What to read after Public Private Partnership: Asian Perspectives - Recommendations for Azerbaijan?

As the world makes great strides on the path to development, the gap between infrastructure

needs and the resources governments possess to meet those needs is ever growing on account

of governments’ razor thin budgets, rapid urbanization and population growth.

Asia’s overall infrastructure investment needs are estimated at USD 9 trillion till 2030, 68%

of which is for new capacity and 32% for maintaining and replacing existing infrastructure.

The average annual infrastructure investment during this period is about USD 750 billion.

As countries move up the value chain and urban populations expand, demand for transport,

logistics and utilities will only continue to grow, increasing the burden on public funds.

If cash-flushed investors have an appetite for Asia’s infrastructure projects, what is keeping

them at bay?

For infrastructure development, statistics show that Asian nations have been turning to Public

Private Partnerships (PPP), which seemed to be one of the main tools to attract financing

and keep pace with rapid growth. Although the PPP models are established in several Asian

countries, such as Singapore, South Korea and Japan, others are relatively immature. Indonesia,

China and India, in particular, have announced ambitious infrastructure programs with

governments developing mechanisms to encourage PPP investment and address barriers to

PPP development. The new game-changers of the 21st century – India and China are showing

aggressive signs of opening their domestic markets to international investors.

While PPPs hold significant potential for Asia, they also present formidable challenges. Case

studies of PPP markets in Australia, China, India, Indonesia, Japan, Korea, Malaysia, Singapore

and Thailand provide an Asian perspective enabling recommendations for Azerbaijan.

The Azerbaijani government has achieved great progress over the last decade in integrating

the country into the global economic marketplace and increasing foreign investment mainly

due to its oil resources. Now, the government’s focus is on diversifying the economy outside

the oil sector. Azerbaijan is facing increasing demand for investment in infrastructure

development, overstretching the government’s budget. There is need for not only private

sector investment but also private sector knowledge and expertise. The traditional approach

of the government for infrastructure development of any kind has been to use the state’s own

budget or privatization. The first is markedly insufficient to meet the country’s needs while

the latter only works in a sound legal and financial framework and is not appropriate for all

public service delivery projects. So there is a need to see if the time is ripe for public private

partnerships.

PPPs may not be the ultimate solution, but they can help address many of the issues systemic

to the region in the field of infrastructure development. All it needs is a systematic approach

undertaken through joint efforts of private and public sectors.