InterMinisterial Conference on Landlocked and Transit Developing Countries

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Inter-Ministerial Conference on Landlocked and
Transit Developing Countries

• (Almaty, 28-29 August, 2003)

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The World Bank/PPIAF Report for The High Level
Investment Forum

• Private Investment in Infrastructure How Can It
  Facilitate Landlocked Developing Countries
  (LLDCs) Access to World Markets ?

PART ONESurvey of Strategies for Enabling
Cross-Border Investment in Infrastructure for
Landlocked Countries
PART TWOSurvey of Private Investors and
Operators (from interviews in April 2003 with
some 30 participants representing 17 different
European and North American Firms)
ANNEX I19 Boxes (illustrating specific private
participation investments and specific types of
international support for such efforts)
ANNEX II7 Tables (comparing private and public
investment flows to transit transport
infrastructure in each of 31 LLDCs and about 40
transit neighbor countries, as well as basic data
on these countries)
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The Abidjan-Ouagadougou Railway Concession
Sitarail
The Chad-Cameroon Petroleum Development and
Pipleline Project
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Overcoming Barriers to Private Investments in
Transit-Related Infrastructure for
LLDCsCross-Border Investments

• Traditionally transport projects have been
  accomplished as separate activities by govts on
  each side of a border. But in seeking big
  productivity increases expected from
  privatization, major gains may come about if
  resulting private entity is able to control the
  full length of a corridor, regardless of
  intervening borders.
• The ability to develop true multi-country
  cross-border privatization projects requires
  cooperation of the countries involved in unusual
  ways. To pull together a single project
  involving assets separately owned by governments
  of two (or more) countries on which to elicit
  single bids by a number of consortia of private
  parties, and which also might receive support
  from multilateral entities, is a complex effort.
  A legal regimen that covers the new created
  private entity needs to be clearly understood by
  all parties concerned in case of disputes.

5
The Bolivia-Brazil Natural Gas Pipeline Project
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Some Highlights from The Survey of Private
Investors and Operators

• Bidding Process(I) too expensive, and costs
  should be reduced or partly subsidized (ii)
  should be shortened (iii) potential investors
  need to be able to argue their objections to
  proposed bidding requirements before they are
  finalized (iv) lack of precision in concession
  terms, while also criticizing lack of flexibility
  of rigidly fixed investment requirements in face
  of changing economic conditions.
• Infrastructure investment for the long term
  needs to be better financed, with the
  participation of the IFIs.

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More Highlights

• Ways need to be found to reduce the very high
  risk exposure of private investors from time of
  announcing winning bid to completion of
  financial contracting requirementsby sharing
  those risks with government, or insurers, or IFC
  or other IFIs.
• Several investors want to see World Bank and
  other multilateral agencies take a stronger role
  in follow-up of compliance with concession
  requirements, and, where governments fail to
  comply, investors would like to see World Banks
  weight brought to bear to make correction of such
  failures part of overall conditionality
  requirements governing further lending by the WB
  and others.
• Flexibility and desire to attract more bidders
  argue for a negotiated sale of a concession,
  whereas transparency argues strongly for
  competitive bidding to given terms with price as
  main criterion.

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A Private Participation Action Program for
Landlocked Transit Cooperation

• Assessing The Potential for Privatization
• An Immediate stocktaking of the existing or
  planned public or public-private transit
  transport assets
• A rough assessment of the potential benefits to
  be gained from private participation in best
  immediate targets
• Focus on corridors and main cargo owners
• Telecoms, IT overcome geography
• Dry Ports offer economies of scale in logistic
  services, if users are willing to pay
• Air freight facilities

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Conclusions

• Large productivity gains are possible from
  private provision of some transport services
  (notably rail).
• Need to be win-win for transit country
• But transactions can be very demanding of scarce
  govt management skills.

10
Conclusions (contd)

• Think ahead regarding competitive bidding versus
  negotiation. 2-stage process?
• 5. World Bank is willing to advise govts on
  concession transactions and may finance prior
  upgrading of infrastructure and labor
  restructuring.

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Main Subjects Covered in The Survey of Private
Investors and Operators (with some sample quotes)

• Privatization Projects in Landlocked Countries as
  A Nucleus for Cross-Border Projects
• IFC and World Bank Support
• Private Investment Based on An Original Materials
  Model
• Railroad Efficiency and ProductivityRealistic
  Expectations
• Problems in Railroad Tendering
• Alternative Offers vs. Transparency and The World
  Bank
• Negotiation vs. Competition in Concession
  Arrangements
• Railroad Concessioning and Possible Further Areas
  for Its Use
• Enforcing Compliance with The Terms of
  Concessions, and The Role of The World Bank
• Public-Private Partnerships and The International
  Finance Corporation (IFC)
• The Costs of Bidding
• How Can We Shorten The Time and Lower The Cost of
  Bidding ?
• Open Access
• Overbuilding and Unnecessary Aid
• The Role of The World Bank
• RiskThe Views of An Investment Banker on Risk
• Rates of ReturnThe Views of An Investment Banker
  on Rates of Return
• Corruption
• Management, Control and Expertise

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Examples of True Cross-Border Projects Affecting
Landlocked Developing Countries (LLDCs)

• There have in fact been a fair number of true
  cross-border projects affecting LLDCs
• The N4 Mozambique-South Africa toll road project.
• The recently awarded bid for a Senegal-Mali
  railroad concession.
• The concessioned railroad system in Malawi which
  is now joining the Mozambique railroad line to
  the port of Nacala.
• Sitarail from Côte dIvoire to Burkina Faso.
• In South Asia, there is the new rail-based dry
  port in Nepal (an extension of Indian Railways).
• In Latin America, two cross-border projects link
  Chile and BoliviaThe Arica to La Paz
  concession(currently inoperative because of
  floods) and the Antofagasto and Bolivia, which
  has been a private railway for many years.
• Further examples include private investor
  pipelines, usually in cooperation with
  governments, such as those serving oil production
  in Central Asian Republics, the oil pipeline
  project serving Chad, and in South America a
  major gas pipeline project from Bolivia to
  Brazil.
• Several cross-border power transmission and
  pipeline projects have been supported by World
  Bank partial risk guarantees, and a new one in
  LaosThe Nam Theun private sector power project
  scheduled for 2004involves construction of a
  1,070 MW hydropower facility to primarily export
  power to Thailand, at an estimated cost of
  US1,280 Million, and to include a partial risk
  guarantee for USD 80 Million.