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Bank financial investment facility world loan world

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Unformatted text preview: Investment Facility (Development Finance Company) Loan/Investments Repayments/Returns Project Company A Loan/Investments Project Company B World Bank-Financed Equity World World Bank Loan Repayment Loan Project Agreement Country Equity Investment (Goods and Services) Return on Equity Project Revenues Project Company Output Purchaser World Bank-Financed “Take-or-Pay” World Financed and Other Contracts World Bank Loan Repayment Loan Country Project Agreement Loan Proceeds Government Purchaser Output Payment under “Take-or-Pay”/ “Take-and-Pay” Contract Project Company Equity Investment Shareholders World Bank-Financed Put Option World World Bank Contingent Loan Repayment Contingent Loan Country Loan Proceeds Project Agreement Repayment Government Agency Put Option Project Financier Financing Repayment/Returns Project Revenues Project Company Purchaser Output World Bank-Financed Third-Party Guarantee World World Bank Contingent Loan Repayment Contingent Loan Country Loan Proceeds Project Agreement Funding Agreement Third-Party Guarantor Guarantee Project Financier Financing Repayment/Returns Project Revenues Project Company Purchaser Output World Bank-Financed Country Guarantee World World Bank Contingent Loan Repayment Contingent Loan Country Loan Proceeds Guarantee Project Financier Financing Repayment/Returns Project Revenues Project Company Purchaser Output IBRD “Partial Credit” Guarantee Guarantee Through a Put Option Through Indemnity IBRD Loan Country Put Options Commercial Lenders Loan Loan Repayment Project Revenues Project Company Output Equity Investment Share Holders Purchaser IBRD “Partial Credit” Guarantee Indemnity IBRD Loan (or Counter-Guarantee) Country Guarantee Commercial Lenders Loan Loan Repayment Project Revenues Project Company Output Equity Investment Share Holders Purchaser IBRD “Partial Risk” Guarantee Indemnity IBRD Loan (or Counter-Guarantee) Guarantee Country Undertakings to Project Company for Commercial Lenders Commercial Lenders Loan Loan Repayment Project Revenues Project Company Output Equity Investment Share Holders Purchaser IDA Credit IDA IBRD Credit Repayment Credit Country Project Agreement Sub-Loan Sub-Loan Repayment Project Revenues Project Company Output Equity Investment Share Holders Purchaser MIT OpenCourseWare http://ocw.mit.edu 1.040 Project Management Spring 2009 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms. 1.040/1.401 1.040/1.401 Project Management Spring 2009 Privatization Fred Moavenzadeh James Mason Crafts Professor Massachusetts Institute of Technology Privatization Privatization Transfer of responsibilities from public sector to private sector for: Construction Construction Operation Operation Management Management Maintenance of Infrastructure Maintenance Sectoral Allocation of Project Responsibilities by Stages PUBLIC PRIVATE Own-Finance-Construct-Operate ------------------ Own-Finance-Construct Operate Own-Finance-Operate Construct Own-Finance Construct-Operate ---------------- Own-Finance-Construct-Operate Argument Against Public Ownership Argument Private Sector Provides Greater Incentive for Efficiency Private Public Managers Have Weak Performance Standards and Incentives Public Public Managers are Encouraged to Maximize Budgets Public Public Enterprises are not subject to Market Controls: Public Bankruptcy Bankruptcy Takeover Takeover Public Enterprises do not have to Borrow in the Capital Market Public Potential Advantages of Privatization Potential Reduce Public Sector Borrowing Requirements Reduce Transfer development risks to the private sector Transfer Increase operating efficiency Increase Promote market competition and accelerate growth Promote Reduce size of public sector Reduce Why Privatization? Why Economic Argument: Economic Lower Cost Lower Improved Quality Improved Increased Economic Choice Increased More Efficient Allocation of Resources More Ideological Argument Ideological Role of Government is to Oversee the Provision of Services, Role Not their Production Reduce Government Spending, Thus Limiting Government’s Reduce Role in the Economy as a Whole Proponents Argue that Private Sector is Driven by: is Competition Competition Lower Cost or Better Service Economy of Scale, Scope, and Experience Economy Easier Access to Capital Easier Incentive Driven Management Incentive Lower Unit Costs Upgrading Equipment and Facilities More Flexibility in Management Government Should Set Policies that make Private Sector Alternative Government More Attractive than Government Production Critics Argue that Privatization Creates: Critics Inequity or Distributional Effects Inequity Monopolistic Behavior Monopolistic Lack of Concern with Externalities Lack Disruption of Services Due to Bankruptcy Disruption Private and Public Sector Seem to Chase the Same set of Private Projects Many Have Argued that Privatization is Successful When: is The objectives are relatively narrow and are easily defined and The measured; i.e., providing a certain level of service; The product processes are familiar and observable at a low cost; The There is competition among private sector producers; There There is competent, honest government that insur...
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This note was uploaded on 07/25/2012 for the course ECON 111 taught by Professor King during the Spring '12 term at CSU Bakersfield.

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