Report No: AUS0000406 . Latin America Regional Conference: Cuentas Claras II: Transparent Government: Leveraging Private Sector Partnerships . Summary of Conference Proceedings December 21, 2018 . GGOLF LATIN AMERICA AND CARIBBEAN . Table of Contents Executive Summary of the Conference ........................................................................................................................... i The Panama Accord. ............................................................................................................................................................... ii Dissemination of the Event. .................................................................................................................................................... ii Acknowledgements ................................................................................................................................................................. ii Bank’s Team. ........................................................................................................................................................................... ii A. Background .............................................................................................................................................................. 1 a) Transparency and Accountability in Latin America and the Caribbean .......................................................................... 1 b) The Need to “Crowd in” the Private Sector .................................................................................................................... 3 c) The Need for Good Governance to Help Address Latin America’s Financing Gap. ........................................................ 4 B. Summary Conclusions Arisen from the Cuentas Claras Conference ............................................................................. 7 a) Development Context, challenges and possible solutions ............................................................................................. 7 b) Corruption as a binding constraint ................................................................................................................................. 8 c) Addressing Governance in infrastructure ....................................................................................................................... 8 d) Leveraging the use of modern technologies ................................................................................................................... 8 e) Transparency in the private sector. ................................................................................................................................ 9 f) Ensuring compliance in the private sector ...................................................................................................................... 9 g) Addressing challenges in PPPs ........................................................................................................................................ 9 h) Demystifying Political Risk Insurance: Mitigating Non-commercial Risk in LCR ........................................................... 10 C. Looking forward and opportunities...........................................................................................................................10 Annex I – Panama Accord .............................................................................................................................................11 Annex II – Media Coverage ...........................................................................................................................................15 ACRONYMS CONAMER Comisión Nacional de Mejora Regulatoria (México) DRM Domestic Resource Mobilization FCI Finance, Competitiveness and Innovation GGI Infrastructure Practice Group GGOLF Governance Global Practice-Latin America-Financial Management GGP Governance Global Practice GPs Global Practices IFC International Finance Corporation IMF International Monetary Fund INT Institutional Integrity Department IPSASB International Public Sector Accounting Standards Board LAC / LCR Latin America and the Caribbean region MDBs Multilateral Development Banks MIGA Multilateral Investment Guarantee Agency MTI Macroeconomics Trade and Investment Global Practice OAS Organization of American States OECD: Organization for Economic Cooperation and Development PPPs Public-Private Partnerships SOE State-Owned Enterprises WBG World Bank Group WCD: Women’s Corporate Directors (Panama) WGI Worldwide Governance Indicators Executive Summary of the Conference Cuentas Claras II: Transparent Government: Leveraging Private Sector Partnerships Panama City, Panama, June 13 – 14, 2018 The second edition of the LCR Regional Conference on Transparency and Accountability “Cuentas Claras”, held in Panama City from June 13 to 14, was a great success. The conference, organized by the World Bank Group in collaboration with the Government of Panama and the Organization of American States (OAS), served as a platform to launch the Panama Accord (full text is included as Annex I, Press Release can be accessed through this link). The conference gathered over 140 participants from 19 countries, including representatives from governments, the private sector, standard-setter entities, academia, the media, NGOs, and international organizations with the objective of fostering dialogue on the importance of transparency, accountability, and financial regimes in mobilizing private capital for development. Opening remarks were delivered jointly by LCRF VP Jorge Familiar, Vice President of Panama, Ms. Isabel De Saint Malo, and the Secretary General of the OAS, Mr. Luis Almagro. "A transparent government and accountable institutions are essential to provide certainty, maximize finance for development and reduce poverty." said Jorge Familiar at the opening of the conference. "Through the Panama Accord, countries in Latin America and the Caribbean could make concrete progress in enhancing governance, fostering transparent investment and showing that the response to corruption and impunity will be zero tolerance" added Luis Almagro. De Saint Malo concluded the opening session by highlighting that transparency, strong institutions and good governance are elements required to ensure that investments in development reach the population in an