A United Nations body has proposed a new index to help develop public-private partnerships (PPPs) to tackle the lack of infrastructure in Southeast Asia.

The body, the Economic and Social Commission for Asia and the Pacific (UNESCAP) outlined the idea in its 2018 Economic and Social Survey.

UNESCAP, the United Nations Economic and Social Commission for Asia and the Pacific, is proposing a new composite index to be used to assess the extent of a country’s readiness to implement PPPs in infrastructure projects in selected Asia-Pacific economies in hopes of helping more PPPs – which usually build big pieces of infrastructure – get started.

The PPP Enabling Environment Index (PPPEEI) will comprise five equally weighted sub-indices: institutional arrangements for PPP projects, past experience with PPPs, macroeconomic stability, financial market development and an economy-wide legal and regulatory framework.

UNESCAP is hoping to mobilize more funds for infrastructure, though the survey does not mention specific pieces of hardware.

“Infrastructure is an investment area with the largest financing gap,” a UNESCAP briefing note says. By its estimate, private financing could contribute at least half of the global required investment in energy, transport and telecommunications.

What is also concerning UNESCAP is the decline of money going into PPPs, especially as needs are starting to grow.“ After its peak in 2010, total infrastructure investment under PPP projects in developing Asia-Pacific economies has trended downward in recent years,” the briefing note said.

In 2016, PPP investments stood at US$36.9 billion, a decrease from an annual average of US$67 billion during the period 2013-2015 and the peak of US$120 billion in 2010, the note added. (Transport and energy typically account for about three-quarters of the total investment.)

Overlaying this is the variability of governmental policies throughout the region. For example, China, India, the Philippines, South Korea and Thailand all have better policy environments for PPP projects than some other countries do.

One reason for the UNESCAP push is that investment into projects flows better when investors feel more comfortable about where their money is going. “The impact of an enabling policy environment on the amount of infrastructure investment under PPP is notable,” UNESCAP literature said. “A one-unit increase in the value of the PPP Enabling Environment Index corresponds to a 5.1% increase in the amount of PPP infrastructure investment.”

The example the literature gave is telling, pointing out that if Bangladesh were to raise its policy environment to that of Malaysia, the amount of PPP infrastructure investment in Bangladesh could rise by about 37%. Given Bangladesh’s needs, this is something worth considering.

What UNESCAP is outlining may a good idea, but there are still concerns about how projects are ultimately implemented and about the type of projects involved. One commenter who requested anonymity because of the controversial nature of comments reported a tendency for governments to offer the less-desirable projects and keep the better ones for themselves, leading to private sector complaints over the financial viability of such projects. “The big challenge is, it depends on the type of project,” he said.

UNESCAP stressed the “most notable” impact of the quality of the legal and regulatory framework.

“A one-unit increase in the value of the legal and regulatory sub-index is associated with an 8.6% increase in the amount of PPP infrastructure investment. This is larger than the impact of 5.4% for the macroeconomic stability sub-index and 4.8% for the PPP institutional arrangements sub-index,” it said. This is consistent with other studies into the issue.

UNESCAP also noted that financial market development helps boost PPP investments, but only if it is accompanied by stable macroeconomic conditions and the importance of project preparation and procurement practices.

While UNESCAP is putting forward the idea of the index, saying it is promoting it is rather a stretch. It is an important addition to its ongoing work to tackle the region’s problems, Hamza Ali Malik, director, macroeconomic policy and financing for the development division at UNESCAP, told Asia Cargo News.

“Rather than seeing the PEEI as a standalone project or proposal, the index should be seen as part of UNESCAP’s ongoing work on promoting a public-private partnership as one of the financing approaches that Asia-Pacific countries could adopt in closing their infrastructure shortages,” he said.

By Michael Mackey

Southeast Asia Correspondent | Bangkok