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PPP Introduction and Overview

14. Where PPPs are Used – Infrastructure Sectors

This section explains further the concept of infrastructure and public assets. It provides examples of infrastructure types that are usually developed under PPP schemes.

Public Assets and Infrastructure

This PPP Certification Guide is about procuring public tangible assets using a PPP process. Public assets are fixed assets (that is, assets purchased for long-term use) that are subject or dedicated to public use or concomitant to the provision of a public service.

The PPP Certification Guide also refers to public infrastructure instead of public assets, using infrastructure in the broad sense, as the type of public asset normally procured under a PPP.

The Oxford English Dictionary defines infrastructure as: “The basic physical and organizational structures and facilities (for example, buildings, roads, and power supplies) needed for the operation of a society or enterprise”.

This may include complete systems, but also parts of it, such as structures, plants, facilities or equipment generally necessary for the provision of a public service or subject to public use. Some examples are as follows:

  • Facility buildings hosting the provision of justice, health, education, public security services, and culture (for example, theaters and convention centers);
  • Transport structures, facilities or systems used by the public for transportation purposes. This includes structures such as roads, bridges, and tunnels; complex facilities such as airport terminals; systems such as light rail lines or groups of lines (including the rail structures, electro-mechanical equipment, depot facilities, communication and signaling systems); and vehicles for public use/transportation of passengers;
  • Transportation structures, facilities or systems linked to a public service used by economic operators, including electricity or gas transportation, water transportation, passenger transportation (the rail track and related systems), and data transportation (in telecommunications);
  • Equipment or plants treating sewage, and those generating public goods such as power, gas, and water;
  • Buildings for social housing, that is, those intended to be rented to low-income families;
  • Housing or accommodation facilities to host public servants (for example, office accommodations); and
  • Systems or equipment for testing or investigating for a public benefit, such as public security, forensic services, or defense force equipment.

BOX 1.13 sets out distinctive features of a public asset that influence the concept of PPPs as an infrastructure procurement method.

BOX 1.13: Features of a Public Asset that Potentially Suit a PPP

Public infrastructure has a number of distinctive features that influence the concept of PPPs as an infrastructure procurement method.

  • Infrastructure refers to public works, that is, works subject to public use or concomitant to the provision of a public service;
  • Infrastructure will usually be procured (tendered) under public procurement rules using the principles of equality, non-discrimination, efficiency, and transparency;
  • Infrastructure is a fixed asset. It has a long life and is a potential generator of cash flow in the long term, or it is available for public use or the provision of a public service over the long term;
  • The government is usually the ultimate legal owner of the asset or of the land/site on which the asset is located; and
  • Infrastructure may be a complete system, or comprise relevant parts of a complete system that function as a single unit.

Types of Infrastructure: Economic versus Social Infrastructure

There are two main types of public infrastructure: economic and social infrastructure.

Economic infrastructure is infrastructure that makes business activity possible, such as communications and transportation (for passengers and freight), as well as utilities’ networks, and systems and plants such as in water, waste and energy supply systems[30]. Typically, the activity that uses the infrastructure is priced or a related service is charged to the user or to an economic operator that uses the infrastructure to provide the service to the ultimate user/consumer.

Communications infrastructure is de-regulated in many countries and private operators are the ultimate legal owners of the infrastructure. They use the infrastructure to provide communications services in an open and competitive market. However, telecommunications systems can be considered public infrastructure in those countries in which the utilities are publicly owned and the activity is reserved for the public sector, or when the public sector decides to boost a telecommunications network in specific areas (for example, rural areas) through government investment[31].

Social infrastructure is infrastructure (mostly facilities in the form of buildings) that accommodates social services. For example, hospitals, schools and universities, prisons, social housing, law courts, and so on. See box 1.14 for distinction between social and economic infrastructure.

When the objective of the facility is to host or accommodate administrative functions or even to provide housing for public servants and their families (that is, where there is no public service provided from the building), the infrastructure is usually referred to as accommodation infrastructure.

This type of infrastructure and other assets used in government activities that do not necessarily provide a direct service to the public (for instance, defense) are sometimes also referred to as government infrastructure.

