COVID-19 continues to shine a harsh light on the world’s infrastructure deficits. As a result, the role of multilateral development organizations, as well as the private sector, is more important than ever to help stimulate economies. As part of the ADB’s response, its vice-president for private sector operations and Public-Private Partnerships (PPPs), Ashok Lavasa, is deeply engaged in Asia’s economic and social recovery.
Mr. Lavasa brings a wealth of experience to Asia’s fight to meet its development challenges. He shared some of his experiences and vision with the PPP industry publication, Partnerships Bulletin.
1. In your new role, what will be the key priorities under your leadership?
My priority is to see that the bank’s strategy is implemented in a manner that [allows] the bank to continue to play its role as a development partner of its member countries.
The Asian Development Bank has very clear objectives and strategies for its private sector and PPP operations. These include, among others, catalyzing and mobilizing financial resources for private sector and PPP operations.
Our objectives include achieving $2.50 of long-term co-financing for every $1 of ADB’s private sector financing by 2030; strategic use of public-private partnerships to achieve specific infrastructure objectives; and improving the business environment in our developing members.
While pursuing these objectives, we are committed to significantly enhancing our gender focus, achieving increased climate finance targets and expanding our private sector and PPP operations in more frontier economies, including member countries which are small island developing states or are experiencing fragile and conflict affected situations.
2. ADB is set to play a crucial role in the economic recovery of the region. How do you see PPPs fitting into this?
Even before the COVID-19 crisis, the annual infrastructure gap in the Asia-Pacific region was a staggering $1.7 trillion. As we know, many governments are already struggling under significantly higher expenses for social care and health services due to COVID-19, so the funding gap for key infrastructure could increase further.
In response to the crisis, we see governments increasing their focus on PPP policies and laws and regulations. We also see governments reaching out to ADB to go beyond projects and provide them with more comprehensive portfolio and programmatic solutions.
In the post-COVID-19 ‘new normal’ world (once the crisis phase is over), PPPs will become even more relevant and useful. Governments that are unable to spend upfront capital expenditure on building infrastructure and services may consider structuring PPPs using an availability payment model.
3. From a wider perspective, what do you see for the next five years for the Asian PPP market?
Institutionally, we will soon be working on a PPP Directional Paper for ADB to cover the period up to 2030, which will update our current operational plan prepared in 2012. That will set out our strategic directions for PPP in line with Strategy 2030.
In the near-term, we see that investments in healthcare and services will increase. Over the medium- to long-term, the need for ‘hard’ infrastructure would remain.
In some cases, demand for technology solutions supporting distance education has also been growing.
In areas with significant migrant worker populations, we have already started preparing projects that would attract private sector investment and operations and maintenance in housing estates for industrial workers and other vulnerable people.
We also need to be cognizant that PPPs are still a nascent product in many parts of Asia. The next two or three years of recovery will provide the private sector with an increased understanding of the risks of infrastructure.
The private sector also will need to revisit infrastructure PPPs to make sure their bids are not guided by irrational exuberance.
In the longer term, with some fine-tuning both from the public sector and private sector, we can expect PPPs to continue to play a bigger role in closing the infrastructure gap.
4. As someone who has a deep understanding of the public sector, how can governments and authorities best leverage the support of the ADB and private capital?
We are extending our active support to client governments across the region in developing sector masterplans, identifying innovative delivery methods and financing structures, and identifying essential infrastructure projects for private sector participation, and these would be supported through our existing project preparation facilities.
To better leverage private capital, governments in our developing member countries will need to substantially improve their project identification, selection, and structuring process to make sure that the projects they bring to tender offer value for money for the government, and are bankable for the private sector.
We see an increasing demand for PPPs in various urban sectors, but the capacity of cities to prepare and leverage PPPs needs strengthening.
ADB has started an initiative for cities to increase their capacity, improve their resilience and “build back better” following COVID-19. The initiative is providing early-stage assistance to cities to improve the quality of the pipeline of municipal PPPs, and pair this with increased resource mobilization to enhance cities’ resilience to such shocks in the future.
This is a slightly edited version of an article originally published in Partnerships Bulletin.