Transcript Vincent Piron_Paris 2014

Public-Private Partnership
Usefulness and socio economic benefits
Confederation of International Contractors’ Association
Paris
November, 17-18, 2014
Presentation by Vincent Piron (PIRON Consulting)
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GENERAL ECONOMICS
• Global GDP worldwide is growing slowly
• In OECD countries it is growing more slowly than in Asia
• But the GDP is not a adequate parameter:
•
•
•
•
Ex: USA, where GDP increases and median salary decreases
Ex: China, where pollutuion and housing are masking reality
Ex: the global problem of urban development
Ex: the environmental question, sea level in cities nearby seas
• Interest rates cannot anymore decrease because they
are around zero
• So we have now a new model to develop
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WHERE THE MONEY FOR INVESTMENT
MAY COME FROM
• It is usually said that the States have no money to invest
in housing and infrastructures (I hear this since 45 years)
• But it is a matter of allocation of money because money
is there, it has been printed by the central banks
• The Juncker Plan (300 billion €) is just a reallocation of
existing budgets, and further support from EIB and
private sector. In USA it is the same music.
• But what is new is the idea of coordination and
profitability of investment
• « further support » means « profitable investment » in
order to reimburse the « additional debt»
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WHICH TYPE OF INVESTMENT
• Digital economy, Energy, Transport Infrastructure
• Social infrastructure and environment
• These last two items practically mean « housing » and
organisation of urban development
• Digital economy and Energy are paying the investment
directly through invoicing directly the final client
• For Transport Infrastructure and housing the final client
will never repay directly the investment and the State
should provide support.
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ECONOMIC INDEXES VERSUS TRAFFIC
Household
consumption
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Manufactured
goods
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GDP
5
HOW TO PROVIDE SUPPORT
• There are two ways to evaluate the profitablility of a
project: financial and socio-economical
• Financial profitability is a clear and well known notion
• Socio-economical profitability means that benefits to be
considered are not only monetary benefits but also
wellfare, safety, social amenities, better housing,…
• These socio-economic benefits generate indirect GDP
growth,
• In there is GDP growth, there is additional renevues from
taxes and thus increase of budget
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WHICH INFRASTRUCTURE FOR WHICH
SERVICE
• Transportation
• Water supply
• Waste management
• District heating
• Telecommunications
• Education
• Health
• Recreation
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• Roads, airports, rail …
• Dams, reservoirs, plants
• Incinerator compost u.
• Plant, network
• Tel exchanges & lignes
• Schools, University
• Hospitals
• Stadia, theatres …
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CONDITION TO HAVE WELL PREPARED
PROJECTS (CONCESSIONS AND PFI)
• In order to develop this process:
• The States have to choose the relevant projects
• The States have to be convinced of the fact that additional
revenues « in cash » for their budget will come from the
implementation of the project
• Then they will accept to provide grants and subventions, or
guaranties for loans
• To help to develop this virtuous process, CICA is working
since many years on documents describing the way to
select, prepare and implement good projects
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THE VARIOUS ASPECTS OF PPP’S
• Financial : the most evident and the most spoken of.
• Accounting : difficult, changing and conditioning the very existence
of the PPP
• Legal : the most complicated, and often the main issue
• Technical : assumed to be easily solved by contractors
• Economical : supposed to be solved previously by the grantor, but
never really discussed and checked
• Political : has always been managed as a matter of feeling and
seldom with a scientific approach
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TOO MUCH IS TOO MUCH
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PPP’S DEFINITION AND EVALUATION
• « PPP » does not cover any legal reality.
• Existence of 2 families of contracts (typology):
• Concessions:
• More (concession contract) or less (lease, affermage or service
contracts) investment is made by the private party
• The private operator bears demand and industrial risks
• PFIs
• Investment is made by the private party
• But he does not bear the demand risk. It bears only an availability risk
for which he receives a guaranteed revenue.
• In fact, families are not entirely separate. There is a
Continuum of contractual provisions.
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PPP’S DEFINITION AND EVALUATION
The vertical and horizontal continuum of PPPs
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STAKEHOLDERS
AND NOTION OF NON WRITTEN AGREEMENTS
POPULATION
FINAL CUSTOMER/END
USER
CONCESSIONGRANTING
AUTHORITY
(State, regional/local
authority)
(Motorists, truckers, airlines
companies, railway companies,
airline passengers)
1
2
TAXES
SHAREHOLDERS
Concessionaire
Ministry of Finance
3
7
Purely-financial investors
Project builders investors
4
LENDERS
Allocation of funds
5
CONTRACTOR
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Construction company
6
OPERATOR
13
WHO PAYS, UNDER WHICH STRUCTURE?
Administrative and Contractual
Structure
14
Funding
Toll only (higher
rate)
Taxes only
Taxes + Toll
Public Authority operates by
itself
Traditional
procurement
Traditional
procurement
Contracted out to a public
company
Traditional
procurement
Concession
Concession
Contracted out to a private
company
PFI, Contrat de
Partenariat
Concession or PFI or C.
de partenariat
Concession
REVENUES FROM SOCIO-ECONOMICS
• Revenue generated by the utility of the project
• An economically viable construction will generate activity and
therefore fund flows. Such flows will be split between the privatesector actors, commercial or industrial companies, and the publicsector actors.
• Recent research, notably that directed by Professor Rémy
Prud’homme have shown it to be possible to estimate budget
revenue for the State, which collects taxes and social contributions,
at 20% of the annual surplus.
• In the case of local government in France this percentage falls to
approximately 3%.
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ROLE OF A REAL TOLL POLICY
• On a real tolled infrastructure there is a strong interaction between
utility and financing : the toll policy
• Maximizing socio economic benefits is achieved by a low toll level
• This eases the political problem created by the real toll
• But the optimum of revenues for the concessionaire is reached with a
rather high toll level
• This minimizes the grant that is requested from the authorities but
decreases the socio economic benefits and makes more difficult the
political acceptability of the toll
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HOUSEHOLD INCOME
Distribution of household income Whole of France
(1994 figures)
100
90
Distribution
80
70
Distribution
60
Accumulative total (log
normal model)
50
Cumulated total (INSEE
figures)
40
30
20
10
0
0
100
200
300
400
500
600
700
800
Annual income in FF. (x 1000) for 1994
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COST / VOLUME RELATIONSHIP
Relation entre Trafic et Coût généralisé
30
Generalized costs in euros
Coût généralisé en euros
25
20
Surplus
Ci
A
15
10
Série1
Cp
B
Bitterness
Cp'
B'
M
5
Toll proceeds
Cg
D
E
0
Ti
0
5
C
Tp
10
15
Tp'
20
Tg
25
30
35
Trafic journalier en milliers
Daily traffic in thousands
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ACTIONS BY CICA
• Developing with UNECE a methodology to prepare and
implement efficient projects
• Create a « center of excellence » for training decision
makers to these rather complicated process of project
evaluation, selection, tender and implementation
• Studies with economists about the link between socioeconomic development linked to a new project and
budgetary resources
• Consider how to developing maintenance of the works
already build(main part of the activity now).
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EXCELLENCE CENTER
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