1. PPP Project Identification and Screening
7/11/2018
PPP Project Identification and Screening
Republic of Korea
Hyeyoung Kim, Principal Policy Advisor
11/7/2018
With thankful acknowledgement of valuable resourecs from KDI PIMAC

2. Global Infrastructure Hub
7/11/2018
Global Infrastructure Hub
A G20 organisation
Independent organisation established by the G20 to increase the flow and quality of infrastructure investment opportunities in all countries
Staffed by infrastructure specialists from the public and private sectors of various countries
Funded by
Australia
United Kingdom
Saudi Arabia
Republic of Korea
People’s Republic of China
New Zealand
Singapore
Mexico

3. Our mandate An ambitious program
7/11/2018
Our mandate An ambitious program
Launched by the G20, the Global Infrastructure Hub is mandated to grow the global pipeline of quality, bankable infrastructure projects.
We have the ambitious goal to increase the flow and the quality of opportunities for private and public infrastructure investment in G20 and non-G20 countries by:
facilitating knowledge sharing;
highlighting reform opportunities; and
connecting the public and private sectors.
Our size, independence, unique mix of expertise, and our international scope gives us speed and agility.

4. Contents Background Overview Project Identification
7/11/2018
Contents
Background
Overview
Project Identification
Feasibility Assessment
VFM Assessment
Conclusion
With thankful acknowledgement of valuable resources of Korea Development Institute
With thankful acknowledgement of valuable resourecs from KDI PIMAC

5. Background Legal Inception of PPPs PPP Implementation type
7/11/2018
Background
PPPs in Korea
Legal Inception of PPPs
In 1994, Act for the Promotion of Private Capital Investment in Social Overhead Capital
Revised to Act for PPP in Infrastructure in 1999
(1999 PPP Act)
PPP Implementation type
User-Pay type : mainly Build –Transfer-Operate (‘BTO’), also BOT or BOO
Government-Pay type : Build –Transfer-Lease(‘BTL’)
Size of PPP delivery
684 Projects (1994~2015)
Majority (number, investment size) is in transport sector
PPP Policy Statement
PPP Basic Plan
Annual announcement by Ministry of Strategy and Finance (MOSF)
PPP Unit
Korea Development Institute Public and Private Infrastructure Investment Management Center
(KDI PIMAC)
Sources of PIMAC Authority
PPP Act creates PIMAC
Preliminary Feasibility Study for public financing projects under the National Finance Act
With thankful acknowledgement of valuable resources of Korea Development Institute
With thankful acknowledgement of valuable resourecs from KDI PIMAC

6. Overview Project Identification Feasibility Assessment VFM Assessment
7/11/2018
Overview
VFM Assessment
PIMAC's appraisal & Establishing PFI alternative
Feasibility Assessment
PIMAC 's screening
Analytic Hierarchy Process-based decision-making process
(Economic, Policy, Balanced Regional Development Analysis)
Project Identification
Solicited Projects : line ministry’s infrastructure planning or MOSF’s PFS for budget allocation
Unsolicited projects
With thankful acknowledgement of valuable resourecs from KDI PIMAC

7. Infrastructure Plans (Ministry of Land, Infrastructure and Transport)
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Project Identification
PPP solicited project (1) by Line Ministry
Infrastructure Plans (Ministry of Land, Infrastructure and Transport)
PPP Unit (KDI PIMAC)
(Transport) National Core Transport Network Plan, Mid-Term Investment Plan, Sector Infrastructure Plan (Road, Railway, etc.)
Investment priority
Building of project pipelines
Seeking for Investment efficiency through PPP alternatives
(Methodology) Guidelines for the Evaluation of Investments in Public Transport Facilities Development Projects
Feasibility test based on Economic analysis and comprehensive evaluations
Financial feasibility for PPP
Final analysis for PPP identification
Large Scale
Above Preliminary Feasibility Study threshold
Unified Methodology in Feasibility Assessment as PFS for public financing
Economic, Policy, Balanced regional development analysis
Suitability for PPP
Financial analysis
VFM
With thankful acknowledgement of valuable resourecs from KDI PIMAC

