Infrascope Study Reveals Improvement in Asia-Pacific's Readiness for Infrastructure PPPs

The EIU study shows that most countries in Asia-Pacific stand in good stead to take part in much needed join public-private partnerships to improve the regions infrastructure

Most countries in Asia-Pacific are in a strong position to carry out the joint public-private deals that are essential to improving the region’s infrastructure, according to The Economist Intelligence Unit’s (The EIU’s) ‘Evaluating the environment for public-private partnerships (PPP) in Asia-Pacific’ report. 

The 2014 Asia-Pacific Infrascope, a benchmarking index that assigns scores to PPP capacity in individual countries and the region as a whole, shows significant improvement in transaction flows over the past three years and identifies the important role of early development of regulatory and institutional frameworks in overall PPP market effectiveness.  It is noteworthy that all countries included in the last Asia-Pacific Infrascope, produced in 2011, improved their ratings in 2014, with greater convergence of scores in the latest study in the emerging-market group, many of which experienced large overall gains in the study.

The study uses 19 indicators to measure a country’s ability to mobilise private investment in infrastructure through PPPs. Commissioned by the Asian Development Bank, the Index was built by, and its assessments made by The EIU. This is the second edition of the Asia-Pacific Index. It is unique in that it incorporates in-depth industry knowledge and analysis, interviews with country and regional field experts, a supporting literature review, and comprehensive secondary research. As a benchmarking and learning tool, the index is intended to assess progress in the environment for PPPs in infrastructure and to encourage change. 

Four countries - Armenia, Georgia, Kyrgyz Republic and Tajikistan, as well as one new sub-national jurisdiction, Sindh province- have been added to the study, bringing the total number of jurisdictions covered to 21, an increase of five jurisdictions from the 2011 study. This reflects the growing importance of PPPs across a broader range of geographies and economic contexts in Asia-Pacific.  

The Asia-Pacific region continues to experience fast economic growth, with strong demand for infrastructure investment across most sectors. The capacity of regional governments to finance infrastructure is limited and there is a strong commitment to privately financed infrastructure and the important contribution they may bring.

14 out of the 16 jurisdictions included in the 2011 study have improved their ratings between 2011 and 2014. The only exceptions were two of the benchmark countries, Australia and the UK, which finished as the top two countries in the study. The major improvements over this period were in the investment climate, the regulatory framework and the institutional framework. The data suggests a positive correlation between overall score, regulatory and institutional frameworks. This is consistent with empirical evidence that robust regulatory and market institutions are an important starting point for the development of successful PPP programmes.

The outlook for greater private sector participation as a driver of infrastructure development in Asia-Pacific is positive. The region is a strong performer in global PPP programmes, with deal flow increasing from 1,243 in 2011 to 1,739 in 2014. The improvement is evident in the regulatory framework governing project selection, the building of improvement in the capacity of public sector agencies, the design and management of bid processes, and wider implementation of mechanisms such as alternative dispute resolution that are designed to improve certainty for private sector bidders. The countries that made most progress in their regulatory frameworks were the Philippines, Papua New Guinea and Mongolia in the emerging group and Japan in the developed market group.

An important characteristic of the Asia-Pacific PPP market is the commitment demonstrated by governments for PPP procurement. This is captured with the study’s indicator of ‘political will’, which improved for nearly all countries in the study and was remarkably consistent throughout the region. The countries that were top improvers in ‘political will’ were Japan, Bangladesh, Papua New Guinea and the Philippines, countries which were also the most improved in operational maturity, emphasising the important connection between political will, improved PPP regulatory frameworks and the number of transactions implemented.

Sumana Rajarethnam, Senior Economist at The EIU says “The 2014 Infrascope indicates that governments across the region have made significant progress to improve PPP readiness. The leading performers in the study were mainly countries in the emerging market group, which is a positive sign given that these are the countries facing further challenges as they move to best practice standards in future years.”   

The 2014 Asia-Pacific Infrascope report and benchmarking model are available free of charge on the EIU website here: www.eiu.com/AsiaInfrascope2014