERSHIPS AND FINANCEFINANCE
by by S. Adrian RossS. Adrian Ross
Senior Programme OfficerSenior Programme OfficerPEMSEAPEMSEA
$80 – $180 billion for investment in environmental facilities and services
70% of which is needed for:• Wastewater treatment
• Pollution abatement
• Nutrient reduction
• Water reuse/recycling
The NeedThe Need
Public sector has:
• legal authority
• law-making power
• monitoring and regulatory function
• mandate
…but lacks
• funding
• technical resources
• business skills.
The SituationThe Situation
Private sector has: • experience• expertise• technology• business skills• access to financing…but faces• a conflict between making long-term investments and reporting on short-term financial cycles.
The SituationThe Situation
NGOs have: • an understanding of local needs• ability to work with and influence people,
including poor communities• credibility• organizational and communication skills
…but lack• sufficient and predictable funding• staff and technical capacity• experience in partnership arrangements.
Building SustainabilityBuilding Sustainability
Set within a policy, regulatory and investment environment that is conducive to business participation
An alternative delivery mechanism…not the only one
Principles of multi-sector Principles of multi-sector partnershipspartnerships
Building SustainabilityBuilding Sustainability
Bringing together government, private sector and civil society to better tackle the challenges of providing water and sanitation services, as well as other services to communities
Recognizing two separate but related issues, namely:
Partnership development and sustainability
Project development and sustainability.
Principles of multi-sector Principles of multi-sector partnershipspartnerships
Constraints to Private Sector ParticipationConstraints to Private Sector Participation
Political risk
Regulatory risk
Commercial risk
• Financial risks
• Design fault
• Construction and operational risks
Revenue risk
• Tariff system
• Demand forecast/willingness to pay
Failure to identify or lack of sound projects
Bias against projects in small- and medium-sized urban and rural areas
Public-Private PartnershipsPublic-Private Partnerships
Local Government Local Government UnitsUnits
ICM Framework and ProcessICM Framework and Process
Planning and Implementation Cycle
Planning and Implementation Cycle
The implementation of ICM programs provide local
governments with:
a management framework
institutional arrangements and mechanisms
long-term vision and strategies
action programs addressing priority concerns
local community participatory process
climate for investment.
Political RiskPolitical Risk
Public-Private PartnershipsPublic-Private Partnerships
Local Government Local Government UnitsUnits
Local communities, Local communities, NGOs and POs NGOs and POs
Manila Bay Coastal StrategyOctober 2001
Danang - 2001
PEOPLE’S COMMITTEE OF DANANG CITY
Coastal Strategy ofCoastal Strategy of DanangDanang CityCity
Community awareness/participation
• Information dissemination
• Consultation/communication
• Issues, causes and effects
• Shared vision, roles and responsibilities
Political Risk: Community supportPolitical Risk: Community support
Scoping the Needs/Capacities
• Socioeconomic considerations (services to poor communities)
• Community mobilization – as a partner in the project
• Expectations/benefits to be derived
• Willingness and ability to pay
• Monitoring and evaluation
Revenue Risk: AffordabilityRevenue Risk: Affordability
Revenue Risk: Tariff StructureRevenue Risk: Tariff Structure
Information and education campaign
‘Full-cost’ pricingpublic’s attitude regarding ‘public services’
Implications on the poor and disadvantaged sectors of the population
Efficiency of existing bureaucracies with regard to collection of fees and taxes
Increasing block structureLifeline price for the poor
Strengthen local governance
Public-Private PartnershipsPublic-Private Partnerships
Local Government Local Government UnitsUnits
National Government National Government and in-country and in-country contractors, suppliers, contractors, suppliers, financial institutions, financial institutions, banks and investorsbanks and investors
Local communities, Local communities, NGOs and POsNGOs and POs
Delineation of responsibility:
• authority of local governments in the investment
area
• mandate local governments to form partnerships,
raise funds and impose tariffs for environmental
facilities and services
• stipulate standards against which performance can
be measured.
Regulatory RiskRegulatory Risk
Capacity building to fully implement delineated responsibilities by strengthening:
• technical/scientific skills
• regulatory and economic instruments
• monitoring and evaluation
• enforcement
Regulatory RiskRegulatory Risk
Commercial RiskCommercial Risk
Financial risk
• Exchange rate fluctuations
• High interest rates
• High inflation rates
Construction and operational risk
Start-up delaysConstruction and operating cost overruns & delays
Actions
• Access to domestic funds
• Innovative financial structures
• Financial commitment
• Performance standards
• Licensing/permit approvals
Public-Private PartnershipsPublic-Private Partnerships
Local Government Local Government UnitsUnits
International operating International operating companies, investors companies, investors financial institutions, financial institutions, development agencies development agencies and donorsand donors
Local communities, Local communities, NGOs and POsNGOs and POs
National Government National Government and in-country and in-country contractors, suppliers, contractors, suppliers, financial institutions, financial institutions, banks and investorsbanks and investors
Capacity building is a major bridge for overcoming barriers to private sector participation in environmental investments.
Strengthening:
• capabilities in local governance (ICM)
• project development and management
• technical/scientific skills and support
• regulatory and economic instruments
• financial management
• monitoring and evaluation
• enforcement
Commercial RiskCommercial Risk
Financial Risk• accessibility to multiple
sources of financing
• project portfolio that is affordable, self-sustaining and attractive to private sector
ActionsActions• Creation of
innovative financial mechanism to meet the needs and capacities of local governments and
their partners.
Commercial RiskCommercial Risk
Public-Private PartnershipsPublic-Private Partnerships
Local Government Local Government UnitsUnits
Public-Private Public-Private PartnershipPartnership
(PPP)(PPP)International operating International operating companies, investors companies, investors financial institutions, financial institutions, development agencies development agencies and donorsand donors
Local communities, Local communities, NGOs and POsNGOs and POs
National Government National Government and in-country and in-country contractors, suppliers, contractors, suppliers, financial institutions, financial institutions, banks and investorsbanks and investors
PEMSEA’s Guide to Environmental Investments
Is this a good time for environmental investments?
5 ICM sites and 2 hotspots:
• more than 40 investment opportunities identified
• priority environmental concerns screened
• 15 projects proceeding through pre-feasibility studies, lead by local stakeholders
• more than $600 million in capital investments
• local governments and local stakeholders providing concrete commitments
Is this a good time for environmental investments?
Contingent valuation surveys:
• overall willingness to pay for environmental services
• correlates with household income
• <1% of monthly household income
• ability to pay is a factor, as is education and age of respondent
• unwillingness to pay <1% of respondents
What about the private sector?
Challenges:
• Trust, transparency and confidence in the process and the other ‘partners’
• Goals, expectations, verification of viability
• Roles and responsibilities
• Governance structure of partnership
• Communication
What are the critical features?
Critical features:
• leadership
• concrete commitments of local government and local stakeholders
• private sector awareness and confidence
• innovative financial mechanism accessible by local governments and their partners