8. Budget allocation(Ministry of Strategy and Finance)
7/11/2018
Project Identification
PPP solicited project (2) during budget allocation
Budget allocation(Ministry of Strategy and Finance)
PPP Unit(KDI PIMAC)
PFS for large construction works under the National Finance Act.
Linkage between budget process and PPP identification
(MOSF) Should request for PPP suitability opinion to KDI PIMAC in conjunction with PFS
(PIMAC) Mandatory process during PFS to review whether PFI alternative is more efficient
PFS & PPP project analysis
Same methodology for feasibility assessment
Suitability for PPP(previously)
(previously) Checklist
Level 1 ; Feasibility in law and policy, PPP implementation method,
Level 2 ; Ease of management, Creativity and efficiency, Risk distribution, Effects on public sector)
(recent arrangement) mandatory VFM assessment during PFS in addition to checklist
With thankful acknowledgement of valuable resourecs from KDI PIMAC

9. Project Identification
7/11/2018
Project Identification
Unsolicited Project
Private party
Considering Infrastructure plan and project pipeline
Voluntary search for PPP projects
Business judgement
Competent Authority
May reject the proposals in exceptional case when the proposals are not complying with upper-level of plans or policy
Should send proposals to PIMAC for review
KDI PIMAC
Feasibility decision from national economy perspective ; same as PFS
Same analysis methodology as solicited projects
Line ministry
With thankful acknowledgement of valuable resourecs from KDI PIMAC

10. Feasibility Assessment
7/11/2018
Feasibility Assessment
PIMAC’s screening
Both solicited and unsolicited project
Large-scale Solicited Project
Total project cost with at least 200 billion KRW (approx. 170million USD) for BTO or 100 billion KRW for BTL
Solicited Projects above PFS Threshold
Total project cost with at least 50 billion KRW, of which at least 30 billion KRW is to be subsidized by the State. d Project
All unsolicited projects
Gatekeeping, decisive phase whether to invest
With thankful acknowledgement of valuable resourecs from KDI PIMAC

11. Feasibility Assessment
7/11/2018
Feasibility Assessment
Analysis of Economic, Policy and Balanced Regional Development
Participants : PIMAC members (Project manager and research associate) (2), Outside experts (Cost, Benefit analysis) (2), Independent advisors (1or 2)
Structured decision-making tools to collaborate quantitative and qualitative elements
Quantitative elements : B/C ratio, Balanced Regional Development
Qualitative elements : Policy analysis
Analysis and Decision-making based on Analytic Hierarchy Process(AHP)
With thankful acknowledgement of valuable resourecs from KDI PIMAC

12. Feasibility Assessment
7/11/2018
Feasibility Assessment
Structuring an Analytic Hierarchy Process
Overall Feasibility
Economic Analysis
Policy Analysis
Consistency with higher level of plans
Conformity with relevant plans
Strong political Will
Preparation degree
Project Risks
Availability of funding
Environmental Impact
Impact on Employment
Balanced Regional Development Analysis
Level of regional development
Ripple effect on regional economy
Level 1
Level 2
Level 3
(*Translated from KDI PIMAC PFS Guideline
With thankful acknowledgement of valuable resources of Korea Development Institute
With thankful acknowledgement of valuable resourecs from KDI PIMAC

13. Feasibility Assessment
7/11/2018
Feasibility Assessment
How each analysis element is weighted and scored for AHP
Economic Analysis
Benefit –Cost ratio
(IRR, NPV)
Policy Analysis
Consistency of relevant plans and policy
Risks in project implementation
Effect on employment
Balanced
Regional Development
Regional development index
Ripple effect on regional economy
40-50%
25-35%
20-30%
Quantitative analysis
Higher score for
- higher B/C ratio
Qualitative analysis
Higher score for
high consistency, strong will and well-preparedness
less obstacle in funding and environment
higher effect on employment
Quantitative analysis
Higher score for
- less developed region
- higher added value
With thankful acknowledgement of valuable resourecs from KDI PIMAC

