Regional countries look at PPPs for infrastructure development

Governments in Asia are starting to explore the potential of working with private firms when developing domestic infrastructure.

Such public-private partnerships, or PPPs, have been a mainstay in countries like Britain and the United States in the past decade. And it is starting to catch on in the region as governments look to cut costs on large scale projects like building roads and airports.

Industry players are calling it the new frontier for Asian infrastructure.

Singapore’s future sports hub in Kallang is already getting people excited and these are not just sports fans. Governments in neighbouring Thailand and Malaysia are looking at the public-private partnership deal to see how they too can get in on the action.

Lynn Tho, HSBC Singapore’s director for project and export finance, said: “Singapore has really embraced the PPP initiative in delivering better value in infrastructure services sector. Other countries are looking at PPP and how to implement it, and Singapore has a great reputation in terms of developing new initiatives and following them through.

“So as the different governments look at how we do PPP as an Asian country they can relate better to the Singapore PPP framework rather than US or UK because the issues are more similar.”

PPP is still in its infancy in Asia although countries are studying ways to put contractual frameworks in place. In 2005, the total dollar value of PPP deals came up to some US$40 billion.

William Streeter, MD, head of global infrastructure & project, finance, Fitch Ratings Singapore, said: “I think it’s going to expand very quickly. I think the next country to jump (in) is China. There’s been a lot of progress in terms of contractual law development there and certainly a lot of interest in large projects.”

Experts said governments are starting to see the limitations of pure public sector financing. They are studying how to use private sector skills and financing to relieve the burden of infrastructure development.

HSBC estimates that global demand for infrastructure development today is around US$2 to US$3 trillion. And a significant portion could go the PPP way.

Ms Tho said: “As the Asia infrastructure demand grows and there’s a huge burden on governments, different governments are looking at how best to utilise private sector skills and financing to relieve the burden of developing infrastructure.”

HSBC said the growth of such projects will not happen overnight.

Ms Tho continued: “Putting together a PPP framework is more complex (than) you can imagine because of the sheer size and issues to consider. This will take a few years to put in place.”

Such projects allow companies to gain a foothold into new markets in emerging Asia with a reliable partner. Already, some international firms have come to the region just to bid on PPP projects.

“Infrastructure asset class is something that’s picked up over the last few years and from the experience over in the West, you find that construction companies see this as a new way to get into the market,” said Ms Tho.

Over in Singapore, a pipeline of such projects are likely to come from the education sector in the next few years. – CNA/vm

Source : Channel NewsAsia – 23 Aug 2008

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