Afghanistan PPP Program Lessons from Project Selection Table

Afghanistan PPP Program Lessons from Project Selection

Table of Contents • Country and Project Overview • PPP Pipeline Development • Updated PPP Framework and PPP Pipeline • Lessons Learned and Next Steps

PPP Framework at Project Initiation PPP Unit • • • PPP Regulations • • Formed in 2014 within Budget Department in Mo. F. 3 staff and consultants. Limited capacity and visibility. PPP Pipeline Drafting began in 2013. Led by Ministry of Public Health. Intended to sit under revised Procurement Law. Multiple iterations, but still in draft form. Sponsoring Entities • • No national infrastructure plan or PPP pipeline. Donor-led approach to project development. No successful PPP experience, except telecoms Line ministries, SOEs, agencies and local governments. Lack of coherent sector planning. PPPs largely driven by budget constraints. Limited capacity.

World Bank-PPIAF TA Program PPP Framework • PPP Project Identification and Prioritization • • • Support to finalize PPP Regulations. Draft and finalize PPP Policy. Strengthen institutional capacity of PPP Unit. Capacity Building • • Training needs assessment. Implement training program to address knowledge gaps. Identify priority infrastructure projects/ programs. Develop suitability and prioritization criteria. Refine long-list into a priority short-list. Select two priority projects. Pre. Feasibility Studies • Develop pre-feasibility screening criteria. Prepare two pre-feasibility studies. Objective: develop projects sufficiently for Go. IRA decision. • •

Table of Contents • Country and Project Overview • PPP Pipeline Development • Updated PPP Framework and PPP Pipeline • Lessons Learned and Next Steps

Project Identification Approach • • • Capacity Building • Consultative meetings to identify projects. Gradual process of identifying projects and gathering data. Continual updating of longlist of projects. Identify capacity gaps through hands-on project identification: • What makes a PPP project suitable? • What data/ information is needed? • How can this data be analyzed/compared? Sponsoring Entities • Focus on higher capacity line ministries : • MEW • MAIL • Mo. PH • Mo. CI • State-owned enterprises/ corporations and subnational entities not project ready. • Role of donors important in two ways: • Guiding priorities; • Financing infrastructure. sector

Project Challenges Impacted Approach Lack of Process • • No PPP framework/ experience No process/ approach to project identification Lack of Planning • • • Huge infrastructure needs No ability or processes to prioritize projects • • Preparation Skills Struggle to Prioritize • No coherent development/ infrastructure plan Some sector plans, not adhered to Donor Role • • Line ministries unable to develop project concepts Unable to prepare basic project info Donor priorities over sector needs But, general interest in longterm asset upkeep Over-Enthusiasm • • • Data Availability • • • Challenging to obtain projectlevel data Unwillingness to share data Language issues Unrealistic expectations Substitute for Go. IRA/donors Go. IRA as commercial partner Managing USPs • • USPs from President’s Office Distracted Mo. F, no capacity to review

PPP Pipeline Criteria (1) Government Commitment • • Broad commitment? Would commitment survive government change? Public Sector Capacity • Private Sector Appetite Sufficient capacity sponsoring entity? in PPP Environment Funding Availability • Does project require Go. IRA/donor funding for viability? If so, is it available? • • Appetite and capacity? Similar projects executed elsewhere? Community Support • Community awareness? support/

PPP Pipeline Criteria (2) Project Characteristics • • Project value/ private sector investment requirement? Operational costs? Is there a clear business model? Expected project duration (including construction)? Are outputs easily definable, measurable and verifiable? How secure is project location? Qualified local staff to implement project? Is project reliant on other projects yet to be constructed? Development Priority • Consistent with national development/ sector plans? Project Suitability E&S Issues • • • Business Model • Project Readiness • • To what level is project prepared? Is sufficient data available? If not, can it be obtained? Any negative environmental or social consequences? Job creation or job losses? Is land acquisition required? By who? • • • What is main revenue source? Demand risk? Government guarantee? Dependence on grant or subsidy?

Project Suitability and Prioritization Tool Usability • • Simplicity. Rank, compare, and prioritize. Limited data required. Supported further pipeline development.

Project Categorization and Selection Approach • • Project Already at Preparation Phase or With Other Donors Project prioritization to select two projects for pre-feasibility analysis Two projects needed to demonstrate: • Preliminary PPP suitability • Data availability or means to obtain data • Required preparation support Immediately Register Project Proceed to Pre-Feasibility Assessment Not Yet Sufficiently Defined Kandahar Solar IPP Sheikh Zayed Hospital Dry Ports (x 8) New Kabul Agriculture Industrial Park 100 MW Renewables Jamhuriat Hospital Gemstone Bourse Driving Licensing/ Testing Mazar IPP Jinnah Hospital Cold Storage AAEDC Salang Tunnel O&M Slaughterhouse Cancer Hospital Sheberghan and Mazar Water Supply Kabul Solid Waste Kabul Airport Terminal

Pre-Feasibility Tool Usability • • Emphasis on simplicity – traffic light approach to data availability. Used to determine project readiness for concept registration.

Table of Contents • Country and Project Overview • PPP Pipeline Development • Updated PPP Framework and PPP Pipeline • Lessons Learned and Next Steps

PPP Framework: November 2016 PPP Law • • • Central Partnership Authority • • Enacted in September 2016. Gives legal authority to the PPP framework. Follows international best practice. PPP Regulation • Close to finalization. • Detailed PPP process and governance arrangements. Newly-established within Mo. F, direct line to Minister. Mandate to oversee and support PPP process. Functions defined in PPP Law and PPP Regulation. Recruiting staff in readiness for full operational capability in late-2016. Sponsoring Entities • Line ministries, SOEs, agencies and local governments can all propose PPPs. Several project concepts progressing. Substantial support available from donors for identification and development of projects. • •

PPP Process • Well-defined process for review and approval of PPP proposals • Confirms that PPPs offer value-for-money and are least-cost • High-level approvals give necessary authority to ensure that PPPs actually happen • Extensive support and advice available to sponsors throughout the process

Table of Contents • Country and Project Overview • PPP Pipeline Development • Updated PPP Framework and PPP Pipeline • Lessons Learned and Next Steps

Lessons Learned • • Creating simple tools to enable clients to “learn by doing” was critical to capacity building and pipeline development. • Broad stakeholder commitment is even more critical in FCS. A lone “PPP Champion” is not enough. • Lessons Learned Pipeline development from is time-consuming and requires constant local presence. • FCS face common challenges, but require unique solutions. Country context is everything. Donors in FCS help project viability and client interface… but can add complexity and obfuscate client prioritization.

Next Steps • PPIAF 1: to be completed by end. December 2016 • Completion of pre-feasibility studies • PPIAF 2: further pipeline development and additional prefeasibility studies • PPPP-1 (P 158768): under preparation, due to go to Board March 2017 • Feasibility studies and transaction advisory • Institutional strengthening and further PPP framework support Light at the end of the Salang Tunnel…