14. Feasibility Assessment
7/11/2018
Feasibility Assessment
Overall feasibility decision in AHP
Feasibility assessment is based on the consistency between evaluators and AHP scores.
If 6 evaluators all agree with the project implementation and AHP score is higher than 0.5 : the project is feasible
If only 3 evaluators agree with the project while 3 evaluators don’t agree with the project implementation, the AHP score should be much higher than 0.58 to be feasible.
If Project is assessed as feasible in Feasibility Assessment stage, then subject to VFM assessment
To avoid arbitrary decisions
Organize 6 evaluator’s responses among 8
- evaluators consist of senior-level experts (demand, cost estimation) who participates to an Economic analysis, PIMAC members(project manager and executives) and independent advisers
Excluding the highest and the lowest evaluators.
With thankful acknowledgement of valuable resourecs from KDI PIMAC

15. VFM Assessment Quantitative VFM
7/11/2018
VFM Assessment
Quantitative VFM
In quantitative VFM, if the total government’s cost under PFI incurs less than that under PSC, it is decided that PFI has “Value for Money”.
The government base cost under the PSC and PFI are compared and for fair comparison, some risk adjustment is made.
For example,
- The risks related to the cost overrun which incurs under the traditional procurement are quantified to the PSC.
PFI in unsolicited project is adopted from private party’s proposal, however demand is re-estimated and applied to PFI so that PIMAC can analyze how much governmental cost would incur.
With thankful acknowledgement of valuable resourecs from KDI PIMAC

16. VFM Assessment Qualitative VFM analysis Eligibility for PPP
7/11/2018
VFM Assessment
Qualitative VFM analysis
Eligibility for PPP
-Is included in the eligible infrastructure facilities indicated in Article 2 of PPP Act?
- Does it comply with the national infrastructure plan or national investment policy?
- Line ministry’s will and preparedness to implement (manage or supervise) the project
- Objective of the project clearly stated?
- Output specification of the performance of the project clearly presented?
- Does it have the performance enhanced in comparison with conventional procurement?
- Effective management under a PPP contract?
Effectiveness and public interest
- Does it induce competition?
-Independent management or operation of existing infrastructure facilities
-Is another option available to users other than using user-fee facilities?
With thankful acknowledgement of valuable resourecs from KDI PIMAC

17. VFM Assessment Qualitative VFM analysis
7/11/2018
VFM Assessment
Qualitative VFM analysis
Facilitation of PPP implementation
- Political, social, environmental aspects of a PPP project
- Does the project produce excessive or unfair benefit or burden to any party?
Impact of risk allocation
- Risk allocation to the private partner?
Ripple effect
- Does project influence on greater competition?
- Private partner’s influence on financial market by introducing more developed financing skills?
Unique characteristics
- Infringement of the protected intellectual property rights
- National security issues related to project
With thankful acknowledgement of valuable resourecs from KDI PIMAC

18. Conclusion
Key features
Unified framework between Public and Private Financing project in Feasibility Assessment
Provide a clear justification to a PPP project
Fairly judge both traditional and PPP project
Approaches based on social and economic value to the Country
Unified framework between Public and Private financing Project in Identification phase
Economic analysis and Policy consideration applied to both
Linkage between project identification and financial management
Mid-term investment plan by line ministry should be consistent with National Finance Management Plan by MOSF
Independent PPP unit
Continuous research on Quantitative analysis
Supplement of Qualitative analysis for overall credibility and justification
With thankful acknowledgement of valuable resources of Korea Development Institute

19. Thank you to our partners and funders