BOX 1.14: Social Infrastructure versus Economic Infrastructure

Any infrastructure is a platform to provide a public service or use. Such infrastructure can include:

  • A facility that hosts public servants/officials or hosts the provision of a social service (for example, a hospital, a school, prison, or court).
  • A platform that provides a transport or a utility service (for example, water or electricity), or is available for the users and the general public.

The former are usually referred to as social infrastructure, and the latter are regarded as economic infrastructure.

Social infrastructure does not usually generate user payments. Alternatively, if present, they are usually marginal and collateral (that is, ancillary revenues, while economic infrastructure, may or may not generate user revenues). This is because (i) the infrastructure may be provided to users free of charge; (ii) a charge may be levied for use and collected and retained by the developer of the infrastructure; or (iii) a charge may be levied for use, but collected and retained by another public or private entity.

Type of Assets by Sector

Public infrastructure assets may be classified into a number of sectors. Table 1.5 provides a long list of subsectors and types of infrastructure assets where it is common to see examples of PPP developments with private finance.

However, two considerations are relevant:

  • Developing PPPs and any other form of private participation in certain sectors in some countries may face strong public and political opposition; and
  • Some country jurisdictions have opted to leave some sectors out of the scope of PPP policies and legislation (a notable example being health infrastructure and services). This may be appropriate as a compromise solution in order to gain political consensus on the use of PPPs.

So, while PPPs may fit well with most infrastructure sectors, the approach will not necessarily suit all specific projects (see section 5.5. and chapter 3.5).

TABLE 1.5: Types of Assets by Sector. Sectors in Which an Infrastructure Asset may be Procured under a PPP Scheme[32]

Sector

Examples

 

Economic– transport > roads

  • New road/highways
  • Specific tunnel or bridge projects
  • Access links (for instance, to ports)
  • Upgrading and expansion of roads and networks

 

Economic – transport > rail

  • High-speed rail lines
  • Heavy conventional rail lines
  • Rapid links (for instance, to airports)
  • Operational leasing of rolling stock
  • Metro and other mass transit projects
  • Ticketing and fare collection systems
  • Metro stations

Economic–transport > other urban mobility infrastructure

  • Bus rapid transit infrastructure
  • Parking
  • Intermodal interchange or hubs

Economic – transport > ports and airports

  • New or upgraded airports
  • New or upgraded ports

Economic – water and waste

  • Desalination plants
  • Wastewater treatment plants (WWTP)
  • Integrated water cycle concessions
  • Solid waste management systems
  • Waste to energy plants – incineration plants

 

Economic – energy

  • Independent power producer plants through PPAs
  • Electricity transmission lines
  • Gas pipelines
  • Energy efficiency (for instance, in public buildings or in urban lighting)

Economic – Information and Communications Technology (ICT) /telecommunications

  • Optical fiber lines or networks
  • Telecommunications networks/broadband

Economic – Tourism

  • National parks
  • Cultural heritage buildings

Economic – Agribusiness

  • Grain storage PPPs
  • Irrigation projects

Social – health, education, security/prisons, courts/justice, social housing

  • Hospitals
  • Student residences
  • University facilities
  • Schools facilities
  • Court buildings
  • Prison facilities
  • Social housing

Social (others) – sports, emergency response and local security, government accommodations

  • Sport centers
  • Fire stations
  • Police stations
  • Government offices

Other potential sectors for PPPs

  • Defense: flight simulators or other simulators
  • Military facilities
  • National border posts or facilities

 

 

 

[30] Some authors and institutions use the term environmental infrastructure to refer to water, waste and renewable energy networks, systems or plants. Also, when the respective infrastructure market is open to competition (for example, in telecommunications), this is sometimes referred to as “commercial infrastructure” which is also regarded as a subset of economic infrastructure (WEF 2010).

[31] In some cases, the majority of the infrastructure may be in private hands. However, the government may retain ownership or control of parts of the utility (the international gateway in telecommunications, or the transmission network in electricity).

[32] PPP Knowledge Lab provides further information about the application of PPPs in some of these sectors, including concrete examples and case studies. See https://www.pppknowledgelab.org/sectors. More material providing a cross-sector overview of experience and project examples, as well as material “by sector”, may be found in the PPP Reference Guide 2.0 (World Bank 2014) in section 1.2. “How PPPs are used”.

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