OECD Principles for Private Sector OECD Principles Participation in Infrastructure for Private Sector The OECD Principles for Private Sector Participation in Infrastructure aim to help governments work with private-sector partners to finance and bring to fruition infrastructure projects in Participation in areas of vital economic importance, such as transport, water and power supply and telecommunications. These Principles offer authorities a checklist of policy issues to Infrastructure consider in ensuring that citizens get the services they need at a fair cost and the private-sector partners obtain viable returns. 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ISBN 978-92-64-03410-5 -:HSTCQE=UXYVUZ: 20 2007 02 1 E www.oecd.org/publishing 001.fm Page 1 Wednesday, May 23, 2007 4:25 PM OECD Principles for Private Sector Participation in Infrastructure ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT 002.fm Page 1 Thursday, May 24, 2007 11:17 AM ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members. The OECD Principles for Private Sector Participation in Infrastructure were adopted by the OECD Council on 20 March 2007. Also available in French under the title: Principes de l’OCDE pour la participation du secteur privé aux infrastructures © OECD 2007 No reproduction, copy, transmission or translation of this publication may be made without written permission. Applications should be sent to OECD Publishing [email protected] or by fax 33145249930. Permission to photocopy a portion of this work should be addressed to the Centre français d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, fax 33146346719, [email protected] or (for US only) to Copyright Clearance Center (CCC), 222 Rosewood Drive Danvers, MA 01923, USA, fax 19786468600, [email protected]. Foreword On 20 March 2007, the OECD Council approved the OECD Principles for Private Sector Participation in Infrastructure to help governments work with private sector partners to finance and bring to fruition projects in areas ofvitaleconomicimportance,suchastransport,waterandpowersupplyand telecommunications. “Helping countries find new ways of financing investment in areas like water supply and sanitation is one of the OECD’s priorities,” OECD Secretary-General Angel Gurría commented. “These Principles will help both developed and developing countries move forward with infrastructure projectstoboosteconomicgrowthandimprovethelivesoftheircitizens.” Under the aegis of the Investment Committee, the Principles were developedinco-operationwithotherOECDbodiesandthroughaprocessof consultation with a broad group of public and private sector experts from OECD and non-OECD countries, as well as from non-governmental organisations. They are intended to be used for government assessment, action plans and reporting, international co-operation and public-private dialogue, in conjunction with other OECD instruments, such as the Policy Framework forInvestmentandtheOECDGuidelinesforMultinationalEnterprises. At the OECD Secretariat, documentation supporting the Principles was prepared byHansChristiansen oftheInvestmentDivision, headed byPierre Poret,intheDirectorateforFinancialandEnterpriseAffairs.TheDivision’s communicationofficerisPamelaDuffin. 3 OECDPRINCIPLESFORPRIVATESECTORPARTICIPATIONININFRASTRUCTURE-ISBN978-92-64-03410-5-©OECD2007 Table of Contents RecommendationoftheCouncilonPrinciplesforPrivateSector ParticipationinInfrastructure..........................................................................7 OECDPrinciplesforPrivateSectorParticipationinInfrastructure............9 Preamble...........................................................................................................9 I. Decidingonpublicorprivateprovisionofinfrastructureservices.......12 II. Enhancingtheenablinginstitutionalenvironment................................15 III. Goals,strategiesandcapacitiesatalllevels..........................................18 IV. Makingthepublic-privateco-operationwork.......................................21 V. Encouragingresponsiblebusinessconduct.....................................26 Furtherresources.............................................................................................30 5 OECDPRINCIPLESFORPRIVATESECTORPARTICIPATIONININFRASTRUCTURE-ISBN978-92-64-03410-5-©OECD2007 Recommendation of the Council on Principles for Private Sector Participation in Infrastructure, 20 March 2007 THECOUNCIL, Having regard to articles 1(c), 2(d), 2(e) and 5(b) of the Convention on the OrganisationforEconomicCo-operationandDevelopmentof14December1996; Having regard to the Declaration on International Investment and Multinational Enterprises adopted by the Governments of OECD Member countries in 1976 and last reviewed in 2000, and to the Policy Framework for Investment adopted by Council in 2006; Concerned by the important needs for new investment to develop and upgrade infrastructure services in both OECD and non-Member economies in support of economicgrowthandsustainabledevelopment; Recognising the role that the private sector, including multinational enterprises, can play in providing finance and expertise to develop the infrastructure services of host countries; a)INVITESgovernments,inassessingtheirpoliciestowardinfrastructureservicesand in theirdialoguewith investors, to takedueaccountofthePrinciplesforPrivateSector Participation in Infrastructure (hereafter the Principles) which are set out in the Annex tothisRecommendationandformanintegralpartthereof; b)RECOMMENDSthewidestpossibledisseminationofthePrincipleswiththesupport of OECD in co-operation with other international organisations, as well as active engagementofbusiness,labourandothercivilsocietyorganisations; c)AGREESthatthePrinciplesshouldbereviewedbytheInvestmentCommitteeinlight of experience gained in using them, in co-operation with non-Member partners, other OECD bodies and international institutions and in consultation with stakeholders, and toreporttotheCouncilasappropriate. 7 OECDPRINCIPLESFORPRIVATESECTORPARTICIPATIONININFRASTRUCTURE-ISBN978-92-64-03410-5-©OECD2007 OECD Principles for Private Sector Participation in Infrastructure Preamble The shortage of infrastructure in developing countries is an important obstacle to meeting populations’ needs, to enterprise development and to achieving the goals of the Millennium Declaration. Within the OECD area, many countries face the double challenge of growing demand and ageing physical assets in large parts of their infrastructure sectors, which could become an obstacle to sustained growth. The needs for infrastructure investment worldwide in the coming decades – defined to include public utilities such as telecommunication, power, transportation and water and sanitation – are estimated at levels exceeding US$1,800billion per year. If such amounts of money are to be raised, policy makers need to mobilise all the potential sources of capital and consider innovative schemes for infrastructurefinancing. In many countries such levels of investment cannot be financed by the public purse alone. To meet the needs, encouraging private investment in infrastructure is an option that governments cannot afford to ignore. Moreover, private sector participation can bring other benefits than additional capital. The examples include the end-user benefits of a more competitive environment, as well as the mobilisation of the private sector’s technological expertise and managerial competences in the public interest. In a large number of OECD and other countries private participation in infrastructure has in recent decades helped boost both the coverage and efficiencyofinfrastructureservices. Yet at the same time a number of failed public-private partnerships in the infrastructure sectors attests to the difficult challenges facing policy makers. Infrastructure investment involves contracts which are more complex and of longer duration than in most other parts of the economy, operatedunderthedoubleimperativeofensuringfinancialsustainabilityand meeting user needs and social objectives. The challenges are even more 9 OECDPRINCIPLESFORPRIVATESECTORPARTICIPATIONININFRASTRUCTURE-ISBN978-92-64-03410-5-©OECD2007