1. PPP FRAMEWORK AND PROCUREMENT IN KOREA
Jay-Hyung Kim
Managing Director
Public and Private Infrastructure Investment Management Center

2. PPP Act and Legal Framework
2. Implementation Procedure
3. Major Players
4. Framework for Government Support
5. Performance Highlights

3. PPP Act and Legal Framework
Part-01

4. History of PPP Act January 2005 January 1999 August 1994
- Amendment of PPP Act
- Introduced BTL method, Diversified facility types (Social Infra)
- PICKO of KRIHS + PIMA of KDI => PIMAC of KDI
January 2005
Revision of PPP Act
『The Act on Private Participation in Infrastructure』
Introduced Unsolicited project, Risk sharing scheme,
Establishment of PICKO
January 1999
- Enactment of PPP Act 『The Act on Promotion of
Private Capital into SOC Investment』
August 1994
- Infrastructure projects were carried out under
individual laws
Before August 1994 4

5. Legal Framework of the PPP System
Hierarchy of legal and administrative framework of PPP System
PPP Act
PPP Act Enforcement Decree
PPP Basic Plan
PPP Implementation Guidelines
The Legal Status of the PPP Act
The PPP Act and Enforcement Decree are the principal components of the legal framework of PPP.
They define eligible infrastructure types, procurement types, procurement process, the roles of the public and private parties, policy supports, etc.
The PPP Act is a special Act that precedes other Acts:
Exempts PPP projects from strict regulation in national property management
Allows a special purpose company (SPC) to play a role of competent authority

6. Implementation Procedure
Part-02

7. PPP Facility Types Sector Facility Type Road(3)
Road, Ancillary Facilities, Non-road Parking Facilities
Rail(3)
Railway, Railway Facilities, Urban Railway
Port(3)
Port, Fishing Port Facilities, New Port Construction Facilities
Communications(5)
Telecommunication Facilities, Information Communication System,
Information Super-highway, Map Information System, Ubiquitous City Infrastructure
Water Resources(3)
Multi-purpose Dam, River-affiliated Ancillary Structures, Waterworks
Energy(3)
Electric Source Facilities, Gas Supply Facilities, Collective Energy Facilities
Environmental(5)
Waste Treatment Facilities and Public Livestock Wastewater Treatment Facilities,
Waste Disposal Facilities, Wastewater Treatment Facilities, Recycling Facilities,
Public Waste-water Treatment Facilities
Logistics(2)
Distribution Complex, Cargo and Passenger Terminals
Airport(1)
Airport
Culture and Tourism(10)
Tourist Site or Complex, Youth Training Facilities, Public Sports Facilities,
Libraries, Museums and Art Galleries, International Conference Facilities,
Culture Centers, Science Centers, Urban Parks, Professional Training Facilities*
Military Housing (1)
Military Housing
Education(1)
Schools
Forestry(2)
Natural Recreational Resorts, Arboretums
Public Housing(1)
Public Rental Housing
Welfare(4)
Child-care Facilities, Senior Homes, Medical Facilities, Facilities for the Disabled*
* Expected to be included in the 2009 revised PPP Act Enforcement Decree

8. Project Initiation Solicited Projects Unsolicited Projects
A solicited project is that the competent authority identifies a project for private investment and announces a RFP
Unsolicited Projects
For an unsolicited project, a private company (project proponent) submits a project proposal, and then the competent authority examines and designates it as a PPP project

9. Procurement Schemes BTO (Build-Transfer-Operate) Scheme
Both solicited and unsolicited projects are eligible
Roads, seaports, and railway projects, etc
User-fees, Minimum Revenue Guarantee (MRG) for solicited projects
BTL (Build-Transfer-Lease) Scheme
Only solicited projects are eligible
School, dormitory, military housing, etc
Government payments (Lease rent +operating costs)
Low risk-low return
Other Schemes
BOT (Build-Operate-Transfer)
BOO (Build-Own-Operate)

10. Major Players
Part-03

11. Major Players in the PPP System (1)
Ministry of Strategy and Finance (MOSF)
Major players in the PPP program include MOSF, concerned line ministries, and the private sector.
MOSF is responsible for managing the PPP Act, Enforcement Decree, and the Basic Plan for PPP.
MOSF is also responsible for preparing the draft budget for PPPs.
MOSF plays a central role in budgeting as well as in preparing and implementing PPP investment plans.
Main budgeting decisions are made in bilateral negotiations between MOSF and the spending ministry.

12. Major Players in the PPP System (2)
Public and Private Infrastructure Investment Management Center (PIMAC)
In order to provide comprehensive and professional support for the implementation of PPP projects, PIMAC was established under the PPP Act
The mission and roles of PIMAC are prescribed in the PPP Enforcement Decree:
Supporting MOSF in the formulation of the Basic Plan for PPP
Supporting the competent authorities and ministries in the procurement process
Assessment of feasibility and value for money for potential PPP projects
Formulation of the request for proposal
Designation of the concessionaire
Evaluation of project proposals by private companies
Negotiation with potential concessionaire, etc
Promoting foreign investment in PPP projects through consultation services
Developing and operating capacity-building programs for public sector practitioners

13. Major Players in the PPP System (3)
Special Purpose Company (SPC)
Private sector participants who intend to implement a PPP project shall establish a PPP project company, a legal entity which is to be designated as concessionaire upon PPP contract award.
In general, construction companies, financial investors, and professional operators form a special purpose company (SPC) for the associated PPP project.
In many cases, a project proponent is a would-be company when it submits a project proposal.
In such case, it shall include a corporate establishment plan in the project proposal and, when designated as a potential concessionaire, establish the company which is to conduct the designated PPP project.
The SPC shall not engage in businesses other than those acknowledged by the competent authority at the time of designation of the concessionaire except insignificant businesses approved by the competent authority.

