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Gov’t to pave the way for public-private partnerships

Motorists travel out of Phnom Penh last year on National Road 4.
Motorists travel out of Phnom Penh last year on National Road 4. Hong Menea

Gov’t to pave the way for public-private partnerships

The Cambodian government will release a focused public-private partnership policy to help fund the country’s massive infrastructure and logistics requirements – a factor that experts say continues to gnaw at the Kingdom’s export competitiveness.

In his keynote speech to yesterday’s 2016 Cambodia Outlook Conference, Prime Minister Hun Sen said that while the development of domestic and regional connectivity was showing results, there was a need to increase public investment in infrastructure through a public-private partnership (PPP) model.

“I have instructed the Ministry of Economy and Finance to lead the preparation of the policy on developing public-private partnership mechanisms,” he told the conference, which focused this year on infrastructure and logistics development.

While the prime minister did not detail the features of this policy – only saying that it would be “completed in the near future” – he said quality public and private investments were needed to fill gaps in cross-border transport, as well maintaining national highways and key routes for trade and industrial transportation.

A brief released by the conference’s organisers – Cambodia Development Resource Institute and ANZ Royal Bank – puts the country’s infrastructure investment requirements at between $12 billion and $16 billion from 2013 to 2020.

Additionally, it highlighted that domestic transportation costs were twice that of neighbouring countries Thailand and Vietnam.

While the brief pushes for more PPPs in infrastructure and logistics, it also suggests creating a National Transport and Logistics Task Force, as well as an institute to train professionals to fill human capital gaps.

Sok Chenda Sophea, secretary-general at the Council for the Development of Cambodia, said that while PPP agreements have been used in the past, the urgency of the Kingdom’s infrastructure funding requirements warrants a clear and concerted policy to attract this type of investment.

“In the context that the national budget is limited, PPP is the solution,” he said. “So, there needs to be an enabling and reassuring legal environment.”

He added that while the 2004 Law on Concessions has PPP provisions, the legislation was not a “panacea” to the problem and needed more legal, administrative and coordinating guidance.

Working with the Finance Ministry on developing this policy, the ADB’s country director Samiuela Tukuafu said PPP usage was a four step process: evaluating governmental revenue gaps in funding projects, creating a legal and regulatory framework, building human capital to process PPP and implementation.

“At this stage we are very much in phase one and two of that process,” he said, adding that the enabling environment needed to be created before the government can court private sector investment.

Cambodia’s infrastructure needs have primarily been funded by development assistance from China and Japan, with funding coming in the form of concessional loans or via the build-operate-transfer (BOT) model.

Hiroshi Suzuki, chief economist at the Business Research Institute for Cambodia, said the country would need to find the right balance between official development assistance (ODA) and PPP projects, given that the former is a cheaper option but cannot fund every infrastructure requirement.

“If the Cambodian government could use ODA loans, the cost would be cheaper,” he said. “However, the weak point of an ODA loan is the limited amount [available].”

Suzuki added that PPP funding could be difficult to come by as businesses would be wary of facing domestic economic risks.

“So, it is very important to make good and appropriate demarcation among many infrastructure projects for PPP or ODA loans,” he said.

The Ministry of Economy and Finance did not respond to requests for comment yesterday.

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