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funding. The formation of local capital markets,
including debt and equity, is a crucial step to
secure long-term financing for infrastructure
projects and can increase the options available
for governments. By using “blended finance” -
the strategic use of public finance to mobilise
further additional private investment in
frastructrure. Strengthening policy framework
and regulations, APEC members could promote
reliable long term funding basis of infrastructure
projects.
Secondly,
institutional investors are potential
sources for long term investment. APEC
members should review financial regulations
that may potentially pose unintentional barriers
to infrastructure investment of institutional
investors.
Thirdly,
a deep understanding of the risk
allocation principles, risk mitigation measures
and government support arrangements is a
precondition to attract private sector capital.
The enabling environment with the rule of law,
enforcement of contracts and regulatory quality
is found to be of key importance to attract the
private sector to partcipate in infrastructure
markets.
Fourthly,
APEC members, particular APEC
developing economies can use public financing
to support the viability of infrastructure projects.
In addition, there are a variety of techniques
to mitigate risk in infrastructure and improve
effectiveness.
Fifthly,
Building project pipelines is conducive
to encouraging private sector involvement in
infrastructure, and may benefit from a concerted
APEC effort to increase or expand capacity,
project preparation facilities, and technical
assistance. The formation of a project pipeline
may be a prerequisite for certain infrastructure
finance strategies, for instance, the use of project
bonds through local debt markets.
References:
1. Ministry of Finance (2017), The APEC 2017 Work Plan for Long term
Investment in Infrastructure;
2. Ministry of Finance (2017), The APEC 2017 Action Plan;
3. Ministry of Finance (2017); The APEC Vietnam 2017 Joint Finance
Ministerial Statement;
4. Source from websites: mof.gov.vn, apec.mof.gov.vn, sbv.gov.vn...
and debt subordination, to facilitate private
investment are reported.
Selected good practices and case studies in
the report describe how to allocate infrastructure
risks (such as demand risks, currency risks,
commercial risks, political risks, etc) between
private sector and public setor and how to apply
risk mitigation instruments such as: guarantee,
insurance, etc through contractual arrangements
in reality.
Learning from experiences of APEC members
(Mexico, Chile, Peru) and international
organizations (OECD, ADB, GIH, etc) will
benefit APEC members in mobilizing finance of
private sector to infrastructure.
The appendixes provide useful information,
including: (i) Mapping of instruments and
vehicles for the financing of infrastructure, (ii)
Main PPP contractual schemes, (iii) examples
of intervention of national development bank/
investment fund, (iv) GIH PPP risk allocation
tool, and (v) Description of risks.
Based on discussion of the Seminar in May
as well as the report, we have been working
closely with OECD to prepare the draft policy
statement on diversifying financing sources
and fostering private sector involvement in
infrastructure investment in APEC economies.
The final policy statement will be submitted to
Finance Ministers as Annex to the Joint Finance
Ministerial Statement.
The policy recommendations
The policy statement made some following
recommendations, on a voluntary and non-
binding basis:
Firstly,
diversifying sources and instruments
for the finance of infrastructure could
broaden the financing options available for
infrastructure projects and lower cost of
APEC members, particular APEC developing
economies can use public financing to support
the viability of infrastructure projects. In
addition, there are a variety of techniques to
mitigate risk in infrastructure and improve
effectiveness.