equitable manner. The Cuentas Claras conference was successful in many dimensions and very well organized in terms of structure and relevance of the technical discussions. The thematic agenda included sessions centered on the importance of improving governance by creating an enabling environment and though fostering increased levels of private investment in development (e.g. the use of modern technology to combat corruption and stopping illicit financial flows; governance of infrastructure - including regulatory frameworks for PPPs and SOEs; governance and the rule of law; the importance of comprehensive financial reporting for investment decisions and risk management, among other themes). As part of the panel discussions, IFC representatives focused on how important transparency and accountability are for the private sector in terms of investment decisions, especially in the infrastructure sector. Similarly, MIGA representatives explained how innovative applications of political risk insurance and credit enhancement products can help private investors manage political risk and navigate emerging markets—objectives at the heart of MIGA's mission. After two days of engaging discussions among participants, the main conclusion of the conference, as emphasized by Jim Brumby, GGP Director, in his closing remarks, is that the private sector is central to the ability of governments to deliver services. The key constraint in funding development is not the lack of finance itself, but rather the weaknesses in governance that limit the availability of such funds for development. Building the relevant institutions would take time but would help create conditions favorable to the private flow of funds. Any key actions in this regard should include the strengthening of financial reporting regimes to provide information for decision making and for managing risks. The conference Agenda and presentations can be accessed in the Cuentas Claras webpage. i The Panama Accord. This accord aims at guiding the public sector in promoting the use of socially responsible private capital and thus contributing to economic development. It should help guide future actions in the region on how to promote greater collaboration between the public and private sectors for the sake of improving transparency and building the institutions that will help improve trust and confidence. The Panama Accord, with its 3 pillars and 9 actions, has the objective to galvanize all stakeholders -governments, private sector actors, and civil society- to seek ways to enhance their collaboration and improve governance to maximize finance for development. Its 3 key pillars reflect the recommendations of the conference to governments in the region: (i) Improve Quality and Transparency of Fiscal and Financial Information; (ii) Strengthen Accountability; and (iii) Enhance Stakeholder Collaboration. Going forward, the Bank aims to work together with the OAS in the region to frame financial and technical assistance to partner countries in line with the main pillars of the Panama Accord and the Regional Strategy. Dissemination of the Event. The conference was widely covered by the Press and the Media, highlighting the launch of the Panama Accord as a reflection of the enhanced fight against corruption in the region and zero tolerance for it. The main page of the Economy section in Panama’s La Prensa led the way, with its headline “Transparency, a key to attracting more investment”. The subheading stated that a higher level of confidence and trust in institutions was necessary to leverage the participation of the private sector in financing public sector development projects. The conference received wide coverage on World Bank websites, including articles in Inside LCR and the Today’s home page. In addition, the opening session and high-level panel were web-streamed live and there were several interviews covered through Facebook Live. Recordings of plenary sessions, interviews, pictures and news clipping from the conference can be accessed through the following link . Acknowledgements. We take this opportunity to thank the LCR VP's front office (Jorge Familiar, Humberto López, Federico Baechli, Alejandra Viveros and Sandra Sears); GGP Senior Director’s front office (Debbie Wetzel, Jim Brumby and Mike Roscitt); Central America management team and Panama Country Office (Seynabou Sakho, Abel Caamaño, Andrea Guedes, Fritzi Koehler-Geib, Sara Paredes, Kristell Parchment and Miguel Polanco); IFC Senior Managers (Gabriel Goldschmidt, Ceri Lawley and Luc Grillet), MIGA team (Merli Baroudi, Bexi Jimenez Motta and Jorge Rivas) and other colleagues from IFC, and other Bank staff from the GGP (Robert Taliercio, Marco Larizza and Ian Hawkesworth) as well as staff from other GPs (GGI, MTI, and FCI) and INT for their tremendous support as speakers and/or moderators in different sessions of the event. Bank’s Team. The organizing committee was co-led by José Rezk and Joseph Kizito, and included other members of GGOLF’s team (Patricia Mc Kenzie, Gilma Unda, Antonio Blasco, Alejandro Solanot, Juan Carlos Serrano, Daniel Nogueira-Budny, Paola Cordovez and Lily Franchini) and the LCR Communications Team (Cynthia Flores, Angels Masó, Anahí Rama Martínez, Carlos Molina, Jessica Belmont, María José Gonzalez Rivas and Julio Cesar Casma). This document presents a summary of the background and the main issues that were discussed during the conference and is primarily based on the presentations and talks that were delivered on that occasion, although not necessarily in the chronological order in which they were discussed. ii A. Background 1. The main objective of this conference was to identify and put into action transparency, accountability, and financial reporting initiatives that can lower investment risks, better leverage the private sector in development spending, and thus maximize financing for development (MFD). Cuentas Claras 2018: Gobierno Transparente en Colaboración con el Sector Privado builds on the first Cuentas Claras conference and the 2017 CReCER, which promoted dialogue between high ranking government officials, representatives of major institutional investors, and key policy- and decision-makers in the accounting and audit professions and beyond. With this conference, Cuentas Claras has been institutionalized as a biennial conference, on the off-years of CReCER (which currently takes place every other year). 