Moving Forward: Developing Highway Ppps in Lao
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f Moving Forward: Developing Highway PPPs in Lao PDR 2013 Supported by: Anita Mauchan Consultants Limited & Lao-Asie Consultants Group 0 | P a g e About PPIAF .................................................................................................................................................. 3 Acronyms ...................................................................................................................................................... 4 Executive Summary ....................................................................................................................................... 5 Part I: Economic, Political and Historical Context ..................................................................................... 6 Part II: Piloting a PPP project on the 13N and 13S .................................................................................... 7 Part III: Roadmap to Implementation ..................................................................................................... 14 Part I: Context ............................................................................................................................................. 18 1.1 The Macroeconomic Context ............................................................................................................ 18 1.2 Availability and Cost of Private Finance ............................................................................................ 19 1.3 Donor Appetite ................................................................................................................................. 24 1.4 Public-Private Partnerships (PPPs) in Lao PDR .................................................................................. 25 1.5 Transport Infrastructure in Lao PDR ................................................................................................. 30 1.5.1 Transport Infrastructure Needs .................................................................................................. 30 1.5.2 Highway Construction in Lao and Sector Governance ............................................................... 31 1.5.3 Procurement in the Lao PDR Transport Sector ........................................................................... 31 1.5.4 Sector Capacity ........................................................................................................................... 32 1.5.5 Maintenance .............................................................................................................................. 33 Summary ................................................................................................................................................. 35 Part II: Piloting a PPP Approach on the 13N and 13S Upgrade Projects ..................................................... 38 2. 1 Prioritizing Investment on Key Corridors ......................................................................................... 38 2.1.1 The 13N and 13S Corridors ......................................................................................................... 39 2.2 Traffic Forecasting and Analysis ........................................................................................................ 40 2.2.2 Traffic Data Collection ................................................................................................................ 40 2.2.3 Traffic Capture Model ................................................................................................................ 40 2.2.4 Traffic Growth ............................................................................................................................ 41 2.2.5 Illustrative Toll Strategy ............................................................................................................. 41 2.2.6 Traffic and Revenue Forecasts ................................................................................................... 41 2.2.7 Sensitivity Tests .......................................................................................................................... 43 2. 3 Project Description and Cost Estimations ........................................................................................ 44 2.3.1 Specifying Corridor Improvements ............................................................................................. 44 1 | P a g e 2.3.2 Construction Costs ...................................................................................................................... 45 2.3.3 Operating and Maintenance Costs ............................................................................................ 46 2. 4 PPP Options Analysis ........................................................................................................................ 46 2.4.1. Overview of PPPs ....................................................................................................................... 46 2.4.2 Key Considerations for Investigating PPP Options ..................................................................... 51 2.5 Analyzing Possible PPP options ......................................................................................................... 48 Design-Build Contract plus Operating and Maintenance Contract (DB +O&M) ................................. 50 Design-Build-Operate-Maintain (DBOM) ............................................................................................ 51 Design-Build-Finance-Operate-Maintain (DBFOM) – Availability ....................................................... 52 Design Build Finance Operate Maintain (DBFOM) – Toll .................................................................... 53 2. 5 Options Analysis Summary and Recommendation .......................................................................... 54 Part III: Roadmap to Implementation ......................................................................................................... 59 3.1 Defining a Pilot Project ..................................................................................................................... 59 3.1.1 Analysis of Pilot Project under DB+O&M Structure ................................................................... 61 3.1.2 Analysis of Pilot Project under DBFOM (Availability) Structure ................................................. 62 3.2. Risk Analysis ..................................................................................................................................... 64 3.2.1 Optimistic Case............................................................................................................................... 64 3.2.2 Pessimistic Case ............................................................................................................................. 67 3.3. Policy Choices ................................................................................................................................... 69 3.4. Managing Payment/Counterparty Risk ............................................................................................ 70 3.5. Next Steps: Feasibility Study and Capacity Building ........................................................................ 71 Annexes Annex A: Contractor Capacity Assessment Annex B: Traffic and Revenue Study Annex C: Cost Analysis 2 | P a g e About PPIAF The Public-Private Infrastructure Advisory Facility (PPIAF) was created in 1999 to act as a catalyst to increase private sector participation in emerging markets. It provides technical assistance to governments to support the creation of a sound enabling environment for the provision of basic infrastructure services by the private sector. A sound business enabling environment consists of strong institutions, legal systems and rule of law, high standards of public and corporate governance, transparency, competition, protection of investments, enforcement of laws, and dispute resolution mechanisms. Governments are the main generators of private sector projects, but there are obstacles that impede private sector participation. PPIAF can assist to remove some of these obstacles by supporting: Policy formulation, as public authorities decide between public and private provision of infrastructure services The selection of the best mode of delivery of infrastructure services and the risk allocation between the public and the private sectors Building capacity in public authorities to design public-private partnership projects, manage the award process and the service delivery, and partner with private investors Adequate consultation with beneficiaries to share project objectives Legislation and institutional reforms to ensure the sustainability of the investments and the protection of property and contractual rights Support for the negotiations of contracts to ensure adequate risk allocation between public and private parties PPIAF is a multi-donor technical assistance facility, financed by 17 multilateral and bilateral donors: Asian Development Bank, Australia, Austria, Canada, European Bank for Reconstruction and Development, France, Germany, International Finance Corporation, Italy, Japan, Millennium Challenge Corporation, Netherlands, Sweden, Switzerland, United Kingdom, United States, and the World Bank. PPIAF funds are untied and grants are provided on a demand-driven basis. 3 | P a g e Acronyms 13N National Route 13, north section 13S National Route 13, south section