Docstoc

KOREA's PPP

Document Sample
KOREA's PPP Powered By Docstoc
					KOREA’s PPP

       CHO, Yong-Man

Director, PPI Planning Division
Ministry of Planning and Budget
    Ⅰ. Introduction of PPP in Korea
(1) History of PPP Act


                             -Amendment of PPI Act
          January 2005       -Introduced BTL scheme, Diversified facility types (35 → 44)

                                    -Revision of PPI Act 『The Act on Private Participation
         December 1998               in Infrastructure (PPI)』
                                    -Special law, Solicited Projects
                                          -Enactment of PPI Act 『The Promotion of Private
                                           Capital into Social Overhead Capital Investment Act』
          August 1994
                                          -Special law, Solicited Projects


                                                 -Infrastructure projects were carried out
        Before August 1994                        with individual laws
(2) Available Project Types

    ◦ Available project types : BTO, BOT, BOO, and BTL
     - BTO and BTL are most popular


          BTO            Road, Port, Rail, etc
-     (Build-Transfer-
         Operate)
                         User Fees, Minimum Revenue Guarantee (MRG)


          BTL
-
                         School, Sewer Pipe, Military Housing, Rail, etc
      (Build-Transfer-
           Lease)        Lease Payment, No Demand Risk
(3) Available Facility Types
◦ PPI Act defines 44 types of infrastructure facilities in 15
 categories.
                                             Public
                                    Welfare Housing Forestry
                                     (3)      (1)
                                                      (2)
                        Road
                         (3)

                  Railway
                    (3)

                                                                    Education
                 Port                                                  (1)
                  (2)
                                     15 categories
                                    (facility types)             Military Housing
             Communication                                              (1)
                 (4)
                   Water
                  Resources                                Culture & Tourism
                     (3)                                           (9)
                        Energy
                          (3)                          Airport
                             Environment                 (1)
                                  (5) Logistics
                                         (3)
(4) Major Provision of Government Supports


① Construction Subsidy : 30~50% of Total Investment


- Roads : Less than 30% of Total Investment
* PPI Roads Toll Fee : 100%~200% Public Roads

- Rails : Less than 50% of Total Investment

- Ports : Less than 30% of Total Investment

- Freight Terminals : No Construction Subsidy for Terminals
* Government provides roads and rails , Lower Interest Rate
② MRG on Solicited Projects


 - Minimum Revenue Guarantee
  ∙ Adopted after the Asian Financial Crisis of late 90s
  ∙ Induced Private Investment in Infrastructure

 - A certain fraction of Annual Projected Revenues may be guaranteed for
   revertible facilities.

 - Not provided for projects which earn less than 50% of projected revenue
③ Various Tax Benefits

- Exemption of Acquisition and Registration Tax for Land Acquisition on
  BTO Projects

- Application of 0% Tax Rate on VAT for BOT, BTO, and BTL type
  projects

- 15% Separate Taxation on Interest Income from Infrastructure Bond with
   maturities of 15 years or longer

 - Separate Taxation on Dividend Income from Infrastructure Fund


④ Concession Termination Payment

 - Force Majeure, Bankruptcy
   Ⅱ. Performance of Korean PPP
(1) PPP Complements Public Investments
   → Early Development and Supply of Infrastructure Facilities
  ◦ Private Investment               3.2 trillion KRW


                300 billion KRW

                 1995~1997                2006


 ◦ Share of Private Investment to Government Investment in
   Infrastructure                       17.4%



                    1.2%

                    1996                  2006
    Total Investment in BTO
    Total Investment in BTO                               Total Investment in BTL
                                                          Total Investment in BTL
    Local management projects
          4.6 Trillion KRW
            (90 projects)
                                                                         Under Operation
                   11%                                                     36 projects

                                                                               26%
                                                             Preparing to
                                                              Construct         Under Construction
            Central management projects                      43 projects           60 projects
                 37.5 Trillion KRW
                    (53 projects)                                31%
                                                                                     43%
                          89%



