World Bank Group
World Bank Group
08/11/2022 | Press release | Distributed by Public on 08/11/2022 09:10
Creating investor “buzz” about PPPs through market sounding & project pipelines
To market a viable emerging PPP program, market outreach and project pipeline development must go hand in hand. © Shutterstock
While providing public-private partnership (PPP) advisory services to three emerging government PPP initiatives in Sri Lanka, the Maldives, and Nepal I've been asked by senior officials how they can be more competitive with their larger neighbors who already have investor-friendly PPP environments. My answer is always that they can be competitive if they strategically mobilize resources to create an investor "buzz" about opportunities.
This involves a two-pronged approach. In the first place, governments should undertake a private sector market sounding exercise through a timely structured dialogue where programmatic and project viability is tested for attractiveness and interest from developers and investors. This should then be followed by creating a prospective project pipeline that communicates the status of projects to the private sector, allowing them to mobilize resources for future procurements.
Market sounding is in essence a marketing exercise where the public sector "sells" projects to skeptical developers and investors who are looking at a wide set of investment opportunities, often in competing PPP markets . This means the public sector must acknowledge that investors are seeking answers to questions that will affect their perceptions of risk and, ultimately, project bankability. Project proponents need to be extremely motivated and engage effective messaging to tell a compelling story about their vision.
Pragmatic market sounding initiatives should be open to constructive criticism and feedback from the private sector. Sugarcoating potential risks will not work with seasoned developers and investors who most likely know more about proposed project challenges than the initiating agency. Positively, market sounding allows the private sector to share innovations that could improve project bankability ; it allows the public sector to take corrective actions on identified project deficiencies. Fundamentally, it strengthens potential partnerships by addressing private sector's concerns and insights.
Market sounding requires laser-focused public sector market assessment research to show a deep understanding of market perceptions. Gleaned information-including the good and not so good-needs to be candidly shared with investors and developers. It must be remembered that market outreach's ultimate goal is to create private sector interest and demand for proposed public sector programs based on facts and figures that help assess project risk. Successful sector market sounding allows discovery of the optimum level of potential private sector participation thereby contributing to successful procurement processes. Finally, a successful market sounding exercise will allow the public sector to capitalize on the private sector's ability to assess, price, and manage certain types of project risk.
APMG's PPP certification book of knowledge recommends best practices that include:
- Ensuring a clear understanding of the purpose of the market sounding exercise.
- Implementing transparent communication that includes industry communication where information is provided and solicited through project information exchanges, memoranda, and the publishing of draft contract for comment.
- Ensuring that market sounding is in harmony with relevant procurement rules.
- Developing a clear process for selecting organizations to submit written suggestions.
- Ensuring that feedback is not dominated by one party resulting in a bias that would favor them during procurement.
- Keeping an open mind to potential recommendations.
- Developing filters to screen biased feedback from the private sector.
- Documenting all meetings, decisions, and procedures so that a clear audit trail of all the feedback provided by the private sector is kept.
It's important that, once gathered, information is processed and considered for inclusion in the program and project scope. Also, content decisions should be tested with internal stakeholders and political leaders to ensure their ongoing support.
The Global infrastructure Hub (GIH) emphasizes the value in marketing a pipeline of projects, rather than a single opportunity-noting it's especially important for new national PPP programs as it gives investors an incentive to engage, mobilize, and invest resources in a repetitive, sustainable, and viable market.
Unfortunately, many countries that launch a PPP program still lack a visible pipeline. Pipelines should be prominently displayed on government websites, preferably by an authorized national PPP champion organization. A great example of this is Kenya's PPP Unit.
Pipelines serve as de facto announcements by governments they are ready for business, but they should not be unreasonably ambitious. GIH's Global Infrastructure Project Pipeline is another strong example: it shows eight information progress stages that should be included in a pipeline project website. They include: the initial government announcement; project investigation; start of feasibility study; completion of feasibility study; government approval and procurement; successful procurement; financial close/start of construction; and operations phase/construction completed. Ongoing progress announcements of stages give the private sector an indication of the viability of project pipelines and PPP project implementation success.
In summary, there's no shortcut to market a viable emerging PPP program: it's essential that both market outreach and project pipeline development go hand in hand. This will create private sector interest and lead to more successful procurements that are transparent and competitive.
And let's keep in mind why all this matters: ultimately, we're looking to secure more financial resources and know-how to build infrastructure that will increase people's access to services that help them increase their quality of life.
Disclaimer: The content of this blog does not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, staff, or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.
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