Singapore viewed as Asian role model for infrastructure financeMay 21st, 2008 - 1:13 pm ICT by admin
Singapore, May 21 (DPA) Singapore is emerging as an Asian role model for infrastructure finance with its small but active “public private partnership” (PPP) programme, Fitch Ratings said in a report released Wednesday. “While other Asian countries have executed larger PPPs, only a few have had Singapore’s success in sustaining a steady supply of new projects,” Fitch said.
The programme diversifies the way the city-state finances and operates key infrastructure projects, said William Streeter, managing director of global infrastructure and project finance in the Asia-Pacific region.
“As with all PPPs, private counterparty risks are present throughout the various stages of the projects,” said Streeter, the report’s lead author. “However, Singapore, with its project payment schemes, has developed an elegant incentive for PPP project development.”
The PPP payment mechanism that the government makes to the concessionaire is a powerful credit enhancement tool for the senior debt of an eligible PPP project, Streeter said.
“While this payment mechanism mitigates market risk, it does not mitigate the performance risk of the private contractor and should not be viewed as a form of credit substitution by lenders or investors,” he noted.
Future interest in infrastructure finance will depend not only upon the steady supply of new projects, but also upon the broadening of financing options that include the bond market, the report said.
“The long-term concession contracts and government credit enhancements to project cash flows would seem to favour long-term institutional investors,” it said.
Fitch said the appetite for long-term debt in Singapore “is underdeveloped and the commercial banking sector remains very competitive”.
Fitch also noted the absence of a “PPP champion in government” to coordinate the development interests of the various ministries and facilitate the selection process of suitable projects.
Unlike some other Asian countries, the report said Singapore’s PPP framework is administrative in nature, and is not statutorily authorised. It also cited the absence of a methodology for calculating value for money in project selection and of coordinating regulatory and service interests across government ministries.
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Tags: asia pacific region, concession contracts, concessionaire, credit enhancement, credit enhancements, development interests, enhancement tool, global infrastructure, government credit, infrastructure finance, infrastructure projects, institutional investors, payment mechanism, performance risk, private contractor, project finance, public private partnership, senior debt, state finances, suitable projects