Opening Session on Sustainable Infrastructure and SDGs for PPPs – 5th Istanbul PPP Week (2 November 2020)

Shortened transcript of the opening Panel on Sustainable Infrastructure and SDGs, 5th Istanbul PPP Week (2 November 2020)

Natalia Korchakova-Heeb: Good morning, ladies and gentlemen! I am happy to greet you at the opening panel of the 5th Istanbul PPP Week dedicated to sustainable infrastructure and Sustainable Development Goals. (SDGs). Let me introduce myself – I am Natalia Korchakova-Heeb, Managing Director of SDG.17 Consulting GmbH, Germany and founder of PPPHealth4All – a global platform to facilitate sustainable and people-centered healthcare PPPs. Today we are very fortunate to have a distinguished panel: well-known experts that don’t really need an introduction.

Let’s me start from the ladies:  I am very pleased to introduce Hulya Pasaogullari, who is Principal Consultant for PPPs, Economics & Finance at IMC Worldwide. Hulya is a former Head of PPP Office within the Turkish Treasury and has a long track of experience in sovereign borrowing and public investments, PPP Advisory, Infrastructure Finance and Governance.

Next speaker is Mark Moseley, who is is Principal of Moseley Infrastructure Advisory Services. He is the former Chief Operating Officer of the G20 Global Infrastructure Hub and a former Lead Lawyer in the World Bank’s Infrastructure Practice Group. It is a special pleasure for me to introduce Mark as he is also a member of the Advisory Board for PPPHealth4All.

Next speaker is Hugues de La Forge, Partner at the Law Firm Fidal, France. He is Head for PPP projects and is in charge of African countries. Hugues has more than 22 years of experience in advising the public and private clients on contract management, disputes and international arbitration. Thanks to all of you for being with us today.

Ladies and gentlemen,

It is very symbolic that our conference is being opened with discussion on sustainable infrastructure- thanks to organisers for giving a priority to this topic.

Sustainable infrastructure is an essential foundation for achieving the Sustainable Development Goals (SDGs) and the objectives of the Paris Agreement. It is not any about building more roads, hospitals, schools – it is about building sustainably by establishing a sustainable life-cycle: sustainable design, sustainable procurement, sustainable financing, sustainable construction, sustainable operation and maintenance and impact assessment. It is also about increased quality, efficiency, innovation of service delivery and meeting all sustainability criteria (social, environmental, institutional, and economic-financial criteria). My first question goes to Mark Moseley:

Mark, during your time with the World Bank and the Global Infrastructure Hub, you worked closely with the G20 in regard to sustainable /quality infrastructure. Can you describe the G20’s approach to sustainability and the achievement of the infrastructure-related SDGs, and could you please also explain us how the G20’s approach relates to other sustainable infrastructure initiatives?

Mark: Thank you, Natalia, for that kind introduction, and thanks also to the organisers of this year’s Istanbul PPP Week for the invitation to join this panel. I had the honour of speaking at the inaugural Istanbul PPP Week in 2015 and it is great to be back at the event – although the extraordinary circumstances of this year have meant that we are not able to enjoy the opportunity to gather in the wonderful city of Istanbul.

Even though all of us have been forced to deal with the immediate impacts of the pandemic, we should not lose our focus on critically important longer-term objectives, such as the achievement of the United Nations Sustainable Development Goals. And, as infrastructure practitioners, we must not abandon our efforts to help achieve the infrastructure -related SDGs, in terms of universal access to basic infrastructure services for both economic infrastructure such as transport, power, water and digital services, as well as social infrastructure such as hospitals and schools. The need for these services remains acute, and we must redouble our efforts to achieve the SDG objectives while recognising the new realities that will arise in the post-pandemic world.

Recently, many infrastructure strategists – including Thomas Barret, Chairperson at OECD Infrastructure Governance Forum in today’s keynote address — have promoted the concept of ‘Building Back Better’. Indeed, I believe that there is some sort of election currently going on in the United States in which the opposition candidate has adopted that idea. But what do we mean by ‘building back better’? I suggest that what the idea should mean is a commitment to pay close attention to the quality of the infrastructure we are building.

And this is what brings me to the G20’s approach to achieving the infrastructure-related SDGs, as raised by Natalia. As Thomas Barrett (OECD) also noted this morning, the G20 has, for the last few years – beginning in 2015 under Turkey’s G20 Presidency – been focusing on the quality of infrastructure investments. This focus ultimately led to the G20 Leaders formally approving, last year, the Principles for Quality Infrastructure Investment, also known as the QII Principles.

But what, exactly, are these QII Principles, and how do they relate to the SDGs?

