European Investment Bank Public-Private Partnerships in Financing and Providing Infrastructure Philippe Maystadt President, European Investment Bank Presentation at the Bridge Forum Dialogue Luxembourg, 20 January 2005

2 Contents  How much has public investment declined?  Have public capital stocks been eroded?  Has lower public investment been offset by PPPs?  Economic pros and cons of PPPs

3 Public Investment in EU and US % of GDP Source: OECD EU US

4 Public Investment in Large EU Countries % of GDP Source: OECD

5 Public Investment in Smaller EU Countries % of GDP Source: OECD

6 Public Investment in Cohesion Countries % of GDP Source: OECD

7 Public Capital Stock in Large EU Countries 1970 = 100 Source: Kamps (2004)

8 Public Capital Stock in Smaller EU Countries 1970 = 100 Source: Kamps (2004)

9 Public Capital Stock in Cohesion Countries 1970 = 100 Source: Kamps (2004)

10 “Net Worth”of Governments Public capital less public debt (% of GDP) Source:Kamps (2004), OECD

11 Characteristics of PPPs  Serves a public policy objective  Long-term arrangement  Private finance and ownership of asset  Risk and rewards shared

12 PPPs in Relation to Public Investment Signed value of PPP contracts (stock) to public investment (flow), average (%) Source: ProjectWare, HM Treasury, OECD

13 Geographical Distribution of PPPs Signed value of PPP contracts, Source:ProjectWare, HM Treasury

14 Sectoral Distribution of PPPs, Non-UK Signed value of PPP contracts, Source:ProjectWare

15 Sectoral Distribution of PPPs, UK Signed value of PPP contracts, Source:HM Treasury

16 Size Distribution of PPP Projects Number of projects by size (mill €) Source: ProjectWare, HM Treasury 494

17 Pros: higher cost efficiency from...  Private ownership of infrastructure asset  Bundling and life-cycle planning  Sharing of risks and rewards Economic Pros and Cons of PPPs

18  Cost savings may reduce service quality  Transaction costs  Institutional and administrative capacity requirements Economic Pros and Cons of PPPs Cons of PPPs:

19 Macroeconomics of PPPs  Accounting treatment  Do PPPs boost economic growth?

20 Experience with PPPs  Construction on-time and on-budget  High and underestimated bidding and negotiation costs  Key success factors:  Competitiveness of bidding process  Appropriateness of risk sharing  Public sector’s capacity to manage

21 EIB and PPPs Source:EIB Sectoral distribution of EIB’s PPP portfolio

22 EIB and PPPs Source:EIB Geographical distribution of EIB’s PPP portfolio

European Investment Bank Public-Private Partnerships in Financing and Providing Infrastructure Philippe Maystadt President, European Investment Bank Presentation at the Bridge Forum Dialogue Luxembourg, 20 January 2005