Inter-Ministerial Conference on Landlocked and Transit Developing Countries

1. The World Bank Inter-Ministerial Conference on Landlocked and Transit Developing Countries (Almaty, 28-29 August, 2003)

2. The World Bank/PPIAF Report for The High Level Investment Forum Private Investment in Infrastructure: How Can It Facilitate Landlocked Developing Countries (LLDCs) Access to World Markets ? PART ONE—Survey of Strategies for Enabling Cross-Border Investment in Infrastructure for Landlocked Countries PART TWO—Survey of Private Investors and Operators (from interviews in April 2003 with some 30 participants representing 17 different European and North American Firms) ANNEX I—19 Boxes (illustrating specific private participation investments and specific types of international support for such efforts) ANNEX II—7 Tables (comparing private and public investment flows to transit transport infrastructure in each of 31 LLDCs and about 40 transit neighbor countries, as well as basic data on these countries)

3. The Abidjan-Ouagadougou Railway Concession Sitarail The Chad-Cameroon Petroleum Development and Pipleline Project

4. The Maputo Corridor Development Initiative (MDCI): The N4 Toll Road Overcoming Barriers to Private Investments in Transit-Related Infrastructure for LLDCs—Cross-Border Investments • Traditionally transport projects have been accomplished as separate activities by govts on each side of a border. But in seeking big productivity increases expected from privatization, major gains may come about if resulting private entity is able to control the full length of a corridor, regardless of intervening borders. • The ability to develop true multi-country cross-border privatization projects requires cooperation of the countries involved in unusual ways. To pull together a single project involving assets separately owned by governments of two (or more) countries on which to elicit single bids by a number of consortia of private parties, and which also might receive support from multilateral entities, is a complex effort. A legal regimen that covers the new created private entity needs to be clearly understood by all parties concerned in case of disputes.

5. The Bolivia-Brazil Natural Gas Pipeline Project

6. Some Highlights from The Survey of Private Investors and Operators • Bidding Process—(I) too expensive, and costs should be reduced or partly subsidized; (ii) should be shortened; (iii) potential investors need to be able to argue their objections to proposed bidding requirements before they are finalized; (iv) lack of precision in concession terms, while also criticizing lack of flexibility of rigidly fixed investment requirements in face of changing economic conditions. • Infrastructure investment for the long term needs to be better financed, with the participation of the IFIs.

7. More Highlights Ways need to be found to reduce the very high risk exposure of private investors from time of announcing winning bid to completion of financial contracting requirements—by sharing those risks with government, or insurers, or IFC or other IFIs. Several investors want to see World Bank and other multilateral agencies take a stronger role in follow-up of compliance with concession requirements, and, where governments fail to comply, investors would like to see World Bank’s weight brought to bear to make correction of such failures part of overall conditionality requirements governing further lending by the WB and others. Flexibility and desire to attract more bidders argue for a negotiated sale of a concession, whereas transparency argues strongly for competitive bidding to given terms with price as main criterion.

8. A Private Participation Action Program for Landlocked Transit Cooperation • Assessing The Potential for Privatization • An Immediate stocktaking of the existing or planned public or public-private transit transport assets; • A rough assessment of the potential benefits to be gained from private participation in best immediate targets • Focus on corridors and main cargo owners • Telecoms, IT overcome geography • Dry Ports offer economies of scale in logistic services, if users are willing to pay • Air freight facilities

9. Conclusions Large productivity gains are possible from private provision of some transport services (notably rail). Need to be win-win for transit country But transactions can be very demanding of scarce govt management skills.

10. Conclusions (cont’d) Think ahead regarding competitive bidding versus negotiation. 2-stage process? 5. World Bank is willing to advise govts on concession transactions and may finance prior upgrading of infrastructure and labor restructuring.

11. Main Subjects Covered in The Survey of Private Investors and Operators (with some sample quotes) • Privatization Projects in Landlocked Countries as A Nucleus for Cross-Border Projects • IFC and World Bank Support • Private Investment Based on An Original Materials Model • Railroad Efficiency and Productivity—Realistic Expectations • Problems in Railroad Tendering • Alternative Offers vs. Transparency and The World Bank • Negotiation vs. Competition in Concession Arrangements • Railroad Concessioning and Possible Further Areas for Its Use • Enforcing Compliance with The Terms of Concessions, and The Role of The World Bank • Public-Private Partnerships and The International Finance Corporation (IFC) • The Costs of Bidding • How Can We Shorten The Time and Lower The Cost of Bidding ? • Open Access • Overbuilding and Unnecessary Aid • The Role of The World Bank • Risk—The Views of An Investment Banker on Risk • Rates of Return—The Views of An Investment Banker on Rates of Return • Corruption • Management, Control and Expertise

12. Examples of True Cross-Border Projects Affecting Landlocked Developing Countries (LLDCs) There have in fact been a fair number of true cross-border projects affecting LLDCs : • The N4 Mozambique-South Africa toll road project. • The recently awarded bid for a Senegal-Mali railroad concession. • The concessioned railroad system in Malawi which is now joining the Mozambique railroad line to the port of Nacala. • Sitarail from Côte d’Ivoire to Burkina Faso. • In South Asia, there is the new rail-based dry port in Nepal (an extension of Indian Railways). • In Latin America, two cross-border projects link Chile and Bolivia—The Arica to La Paz concession—(currently inoperative because of floods) and the Antofagasto and Bolivia, which has been a private railway for many years. • Further examples include private investor pipelines, usually in cooperation with governments, such as those serving oil production in Central Asian Republics, the oil pipeline project serving Chad, and in South America a major gas pipeline project from Bolivia to Brazil. • Several cross-border power transmission and pipeline projects have been supported by World Bank partial risk guarantees, and a new one in Laos—The Nam Theun private sector power project scheduled for 2004—involves construction of a 1,070 MW hydropower facility to primarily export power to Thailand, at an estimated cost of US$1,280 Million, and to include a partial risk guarantee for USD 80 Million.