CENTER FOR STRATEGIC STUDIES SAM REVIEW Volume 17, December PUBLIC PRIVATE PARTNERSHIP Asian Perspectives Recommendations for Azerbaijan Mahir Humbatov and Nikita Singla BAKU-2016 SAM REVIEW VOLUME 17, DECEMBER 2016 1 © 2016 SAM - Center for Strategic Studies. All rights reserved. The views represented here are the authors’ own and do not necessarily reflect the views of SAM, its staff, or its trustees. Note: The authors agreed on the final version of the report. Disclaimer: The contents of this publication are the authors’ sole responsibility. They do not necessarily represent the views of the Center for Strategic Studies or of the organization for which the authors work. This publication may be reproduced in whole or in part in any form for educational or non-profit purposes without special permission from the copyright holder, as long as provided acknowl- edgement of the source is made. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from Center for Stra- tegic Studies. Please direct inquiries to: SAM - Center for Strategic Studies Mirza Ibrahimov 8, Baku, Azerbaijan, AZ1005 Tel: (+99412) 5968236 Fax: (+99412) 4373458 E-mail: [email protected] Cover and Page design: Intigam Mehemmedli ISSN: 2218-8436 About Center for Strategic Studies under the President of the Republic of Azerbaijan The Center for Strategic Studies (www.sam.az) is Azerbaijan’s first government- funded, non-profit and academically independent think tank, known as Strateji Araşdırmalar Mərkəzi (SAM) in Azerbaijani. The mission of SAM is to promote collaborative research and enhance the strategic debate as well as providing decision-makers with high quality analysis and innovative proposals for action. Through publications, brainstorming meetings, conferences as well as policy recommendations, SAM conducts rigorous research guided by a forward-looking policy orientation, thus bringing new perspectives to academic research in international level. PUBLIC PRIVATE PARTNERSHIP 2 ASIAN PERSPECTIVES RECOMMENDATIONS FOR AZERBAIJAN CONTENTS 1.0. Infrastructure Financing and Public Private Partnerships..............................................................15 1.1 Global Infrastructure: Overview .....................................................................................................15 1.2 Infrastructure Financing: Need for PPPs .....................................................................................17 1.3 Foreign Investment and Infrastructure Privatization: Recent Global Trends .................20 1.3.1 Foreign Investment Flows ...................................................................................................20 1.3.2 Ongoing Liberalization ........................................................................................................22 1.3.3 Global PPP Market .................................................................................................................24 1.3.4 Private Participation in Infrastructure: Low and Middle Income Countries .............27 2.0. Structuring a Public Private Partnership ..............................................................................................31 2.1 Entry into PPP: Available Options ..................................................................................................31 2.2 Launching a new PPP: Key Areas for Consideration - Commercial, Economic, Technical, Legal, Environmental and Social Aspects .............................................................33 2.2.1 Commercial, Financial and Economic Aspects ............................................................34 2.2.2 Technical Aspect: Resolving Constraints and Setting Standards .........................34 2.2.3 Legal, Regulatory and Policy Aspects.............................................................................35 2.2.4 Environmental and Social Aspects: Benefit for All? ..................................................35 2.3 Ongoing PPPs: Risk Mitigation and Performance Evaluation.............................................36 2.3.1 Treatment of Risks in PPP Projects ..................................................................................36 2.3.2 Evaluation of Ongoing PPPs ..............................................................................................37 3.0. Public Private Partnerships: Trends across Asia .................................................................................39 3.1 Regional Trends ....................................................................................................................................39 3.2 Case Studies ...........................................................................................................................................40 3.2.1 Case of Australia .....................................................................................................................40 3.2.2 Case of China ...........................................................................................................................49 3.2.3 Case of India ............................................................................................................................57 SAM REVIEW VOLUME 17, DECEMBER 2016 3 3.2.3.1 Public Private Partnership Market in India ..........................................................57 3.2.3.2 Evolution of PPPs in India ..........................................................................................57 3.2.3.3 Current Status of PPPs in India ................................................................................58 3.2.3.4 Key Sectors for PPP ......................................................................................................60 3.2.3.5 Challenges and Enablers in Implementing PPPs in India ..............................66 3.2.3.6 Government Initiatives ...............................................................................................68 3.2.4 Case of Indonesia ...................................................................................................................72 3.2.5 Case of Japan ...........................................................................................................................75 3.2.6 Case of Korea ...........................................................................................................................82 3.2.7 Case of Malaysia .....................................................................................................................86 3.2.8 Case of Singapore ..................................................................................................................91 3.2.9 Case of Thailand .....................................................................................................................98 4.0. Case of Azerbaijan .....................................................................................................................................102 4.1 Country Assessment ........................................................................................................................102 4.2 Legislative and Regulatory Framework ....................................................................................103 4.3 Institutional Set-Up ..........................................................................................................................105 4.4 Initiatives Taken .................................................................................................................................107 4.5 Available Case Studies ....................................................................................................................108 4.6 Prospective Fields of PPP Development: Sector Assessment ..........................................110 4.7 Role of Multilateral Institutes .......................................................................................................116 PUBLIC PRIVATE PARTNERSHIP 4 ASIAN PERSPECTIVES RECOMMENDATIONS FOR AZERBAIJAN LIST OF ACRONYMS ADB Asian Development Bank AERA Airport Economic Regulatory Authority AIC Azerbaijan Investment Company AICTA Azerbaijan ICT Association Agreement between New Zealand and Singapore on a Closer Economic Part- ANZSCEP nership ASAN Azerbaijan Service and Assessment Network AZPROMO Azerbaijan Export and Investments Promotion Foundation BAPPENAS Indonesian Ministry of National Development Planning BCAO Business Continuity Advancement Organization BERTS Bangkok Elevated Road and Train System BLO Build, Lease and Own BLT Build Lease Transfer BMCL Bangkok Metro Company Limited BOO Build, Own and Operate BOOT Build, Own, Operate and Transfer BOT Build, Operate and Transfer BP British Petroleum BTO Build Transfer Operate BTS Sky Train System BTSC Bangkok Transit System Corporation CHT Cross Harbor Tunnel CITIC China International Trust And Investment Company CNY Chinese Yuan COAG Council of Australian Governments CSR Corporate Social Responsibility DBFO Design, Build, Finance, Operate DBO Design, Build, Operate DP Dubai Ports DSTA Defence, Science and Technology Agency EBRD European Bank for Reconstruction and Development ECB External Commercial Borrowings EDB Economic/ Export Development Board EFSE European Fund for Southeast Europe EFTA European Free Trade Association SAM REVIEW VOLUME 17, DECEMBER 2016 5 EHC Eastern Harbor Crossing ERLSB Express Rail Link Sdn Bhd ESFTA EFTA Singapore Free Trade Agreement FDI Foreign Direct Investment FF Facilitation