14. Framework for
Government Support
Part-04

15. Government Support (1) Acquisition of land by the concessionaire
Granting of land expropriation rights to the concessionaire
National or public property in designated areas may be sold to the concessionaire
Concessionaires are allowed to use national or public property without charge or at lower price
Financial support
Construction subsidy: The government may grant construction subsidy to the concessionaire, if it is inevitable to maintain the user fee at a reasonable level
Tax incentive
Exemption from acquisition and registration taxes on real estate for BOT projects
0% VAT on construction services
Tax reduction for infrastructure bond

16. Profile of Minimum Revenue Guarantee
Government Support (2) : MRG
A certain fraction of projected annual revenues may be guaranteed when the actual operating revenue falls considerably short of the projected revenue prescribed in the contract
Applicable only to solicited projects
Not applicable to projects that earn less than 50% of projected revenue
Profile of Minimum Revenue Guarantee
Jan 1999
May 2003
January 2006
Solicited
Unsolicited
Period
Whole operating period
15 Years
10 Years
Abolished
Guarantee
Level (Max)
90%
80%
First 5 Years 90%
Next 5 Years 80%
Last 5 Years 70%
First 5 Years 75%
Next 5 Years 65%
Condition
None
No MRG applied
if Actual Revenue < 50%
of Forecasted Revenue
Same as Left

17. Government Support (3)
SOC credit guarantee fund provides credit guarantee for PPP project finance to enhance the timely payment of debt service. Its guarantee products include:
Guarantee for facility loans (during construction)
Guarantee for working capital loans (during operation)
Guarantee for bridge loans
Guarantee for refinancing
Guarantee for infrastructure bond
Buyout options
Force majeure (natural disaster or political turmoil)
Other specific events prescribed in the concession agreements

18. Government Support (4)
Temporary support measures were introduced in the Annual PPP Plan (Feb. 2009) as a response to recent global financial market instability.
Risk sharing for adverse movements in interest rates
Incentive for Early Completion
In the event of early completion, the SPC is granted the right to operate the facility to the extent of ½ the reduced completion period.
BTO
in the event of more than ±0.5% point change in reference rate,
60~70% government support/redemption for reduced/excess interest rate amount
BTL
adjustment period for rate of return reduced from every 5 years to every 2 years
60~80% government support if interest rate difference between government bonds and bank bonds amounts to 50bp

19. Performance Highlights
Part-05
Performance Highlights

20. Public & Private Investment Trends Private Investment (A)
Trends of Private Investment in PPP
Public & Private Investment Trends
(unit: trillion KRW, %)
’98
’00
’01
’02
’03
’04
’05
’06
’07
’08
Private Investment (A)
0.5
1.0
0.6
1.2
1.7
2.6
3.0
3.4
Gov’t Investment (B)
12.7
15.2
16.0
18.4
17.4
18.3
19.6
A / B (%)
3.9
6.6
7.5
9.8
14.2
16.3
17.3
A : Public works completed
B : Annual budget in transportation and regional development sector, The Five-year National Fiscal Management Plan 20

21. Competent Authority Projects
Number of PPP Projects by Procurement Scheme
(unit: number (Trill. KRW))
Type
Step
BTO*
BTL* *
Total
National Projects***
Competent Authority Projects
Under Operation
22(10.6)
75(3.5) 33
130
Under Construction
34(28.2)
12(0.8) 88
134
Preparing to construct
10(5.2)
4(0.2) 45 59
Under Negotiation
15(11.5)
8(0.8) 79
102
Under Review
2(1.7)
3(0.5) 50
Subtotal
83(57.2)
102(5.9)
290
(16.6)
475
(79.7)
185(63.1)
*:as of Jun. 2008, ** as of Dec. 2007
*** Large-scale projects whose total costs are 200bill. or more are monitored by the PPP Review Committee organized by the MOSF 21

22. Major Projects: BTO (Under Operation)
Incheon International Airport Expressway
Total Project Cost: KRW 1,334 billion
Length: 40.2 km, 8 lanes
Competent Authority: Ministry of Land, Transport, and Maritime Affairs
Construction Period:
Operation Period: 30 years
Capital Structure: Equity/Debt/Subsidies = 25%/59%/16%
Seoul Beltway Northern Section
Total Project Cost: KRW 1,471 billion
Capital Structure: Equity/Debt/Subsidies = 23%/51%/25%
Length: 36.3 km, 8 lanes (Total Length: 128 km)
Construction Period: June 2001-June 2008 (currently in operation)
Busan New Port Phase 1
Total Project Cost: KRW 1,648 billion
Capital Structure: Equity/Debt/Subsidies = 20%/55%/25%
Work Scope: 9 berths (50,000 t), 3.2 km
Competent Authority: Ministry of Land, Transport and Maritime Affairs
Construction Period:
Operation Period: 50 years

23. Major Projects: BTL (Under Operation)
Chungju Military Apartment Housing
Total Project Cost: KRW 18.6 billion
Work Scope: 200 households and convenience facilities
Competent Authority: Ministry of Defense
Construction Period:
Operation Period: 20 years
Ulsan National Institute of Science and Technology
Total Project Cost: Approximately KRW 250 billion
Work Scope: Site 1,028,200㎡, Total Floor Area 153,691㎡
Competent Authority: Ministry of Education, Science and Technology
Construction Period: (1st Phase 2007-February 2009)
Anhwa High School
Total Project Cost: Approximately KRW 962 million
Work Scope: Site 13,264.03㎡, 5 stories above ground
Competent Authority: Gyeonggi Province Office of Education
Construction Period:

24. Thank you 24