Korea, ADB to Promote Private Sector Participation in Infrastructure Projects

News Release | 14 November 2008

MANILA, PHILIPPINES - The Republic of Korea and Asian Development Bank (ADB) are promoting public-private partnerships (PPPs) for infrastructure investments in developing member-countries through sharing of knowledge and experiences from successful PPP projects.

The activities will be funded by a $500,000 grant from the Republic of Korea e-Asia and Knowledge Partnership Fund administered by ADB. The fund was established to reduce poverty and promote economic and social development through sharing of experiences, information, and knowledge within the Asia and Pacific region.

The assistance is expected to help formulate and strengthen PPP policies as well as legal, institutional, and financial frameworks for the development and implementation of PPP infrastructure projects.

A recent ADB study shows that Asia needs $3 trillion over the next 10 years, or about $300 billion annually, to build needed infrastructure to support growing population and rising economies. Available public financial resources, however, are not enough to cover the investment requirements resulting in a funding backlog and a big challenge to Asia.

Based on ADB estimates, developing countries must spend around 6% to 7% of their gross domestic product (GDP) annually on infrastructure, while lower-income countries must spend 7% to 9% of their GDP. However, only around 3% to 4% of their GDP are being allocated on infrastructure.

"Increased private sector investments in infrastructure are expected to supplement the public funding and contribute to economic development in developing Asian countries," said Anand Chiplunkar, Senior Water Supply and Sanitation Specialist at ADB's Regional and Sustainable Development Department.

At present, greater private sector participation in infrastructure investments is constrained by a shortage of viable projects, large transaction costs, lack of transparent procurement processes, and in some cases macro-economic and political instability.

Each party has specific roles and sharing of risks in PPPs. The private sector can contribute not only capital but also technology and management, while governments are assured of timely project completion within budget and to quality standards.