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Facilitating Private Sector Participation in Infrastructure

Voluntary Principles to Attain Core Conditions. To facilitate private sector participation in infrastructure, we agreed that the most important contribution that member economies can make towards this end is to establish four core conditions, namely: (a) a sound macroeconomic environment; (b) stable and transparent legal framework and regulatory systems providing a high level of investor protection; (c) sectoral policies that promote competition; and (d) availability of long term capital. To help achieve the core conditions, we agreed to adopt the following voluntary principles:
Sound Macroeconomic Environment
  1. Steady and sustained growth based on sound macroeconomic fundamentals is key to attracting private sector investments in infrastructure. Member economies will continue to pursue and maintain prudent monetary, fiscal and exchange rate policies.
Stable and Transparent Legal Framework and Regulatory Systems
  1. A stable and transparent legal framework is a prerequisite for attracting private investors and safeguarding their interests. Member economies will therefore introduce necessary steps, where appropriate, to put in place a framework to provide a high level of investor protection, including the establishment of mechanisms for fair, credible and effective dispute settlement and enforcement of commercial contracts.
  2. Where applicable, member economies shall seek to put in place the appropriate regulatory framework and to enhance the capability of regulatory agencies.
Sectoral Policies that Promote Competition
  1. In undertaking planning of infrastructure requirements, economies will provide a conducive environment for effective allocation of scarce public resources among competing needs. Economies may, where appropriate, identify priority projects for private sector participation and disseminate the relevant information with respect to these projects extensively.
  2. Where applicable, member economies shall unbundle existing monopolies in infrastructure to promote increased private sector participation, competition, and consumer welfare.
  3. Pricing of infrastructure services should encourage efficiency from both users and providers while allowing the private sector to realize reasonable returns. Member economies will allow prices to reflect the economic cost of delivering the services. Where subsidies are needed to attain socio-economic objectives, these must be properly targeted and transparent.
  4. Where applicable, member economies are encouraged to streamline procedures for the approval and processing of private sector infrastructure projects. To promote transparency and fair market entry, member economies are encouraged to use international competitive tendering or where applicable, internationally recognized procurement guidelines for goods and services.
Availability of Long-Term Capital
  1. Well-developed domestic financial and capital markets play a crucial role in mobilizing savings and making available longer-term capital for infrastructure investments. In this regard, member economies will accelerate efforts to broaden and deepen these markets.
Catalytic Role of MFIs in Attaining Core Conditions. We also recognized the catalytic role of MFIs in assisting APEC member economies in achieving the core conditions. We call on MFIs, and in particular the ADB, to assist concerned economies in the following areas.
  1. Facilitating information-sharing among economies with regard to best practices in the provision of private infrastructure and strengthening public-private partnerships for infrastructure development.
  2. Promoting policy dialogue and technical assistance aimed at creating an enabling environment for private sector participation in infrastructure, while continuing to provide direct financial support for infrastructure development.
  3. Where applicable, assisting member economies in reducing transaction costs associated with competitive tendering by providing technical and financial assistance in the preparation of sectoral frameworks and templates, both of which promote transparency and fair market entry while lowering price and improving the quality of service.
  4. Developing innovative financing mechanisms to address the long-term financing requirements of infrastructure projects.
Voluntary Principles on Risk-Sharing Mechanisms. We also recognized that while steps are being taken to achieve the core conditions, or where these might not be sufficient in the short-run, economies may need to consider adopting transition mechanisms for managing risks. In doing so, we agreed to adopt the following set of voluntary principles.
  1. Where government guarantees are to be provided, a system for charging the appropriate guarantee fee shall be put in place.
  2. Risks should be borne by the party best able to manage them. Any warranted government support shall be confined to specific needs to enhance sector/project viability. Such support shall also be time-bound and disclosed transparently in government accounts.
  3. Where applicable and consistent with international arrangements, MFIs and Export Credit Agencies (ECAs) may provide guarantees and other credit enhancements.