Total investment : 42.1 Trillion KRW (143 projects)   Total investment*: 12.1 Trillion KRW (227 projects)
                                                                                           *announced projects
◦ Public and Private Investment Trend


                                                                           Share of Private
                                                                    17.4   Investment
                                                                           (B/A, %)
                                                             14.2
                                                                           Private
                                                      9.8                  Investment (B)
    1.2
                                        7.5    6.5                         Government
                                                                           Investment (A)
                          6.6    3.8
    0.3            5.6
            3.9                                1.2           2.6     3.2
                                                      1.7
                           1.     0.    1.2
                   0.8     0      6
            0.5
   24.7     12.7   14.3   15.2   16.0   16.0   18.4   17.4   18.3   18.4




  ’95~’97   ’98    ’99    ’00    ’01    ‘02    ‘03    ‘04    ‘05    ‘06
◦ Performance of Korean PPP

                               BTO/BOT/BOO
                               BTO/BOT/BOO
              Project Type
              Project Type                               BTL
                                                         BTL   TOTAL
                                                               TOTAL
 Status
 Status                      National
                             National          Local
                                               Local
                             Projects
                             Projects         Projects
                                              Projects
   Under Operation
   Under Operation             16
                               16               63
                                                63       36
                                                         36     115
                                                                115

  Under Construction
  Under Construction           28
                               28               19
                                                19       60
                                                         60     107
                                                                107

 Preparing to Construct
 Preparing to Construct         9
                                9                8
                                                 8       43
                                                         43     60
                                                                60

          Subtotal
          Subtotal             53
                               53               90
                                                90       139
                                                         139    282
                                                                282

           Total
           Total                        143
                                        143              139
                                                         139    282
                                                                282
◦ Number of BTO Projects by Sectors (Centrally Managed Projects)
            Sectors
            Sectors          Number of Projects
                             Number of Projects          %
                                                         %
             Roads
             Roads                  17
                                    17                  32.1
                                                        32.1
            Ports
            Ports                   16
                                    16                  30.2
                                                        30.2
           Railways
           Railways                 66                  11.3
                                                        11.3
        Environments
        Environments                 3
                                     3                   5.7
                                                         5.7
       Logistics // Others
       Logistics Others             11
                                    11                  20.7
                                                        20.7
            Total
             Total                  53
                                    53                  100
                                                        100
◦ Number of BTL Projects by Sectors
           Sectors
           Sectors           Number of Projects
                             Number of Projects          %
                                                         %
           Schools
           Schools                  88
                                    88                  63.4
                                                        63.4
       Military Housing
       Military Housing              4
                                     4                   2.9
                                                         2.9
      Vocational Training
      Vocational Training            1
                                     1                   0.7
                                                         0.7
            Culture
            Culture                  7
                                     7                   5.0
                                                         5.0
         Environment
         Environment                37
                                    37                  26.6
                                                        26.6
           Railways
           Railways                  2
                                     2                   1.4
                                                         1.4
             Total
             Total                  139
                                    139                 100
                                                        100
◦ Total Project Cost and Investment on BTO Projects as of June
  2007(Centrally Managed Projects)

                                                         Environ
                                                         Environ
                      Total
                      Total   Roads
                              Roads   Ports
                                      Ports   Railways
                                              Railways             Others
                                                                   Others
                                                          ments
                                                          ments

 Number of Projects
 Number of Projects    53
                       53      17
                               17      16
                                       16        6
                                                 6         3
                                                           3        11
                                                                    11

  Total Investment
  Total Investment    37.5
                      37.5    19.8
                              19.8     5.8
                                       5.8      9.3
                                                9.3       0.9
                                                          0.9       1.7
                                                                    1.7

   Average Cost
   Average Cost        0.7
                       0.7     1.2
                               1.2    0.4
                                      0.4       1.6
                                                1.6       0.3
                                                          0.3       0.2
                                                                    0.2