There are six main QII Principles, as follows:

  • Principle 1 is to Maximise the positive impact of infrastructure to achieve sustainable growth and development. This principle directly incorporates the UN’s 2030 Agenda for Sustainable Development, under which the SDG goals were articulated.
  • Principle 2 is to Raise Economic Efficiency in view of life-cycle cost. This involves taking into account all phases of the life-cycle of an infrastructure project, including planning, construction, operation, maintenance and disposal.
  • Principle 3 calls for the Integration of environmental considerations in infrastructure investments, by taking into account the positive and negative impacts of infrastructure projects on ecosystems, biodiversity, climate, weather and the use of resources.
  • Principle 4 speaks to Building resilience against natural disasters and other risks, and the need to create comprehensive disaster risk management plans which inform the design and operation of key infrastructure facilities. Of course, as Thomas mentioned, Turkey unfortunately knows all about the importance of resilience, as was demonstrated by the recent tragic earthquake near Izmir.
  • Principle 5 is the Integration of Social Considerations in infrastructure investment, and it urges the adoption of policies that provide open access to infrastructure services on a non-discriminatory basis.
  • Finally, Principle 6 addresses the need to Strengthen Infrastructure Governance, in terms of the government institutions and processes that impact on the planning, procurement and management of infrastructure investments.

This last principle is, in my view, particularly important. Very recently, both the World Bank and the IMF have emphasised the relationship between good governance and the efficiency of infrastructure investments. In this regard, I would particularly recommend taking a look at the new book which the IMF produced in September, entitled Well Spent – How Strong Infrastructure Governance Can End Waste in Public Investment, which can be freely downloaded from the IMF’s website.

The important point is that the G20, alongside the United Nations and organisations such as the World Bank and the IMF, is now focusing clearly on the practical problems associated with achieving the infrastructure-related SDGs by 2030 – and this focus is demonstrating the importance of infrastructure quality and infrastructure governance, as key elements in the achievement of the SDG objectives.

Hulya, based on your experience in Turkey plus in various developing countries you have been working with, where do you see the gaps for achieving a better sustainability in the PPP governance, particularly from the public finance and the financiers’ side (i.e. project prioritization, policy alignment, etc)? What needs to be done and where the policies to be re-shaped?  project screening and preparation phase? 

Hulya: I wish to elaborate on what Mark has just presented but in terms of public perspective. Our priority is to understand how sustainability contribute to the the success factors of the public services. Here we are taking about hard/soft infra sectors, the service facilities in investment policies. This all relates to the global development efforts. Politicians and the public authorities are setting the trends and goals of sustainability in their development agenda  and these goals need to be achievable ones.

Considering the project life cycles the critical perspective and the responsibility is in the public side when it comes to the project preparation and the project availability for the private sector. Let me elaborate a bit. When you are working on a country diagnostic study, the first ever thing to understand that country is to look at the high level policy documents.  You will screen the development plans and the high-level investment plans of a country.

The related strategies, goals and targets are all very inter-connected and there is an aim to decrease the existing infra gap with fostering the economic growth with investment. Considering the sectors one by one, I believe we have a new paradigm with the COVID that the priorities have been changed in the public services. I was in Kathmandu (Nepal) last year to support the Investment Authorities for PPP policies. We were drafting the PPP guidelines. The key sectors identified were tourism, energy and transportation when we were discussing the procurement parameters for the candidate airport project. But during COVID pandemic, we start discussing the remote education facilities and healthcare service. This is a remarkable shift in all such discussions. This is the demand side key shift that we face with. The needs are changing.  Coming to the supply side, yes, we know that the public money is limited. Especially now, the resources are more limited with the slowdown in the economy and the urgent budgetary expenditures. This increases the importance of the private sector participation which will also trigger the effective usage of resources including the time  saving!

We need to identify how PPPs may help to close infrastructure gaps and inequalities and seek suggestions from PPP experts to improve:

  • poor planning and project selection: analysis, technology and innovation;
  • inefficient delivery: life cycle management and long-term perspective;
  • limited public resources: private financing.

We need to encourage further discussions on best practices in PPP preparation with the aim of creating a knowledge that could assist governments in doing better PPPs. 

Another consideration: some candidate PPP projects are better in terms of financial viability including the affordability and revenue generation capabilities. However, considering the sustainability and the SDG, there is an increasing demand to showcase the social benefit of the projects.

So, if the key consideration is time (which is more important than money nowadays), the social impact of a project is more critical to highlight the importance of the private sector engagement. All these prioritization shifts also impact the project screening and preparation aspects.

This is also good to see that in the last decade there are plenty of new cases of the ESG -compliant projects and I am sure we will be able to hear more from the speakers in the forthcoming sessions where the real cases and country examples to observe that shift will be demonstrated.

The countries and decision-makers should look at the changing world on how they can integrate better the PPP governance and sustainable development. We have seen plenty of good examples during the last 8 months.

Hulya, where you see the differences in the policies and approaches across the countries related to integration and implementation of the SDG goals within PPP projects? Does it increase the complexity of PPPs? How we can facilitate a better stakeholder engagement in PPPs to foster the implementation of Sustainable Goals?

Hulya: Every country has a different way of doing business, which shapes their the political decision making and even technical valuation and criteria settings.Moreover, it is also very crucial who will hold the flagship of SDGs. It is very clear that the governments and public agencies are the key players in leading SDGs.

Happy to see that the private sector who have more integrations with the public side is  more  and more focusing on the social and development-oriented strategies in their corporate activities.  This is a really good pick for these big scale private sector players having a dominant role which puts people in the centre of all these decisions.

