While the infrastructure financing gap is huge, one of the main constraints to infrastructure development is not a lack of finance, but instead, a lack of well-prepared, bankable infrastructure projects.
To address this bottleneck to investment, the Infrastructure Working Group (IWG) during Argentina’s G20 Presidency in 2018 has taken improving project development as an important pillar of Argentina’s Roadmap to Infrastructure as an Asset Class.
The G20 has endorsed the Principles for the Infrastructure Project Preparation Phase prepared by the IWG, which list the critical aspects to consider under the following dimensions: project rationale, options appraisal, commercial viability and deliverability.
The key driver for improving project preparation is at country level with national governments.
Recognising the challenge that governments face, the GI Hub is developing a leading practice reference tool to help analyse and learn from country experiences around the world. The GI Hub has retained consultants, CRISIL Risk and Infrastructure Solutions Limited of India (CRIS), to help develop the Reference Tool on National Processes Facilitating Project Preparation. The tool will respond to ongoing discussions by the G20, national governments and private investors, on how to improve the preparation of bankable infrastructure projects.
The reference tool will be deeply grounded in leading practices and lessons learned on the project preparation process from the national and sub-national perspective. It will closely examine the interfaces between the institutional arrangements of a country, the various entities involved in the technical aspects of a project—such as project planning, feasibility studies and delivery—and the funding entities.
We’ve now completed the Initial Report on National Processes Facilitating Project Preparation, illustrated by five country snapshot examples from the United Kingdom, South Korea, the Netherlands, South Africa and Mexico. From these case studies, the consultants were able to extract a number of key preliminary lessons learned, which will be examined and refined throughout the further development of the final reference tool.
Amongst these key lessons are:
- the importance of building public sector capacity to deliver on globally accepted project preparation procedures
- the availability of a robust project identification framework with a multi-year capital investment planning horizon
- the availability of a sustainable source of funds for project preparation
- strong quality assurance processes
- upfront stakeholder identification and continued involvement in project preparation.
The country snapshots help to illustrate these findings. For example, the UK—one of the pioneers of project delivery globally—has developed detailed guidance documentation related to all major aspects of project preparation. In addition, it is building capacity through sophisticated approaches to training and developing project leaders.
South Korea’s project preparation framework has evolved rapidly since the 1997 Asian financial crisis. Its Public and Private Infrastructure Investment Management Centre (PIMAC) employs a rigorous, multi-stage review process for projects guided by transparent stakeholder engagement. This has resulted in almost 700 projects being implemented since the framework was introduced in 1999.
The Netherlands illustrates leading practices from the ‘upstream’ early stage of project preparation; applying a solution-oriented approach to integrated planning and collaborative project preparation by examining the infrastructure problem holistically, and looking beyond sectoral boundaries to determine a solution that will provide the greatest benefit for all stakeholders.
In South Africa, a programmatic approach to renewable energy power production, with a dedicated management team and sustained project preparation financing, helped to attract considerable private sector investment.
Public sector capacity and funding constraints in Mexico led to the establishment of FONADIN, the national infrastructure fund, to accelerate private participation in infrastructure and alleviate capacity constraints through providing technical support in planning, design, construction, and final transfer of assets.
The GI Hub and our consultants are now working on the analytical framework for the final reference tool. Based on a quantitative and qualitative analysis, this will include at least 13 countries that demonstrate leading practices on which to focus and draw out lessons learned.
These countries are geographically and economically diverse, chosen to provide practical advice to government practitioners from all corners of the globe. For each country, we plan to explore the following themes through a country-level lens, in discussion with country stakeholders and the private sector:
- Infrastructure status and outlook.
- Existing enabling environment.
- Public sector capacity for project preparation.
- Project preparation financing.
- Project identification and concept definition.
- Project feasibility and structuring.
- Project approvals and processes.
- Project marketing and stakeholder engagement.
The final reference tool will be presented in a user-friendly guide that is aimed primarily at government decision-makers and practitioners, as well as wider development partners. For further information on this leading practices initiative, please contact Morag.Baird@gihub.org
The tool is expected to be delivered by the end of 2018.
Initial Report