  Least Expensive
  Least Expensive     0.02
                      0.02     0.2
                               0.2    0.03
                                      0.03      0.6
                                                0.6       0.1
                                                          0.1       0.02
                                                                    0.02

  Most Expensive
  Most Expensive       3.9
                       3.9     2.5
                               2.5     2.4
                                       2.4      3.9
                                                3.9        0.5
                                                           0.5      0.5
                                                                    0.5
◦ Rate of Return
                     Less than 6.0~6.9% 7.0~7.9% 8.0~8.9% 9.0~9.9% More than
                     Less than                                     More than
                       5%      6.0~6.9% 7.0~7.9% 8.0~8.9% 9.0~9.9%   10%
                        5%                                           10%

Number of Projects
Number of Projects      7
                        7        10
                                 10        5
                                           5            20
                                                        20           10
                                                                     10      1
                                                                             1

   Percentage
   Percentage         13.2
                      13.2      18.9
                                18.9      9.4
                                          9.4           37.7
                                                        37.7     18.9
                                                                 18.9       1.9
                                                                            1.9

◦ Operating Period
- From 11 years to 50 years (Port)
  ∙Road : 30 years (88%), Rails : 40 years (100%), Port : 50 years (82%)
 Operating Period
 Operating Period      11~19
                       11~19      20~29
                                  20~29         30~39
                                                30~39          40~49
                                                               40~49       50
                                                                            50
                       years
                       years      years
                                  years         years
                                                years          years
                                                               years      years
                                                                          years

Number of Projects
Number of Projects       5
                         5            6
                                      6          32
                                                 32              1
                                                                 1          9
                                                                            9

    Percentage
    Percentage          9.4
                        9.4       11.3
                                  11.3          60.4
                                                60.4            1.9
                                                                1.9       17.0
                                                                          17.0
(2) Introduction of Efficiency and Creativity of
   Private Sector to Infrastructure Investment
   → Increases Value for Money on Investment


① PPP Projects Reduce Construction Period
② PPP Projects Reduce Project Operation Expense
③ PPP Projects Reduce Total Project Cost
④ PPP Projects Revitalize Korean Financial Industry
◦ Better Project Management Skills and Financing Mechanisms
 * Secured Loans backed by Collateral
   → Lending based on Project Cash Flow

◦ Introduction of Infrastructure Fund
  * 10 Infrastructure fund on the market
   ∙Indirect investment by various investors in PPI projects
   ∙long-term Investment Opportunity
   ∙Both domestic and foreign investors for indirect investment
    in infrastructure
 Ⅲ. Lessons from PPP Experiences
(1) Minimum Revenue Guarantee (MRG)

◦ Introduction : after the Asian Financial Crisis

◦ Projects with MRG : 35 Centrally Managed Projects Among 53

◦ Criticism : Excessive Demand Forecast → Excessive MRG
  * MRG : 65.3billion KRW(’02) → 185.2billion KRW(’06)

◦ Modification of MRG Mechanism

 - Unsolicited Projects : MRG Abolished
 - Solicited Projects :
  ∙Reduction of Guarantee Period (15 years → 10 years)
  ∙Reduction of Maximum Guarantee Limit (90% → 75%)
            <Modification of MRG Mechanism>


                                           Starting January 2006
                                           Starting January 2006
              May 2003 ~
              May 2003 ~
             December 2005
             December 2005                                Unsolicited
                                                          Unsolicited
                                   Solicited Projects
                                   Solicited Projects      Projects
                                                           Projects

 Period
 Period          15 years
                 15 years               10 years
                                        10 years

            First 5 years :: 90%
            First 5 years 90%      First 5 years :: 75%
                                   First 5 years 75%
Guarantee
Guarantee   Next 5 years :: 80%
            Next 5 years 80%                              Abolished
                                                          Abolished
                                   Last 5 years :: 65%
                                   Last 5 years 65%
            Last 5 years :: 70%
            Last 5 years 70%

Condition
Condition     Revenue > 50% Forecasted Revenue
              Revenue > 50% Forecasted Revenue
(2) Competition in PPP