I have been intensively working with the South Asia countries in the last two years and have witnessed that the social benefits and the impact of an infra investment iare very important for the politicians to demonstrate to the public to proof the effective public money spending.  This also relates to the transparency. We observe these sensitivities also in the local level. This also yield an increase in the social infra sectors as top priority in the developing countries.

The key challenge is the local capacity and domestic resources needed both for technical and financial capabilities. The countries who also connect their local development with private sector solutions in terms of domestic mobilization also have a better development impact , especially in mitigating the foreign exchange rate risk and country risks.

Attracting long term investment in private financing is also very crucial for these countries and the

  • tariff regulations,
  • pricing policies,
  • government support tools,
  • creating an enabling environment for the foreign investors like
  • step in rights and arbitration

– are all key elements that require further consideration.

Hugues, you have a lot of practical experience on the ground in Africa, especially with governments and project sponsors. What are the actual trends regarding the inclusion of social impact in infrastructure projects in Africa?

Thank you, Natalia. I would also like to warmly thank the organization of the Istanbul PPP Week for inviting me and especially Dr Eyup Vural Aydin. For sure we would have preferred meeting each other’s in persons and enjoying the view on the Bosporus but for the time being we mainly enjoy our home offices views!

Whereas Africa has been apparently less impacted than others continent by the Covid 19 virus, the current pandemic reveals the weakness of most of African countries as they either depend on importations of goods from outside or rely on exportations of their oil and gas productions. I would like here to remind a few facts:

  • 600 million Africans do not have access to water;
  • the amount of funding needed to achieve the Sustainable Development Goals (SDGs) by 2030 would exceed € 150 billion per year;
  • less affluent and / or isolated social classes are the most affected;
  • investors logically focus on creditworthy and easy-to-serve clients, which excludes the less fortunate and the most landlocked;
  •  Projects affecting a large population – therefore less solvent – are more difficult to finance.

Hence it is urgent to modify the scope of all infrastructure projects to include populations that are less easy to serve, and at the same time finding financial making projects dedicated to make them viable.  

Hugues, could you give us concrete examples on the extent of which infrastructure projects in Africa are modified/adjusted to take into account those social, sustainable and environmental criteria?

Absolutely. The priority list of infrastructures that needs to be addressed is the following :

  • drinking water and sanitation
  • electricity and energy
  • health and education
  • transport and communications

For example :

-a mining train which, although it may find its profitability by its sole mission of evacuating metals or minerals, it can become a structuring axis for entire regions by ensuring passenger trains with adapted (and probably subsidized tariffs) .

– dams are more and more designed to also benefit the surrounding populations, partly as compensation for the nuisance of the building, partly with the consequence of a much greater social acceptability of the entire project.

– off-grid electrical service models are increasingly available, thanks to photovoltaics and mobile phones; the move to a larger scale requires additional capital, and therefore, upstream, studies showing the profitability for the investor, and its conditions. Other specific modes of production or distribution have been developed, in Africa and elsewhere, often thanks to non-profit funding (international aid, NGOs, foundations, CSuR, etc.): shared transport, autonomous management of wells or fountains, multifunctional platforms, subsidized tariffs.

Mark, do you think there is a need to streamline the practices across countries and donors. How should take a lead on that?  Would you please elaborate on this?

Mark: Well, Natalia, your question is a provocative one – because it points to a basic flaw in our system of dealing with international challenges – particularly challenges, like the achievement of the SDGs and the issue of climate change, which require collective action by multiple countries.

Of course, the SDGs are a product of deliberations at the United Nations, and there was a consensus of countries in support of the SDG goals. However, the UN has, historically, struggled to mobilise countries to act on their commitments. In short, it’s fine to agree on aspirational goals, but they are meaningless unless countries actually implement their promises.

Indeed, in response to the long-standing perception that it is very difficult for the United Nations to force countries to honour the commitments which they have made, various states have created other groupings and organisations to take collective action. That was one of the reasons behind the establishment of the G7 Group and, when the G7 was found to be too narrow, a decision was taken to create the G20.

Interestingly, the G20 Group brings together not only advanced economies, but also emerging market countries, such as Indonesia and South Africa. And this gives the G20 a certain ‘moral legitimacy’ in terms of  acting as a coordinating agency. Also, the members of the G20 have significant influence on the boards of directors of the major development organisations, such as the World Bank, the Asian Development Bank, the African Development Bank and their various sister institutions.

Accordingly, I believe that the G20 can and should play a key role in coordinating sustainability practices across countries and onerous – and that is why I wanted to provide some details, in my earlier remarks, on the direction that the G20 is currently taking in regard to quality infrastructure investments.

Natalia Korchakova-Heeb: Thanks a lot for your insights and interesting discussion. Hope we provoked some thinking and inspire our audience to integrate SDGs and make infrastructure projects more sustainable.   Let me close  the session. We wishing our participants a good continuation of the conference.

This site uses Akismet to reduce spam. Learn how your comment data is processed.