World Bank Blog
By Judith Green &
Michelle Ottey
Many Caribbean countries are facing significant fiscal constraints to improving, or even maintaining, vital public projects in transportation, health, energy, and other sectors because the pandemic has led to a sharp decline in tourism revenue—a mainstay of the region’s economies. The fiscal downturn is exacerbated by complex issues such as the region’s vulnerability to natural hazards and the effects of climate change.
With the pandemic bringing new challenges and straining already scarce resources, the collaboration between public and private sectors has never been more important. When structured well, PPPs can help channel financial resources and leverage private sector expertise and innovation to provide improved infrastructure and services, which are key to a sustainable and resilient recovery.
Across the Caribbean, however, PPP projects have often faced challenges in getting to the finish line. This is primarily because tenders were not properly structured, or the size of the project was too small to attract major international players.
Yet these obstacles are not insurmountable. While PPPs can be complex agreements, we have seen that following a few key strategies can enable governments to design successful tenders and deliver much needed social and economic infrastructure. These strategies include:
PPP policies and institutional frameworks in place can help define clear processes for managing and sustaining projects—even during periods of political transition that could otherwise lead to costly project delays or early termination. By enabling all players to work under the same standards and regulations and towards clearly defined public-sector goals, these frameworks give investors the confidence to invest and help maximize the benefits for communities.
Identifying a solid portfolio of projects. Carrying out due diligence and preparing bids is a long and costly process for investors, especially those looking to enter a region for the first time. Knowing there is a portfolio of projects in the pipeline makes the initial investment a smart one and allows local and regional companies to participate by forming consortia with larger international companies. This is particularly relevant in the Caribbean where the majority of projects coming to market are smaller in size.
Building a pipeline of feasible projects requires good infrastructure governance that prioritizes and screens projects to determine which are best suited to the PPP model and would be better procured publicly. It also needs proper preparation. This includes prequalifying bidders based on well-defined, transparent criteria that raises the quality of the technical and commercial proposals to be presented in the bidding process; balanced and bankable structures that align interests and financial incentives of both public and private sectors over the life of the transaction; and proper risk allocation between both parties.
Taking a participatory ap-proach and partnering with experts. A collaborative approach when evaluating the risks of a project is another key step in building a pipeline of projects to take to market. Governments should consult their stakeholders, including local communities, civil society, regulatory bodies, and investors. Experienced advisors are needed to evaluate technical, financial, environmental, and social issues. Bringing stakeholders into the process early helps develop more sustainable and impactful projects. Although PPPs must be tailored to a country’s specific needs, regional cooperation is a good way to share knowledge between countries with similar characteristics . The Caribbean Public-Private Partnerships Toolkit developed by the World Bank Group in collaboration with other development finance institutions offers resources to help establish a dialogue among Caribbean countries and develop a regional framework.
There has already been pro-gress. In 2018, Jamaica signed a 25-year concession agreement with an experienced Mexican airport operator to manage the Norman Manley Inter-national Airport, with operations officially transferred to the company the following year. This partnership will create revenue for the government, while improving services and helping to drive growth in passenger traffic as tourism resumes. Meanwhile, the Government of Barbados launched a prequalification process to identify an operator for its airport, attracting 13 experienced companies interested in the project. While the tender has been delayed due to the pandemic, the transaction is expected to be launched early next year. Across the region, there are potential PPP projects in other sectors such as roads, power, and broadband provision that are in the early stages of development
Although the pandemic hit Caribbean economies particularly hard, PPPs represent a powerful tool to innovate and foster a resilient recovery. When structured and managed well, PPPs can play a key role in improving critical infrastructure, helping countries across the region accelerate their post-pandemic social and economic recovery, create jobs, and improve services for citizens in the years to come.
This blog is managed by the Infrastructure Finance, PPPs & Guarantees Group of the World Bank.
