Recommendation 4: The World Bank Group should systematically integrate efforts to assist governments in (i) making strategic decisions with regard to the level and nature of private sector participation in infrastructure and social service provision and (ii) assessing fiscal implications, including any fiscal liabilities associated with PPPs.
IEG's analysis of the country strategies of 45 countries did not reveal much evidence that the Bank Group had provided advice on whether private sector involvement (in the form of a PPP) was the best option, given the relevant country level circumstances. The nine country cases
indicate that the World Bank Group's approach to PPPs has been based on the assumption that involving the private sector is a good thing.
Although careful analysis of a transaction's
economics, feasibility, and sustainability is of
course encouraged, public sector comparators --
systematically comparing PPP's against the
public sector for value for money to justify private sector involvement- were not a part of the World Bank Group activities.
Systematic approaches to the client government's capacity to assess the fiscal implications of PPPs were rarely found during FY02-12. IEG's portfolio review indicates that although World Bank Group projects tend to give attention to ensuring adequate risk sharing, downstream contingent liabilities are rarely fully quantified at the project level. Recent efforts to systematize
and introduce a framework for assessing fiscal
implications of PPPs are a valuable contribution, but it is unclear how they would be implemented Bank Group-wide.
WB: Agrees. As the evaluation mentions in the overview, the WBG is already increasing efforts to assist countries to develop PPP project pipelines. These efforts include the development of systematic tools capable of integrating various pieces of data into a comprehensive tool for decision makers. Moreover, these tools consider the fiscal space available for infrastructure investments.
The future PPP CCSA is expected to provide analysis, guidance and tools to strengthen the groups' capacity to support client countries decision making about partnering with the private sector, including assessing potential fiscal liabilities associated with PPPs.
In addition, if the Bank Group is to set up a Global Infrastructure Facility (GIF) or Platform focused on PPPs. The GIF will be managed from the PPP-CCSA which will work to establish criteria for project selection and technical support from the Bank, upstream, in project preparation and for financial arranging of investments.
WB Action 4.A: WBG will develop a set of tools to help inform client decisions on PPPs, including when to use PPPs rather than public procurement.
Indicator: Set of WBG tools that will inform strategic decisions on when to use PPPs and prioritizing projects.
Baseline: Currently ad hoc use of different tools and approaches to guide strategy on PPPs.
Target: Develop the following tools -
(a) Assessment of country readiness for PPPs that will look at the enabling and policy framework, fiscal issues, project specific issues, using a set of pre-identified questions to evaluate country and project readiness.
(b) Project Prioritization that will help clients identify and prioritize infrastructure projects against a given countryï¾s national objectives; help the central government (typically the Ministry of finance Or a Ministry of Planning), preï¾select project proposals received from sector agencies and other tiers of government.
(c) PPP Options and choice of modality to help WBG staff and clients decide implementation option for projects (PPP vs public, taking into account a range of public-private options).
(d) Managing Fiscal Costs and Risks that will support project level assessment of fiscal costs and risks of a project.
Timeline: Tools developed and piloted in FY15
Tools used in at least five engagements each in FY16 and mainstreamed by 2017.
WB Action 4.B: WBG build partnerships for improved PPP and infrastructure delivery via Global Infrastructure Facility
Indicator: Establishment and operationalization of the GIF.
Target: GIF fully operational and at least two projects supported.
Timeline: GIF operational FY15
Implementation of this recommendations has progress to a large extent with respect to all targets. Further mainstreaming of the practice to manage fiscal costs and risks can be expected to progress in the next FY which would lead to completion of the implementation.
Action 4.A (a) Tool 1: PPP Country Readiness Diagnostic (CRD) was developed and finalized in the first quarter of FY16. Piloting was immediately initiated in Jordan, Baluchistan (Pakistan), Lebanon, Kazakhstan, Rwanda, Uganda and Sri Lanka. Jordan CRD is finalized and submitted to the client. Diagnostics were substantially complete for Baluchistan and Kazakhstan by the end of FY16. Lebanon, Rwanda and Uganda have initial drafts being reviewed.
(b) Tool 2: A working paper on the Infrastructure Prioritization Framework (IPF) was published in the World Bank Working Paper Series. The paper includes results for Panama and Vietnam in two sectors: Transport and Water ; Sanitation. In addition, two more pilot exercises in Chile and Argentina are currently underway. Final results are expected by November 2016.
(c) Tool 3: Approaches to project screening are being implemented in Rwanda and Uganda and will feed into the final technical guidance along with the country cases being prepared currently. Country practice is being reviewed and case studies are being prepared. A joint WBG-OECD workshop is being planned for Fall 2016.
(d) Tool 4: Extended PFRAM tool developed and established, including a fiscal risk matrix focused on the risk mitigation strategy. Launched during the Spring Meetings, jointly with the IMF. The tool follows a five step decision-tree, automatically generating a set of outcomes: the expected cash flow for the private partner; the government's income statement, balance sheet and cash statement; a series of charts comparing fiscal balance and DSA with/without the specific PPP project; a project fiscal risk matrix; and a sensitivity analysis of macro variables. PFRAM has been piloted with government teams in 3 countries in Latin America and Asia, plus a few desk cases.
WB Action 4.B: GIF has been fully operation; approved one full project activity for a hydro power project in Solomon Islands and five planning grants in Egypt, Georgia, Brazil, Cote d'Ivoire and Ukraine
The Management Response indicates that the implementation of recommendation 4 has started and specific tool are currently under various stages of development. WBG is within the timeline envisaged, i.e. "tools developed and piloted in FY15" as per Action Plan.
WB Action 4.A: WBG is developing a set of tools to help inform client decisions on PPPs:
Tool 1 - Country ‘Readiness' PPP Diagnostic developed during FY 15 and planned to be piloted in 4-5 engagements in FY 16.
Tool 2 - Methodology of the Project Prioritization tool was presented to the G20 IIWG in May and formal Review Meeting planned August, 2015. The tool has been tested in Vietnam (2014), Panama (2015) and will soon be piloted in Peru (starting in August, 2015).
Tool 3 - Draft tool prepared for March 2015, pilot projects currently being identified.
Tool 4 - Joint IMF-WB tool for Managing Fiscal Costs and Risks under development. Target for completion in October 2016
WB Action 4.B: Global Infrastructure Facility operational and project pipeline under development