◦ Early stage : Low Competition
 * Average Bidding Rate
   1.2 (’01) → 1.3 (’03) → 1.8 (’04) → 3.0 (’05) → 3.5 (’07)

◦ Competition → Increase Efficiency and Creativity

◦ How to induce more competition :
  - Simplify Required Documents for Proposal (’05)
  - Mandatory Compensation for Project Preparation Cost (’07)

 → Need to regain “confidence from the public”
        Ⅳ. Fiscal Management Plan
(1) Establishment of Mid-to-Long Term Private Investment Plan
◦ Infrastructure Investment
  → essential elements for continued economic growth and social
  development

◦ Fiscal Investment
  (Past) Economic Development → (Today) Social Welfare System
   → The importance of PPP

◦ Establishment of Mid-to-Long Term Private Investment Plan
 - Strategic PPI Management Plans in conjunction with the National Fiscal
  Management Plan
 - Forecasts appropriate Private Investment Level and Fiscal Burden
(2) Fiscal Management Rule
    - Strict Management of Total PPP Government Expenditure*

 ◦ 2% Limit Rule
  - Limited to 2% of Total Estimated Government Annual Expenditure
  - Allowing flexible fiscal management without heavy burden on government
    expenditure

  - Estimation for Total PPP Government Expenditure is less than 1.7% of
    Total Estimated Government Annual Expenditure
    ∙Estimation : 2010 (1.3%) → 2015 (1.7%) → 2020 (1.6%)

 * PPP Government Expenditure : Lease Payment for BTL Projects, Land
   Acquisition Cost for BTO Projects, Construction Subsidy, and Minimum
   Revenue Guarantee (MRG)
           Ⅴ. PPP Policy Direction
(1) Quantitative Expansion

① Investment Direction for BTO Type Projects

 ◦ Roads : Metropolitan Areas and other Congested Area

 ◦ Rails : LRT, Urban Rail Transit and some Heavy Rails on
  Congested Metropolitan Areas or Areas with Large Urban
  Development

 ◦ Ports : Two Port System with Busan and Gwangyang and
  additional investment on other ports for global trades
② BTL type Investments

◦ Maintain Appropriate Investment Level
 - Building New Schools and Remodeling Old Schools,
   Improvements on Military Housing, Replacement and
   Maintenance of Old Sewer Pipe


◦ Achieve Efficiency and Effectiveness through various
   measures
 - Promote Multiplex (Library, Museum, School, Youth Center)
   Facilities → Creativity and Efficiency of Private Sectors
(2)   Improve Quality of Facility and Services Provided


                                         Transparent
                                        Management             • Avoid Preferential Treatment
                                       of PPP Program

                      Execution of Post            • Service Satisfaction Survey for users
                         Evaluation                • Performance Evaluation



              Strengthening
                                        • Improvement of application on VFM Test and
         Verification of Feasibility
                                          verification of Feasibility for PPP Projects
             of PPP Projects


Rational Selection        • Projects which reduce government spending
                            or implement creativity and efficiency of
 of PPP Projects            private sector in operating facilities
             Ⅵ. Closing Statement
◦ Korea achieved excellent results by implementing PPP
  - PPP Complements insufficient Government Expenditure
  - Early Development and Supply of Infrastructure Facilities

◦ Korea as a Pioneer in PPP
 - Both BTO and BTL type projects are actively implemented
 - Korea's refined PPP policies and project management capability
◦ World wide demand in Infrastructure

 - Middle Eastern : Oil Money, Large Scale Infrastructure Projects
 - Asia : Projects on Transportation, Electric Power and Communication

 → Korea’s refined PPP system, accumulated experiences, project
   construction capability will contribute to meet increasing demand
   of infrastructure in the Asian Pacific Region

◦ A Way to PPP Success – People’s Support

 - Private Sector : Competition in Good Faith, Creative Ideas
 - Government : Continuous improvement on PPI policy and Deregulation in
    order to promote competition among private sectors
Thank You

				
DOCUMENT INFO