2. The Latin America and the Caribbean region (LCR) suffers from a large financing gap, increasing debt and contingent liabilities, and heightened fiscal risks, leading to the need for new sources of development financing. Given the inability of official development assistance (ODA) to address this gap, the private sector needs to be tapped to invest in development spending. However, greater private sector involvement in such financing is predicated upon the public sector addressing governance issues. 3. The conference aimed at addressing this issue by exploring transparency, accountability, and financial reporting interventions that can improve the investment climate, strengthen domestic financial markets, and promote sound and sustainable financing practices regarding debt sustainability so as to foment greater private sector finance for economic growth in the region. This involves better understanding key issues related to trust in government institutions, transparency, and accountability that were addressed in those two conferences, as well as focusing on specific accounting, auditing, and financial management issues preventing greater private sector involvement in development financing. a) Transparency and Accountability in Latin America and the Caribbean 4. Over the last two years, corruption scandals have brought to the fore incidences of poor governance in many LCR countries, as well as business practices that allow corruption to flourish (especially in the implementation of public investments). At the same time, these scandals exposed the role that enhanced governance measures can play in bringing to light such corruption. Indeed, Brazil’s drive to implement International Public Sector Accounting Standards (IPSAS) helped to make the Government’s financial statements more transparent, while reforms in the methodologies used to audit these statements led to a more informative audit report, which then served as the primary basis for legislative consideration of the impeachment of the former president; the current president narrowly escaped being investigated by the Supreme Court for corruption in October 2017. In Guatemala, the former president and his vice resigned over their role in a graft scandal, La Línea, in which importers allegedly paid bribes to evade customs duties. 1 5. Throughout the region, citizens have increasingly demanded better public service delivery from those who govern as a result of greater and more transparent information on the stewardship of resources by the Government. The investigation of Odebrecht, a Brazilian construction company with operations in many countries, revealed numerous cases of corruption at the highest levels in Argentina, Colombia, Dominican Republic, Ecuador, Mexico, Panama, Peru, and Venezuela. This massive scandal—nearly US$800 million in bribes to politicians and political parties throughout the region, and even to Angola and Mozambique, in order to win business contracts—signals the extent and cross-border nature of corruption. It also points to the need for more strategic, integrated efforts to combat it. 6. Corruption has a corrosive effect on inclusive and sustainable growth, hampering governments’ ability to achieve the World Bank’s twin goals of eradicating extreme poverty and boosting shared prosperity. It generates public discontent, leading to increased distrust of government, and discourages private investment. Trust is an efficient means for lowering transaction costs. The widespread distrust in institutions in the private and public sectors means that significant transaction costs are incurred to obtain reliable information; this inefficiency is costly in terms of unrealized economic transactions. Table 1: 2017 Corruption Perceptions Index (CPI) for LCR Countries Country 2017 CPI 2016 CPI 2015 CPI Change from Rank (out of Score Score Score 2016 180) Uruguay 70 71 74 -1 23 Barbados 68 61 - +7 25 Chile 67 66 70 +1 26 Bahamas 65 66 - -1 28 Costa Rica 59 58 55 +1 38 Saint Vincent and The 58 60 - -2 40 Grenadines Dominica 57 59 - -2 42 Saint Lucia 55 60 - -5 48 Grenada 52 56 - -4 52 Jamaica 44 39 41 +5 68 Suriname 41 45 36 -4 77 Trinidad and Tobago 41 35 39 +6 77 Argentina 39 36 32 +3 85 Guyana 38 34 29 +4 91 Brazil 37 40 38 -3 96 Colombia 37 37 37 0 96 Panama 37 38 39 -1 96 Peru 37 35 36 +2 96 Bolivia 33 33 34 0 112 El Salvador 33 36 39 -3 112 Ecuador 32 31 32 +1 117 Dominican Republic 29 31 33 -2 135 Honduras 29 30 31 -1 135 Mexico 29 30 31 -1 135 Paraguay 29 30 27 -1 135 Guatemala 28 28 28 0 143 Nicaragua 26 26 27 0 151 Haiti 22 20 17 +2 157 Venezuela 18 17 17 +1 169 Source: Transparency International 2 7. The World Bank has been a key player in promoting transparency and accountability in LCR. Its 2016 Cuentas Claras Conference highlighted the continuing importance of building trust in the region’s institutions as a way of enhancing transparency and accountability. Against this backdrop, the 2017 CReCER Conference centered on the ways in which private and public sector accounting and financial reporting help foster trust in markets and societies to drive sustainable development. It examined the extent to which the lack of trust has been the underlying factor in some of the highest profile corruption cases in the region, and what efforts are being undertaken to address any trust deficit in the private and public sectors. 8. Cuentas Claras 2018 builds off of these two conferences to foment dialogue on the ways in which transparency, accountability, and financial reporting regime interventions can support the “crowding in” of the private sector. It highlighted the World Bank’s central role in the regional dialogue on good governance and its critical role in enhancing development—in particular, by encouraging greater private investment in development. b) The Need to “Crowd in” the Private Sector 9. In order to achieve the Sustainable Development Goals (SDGs), the World Bank and other multilateral development banks (MDBs) have pledged to catalyze greater development investment and mobilize private capital. 1 A direct result of the United Nations’ Third International Conference on Financing for Development 2 and its global framework for financing sustainable development, this new strategy involves the World Bank leveraging its resources to MFD by optimizing the use of scarce public resources and “crowding in” the private sector. To this end, MDBs committed to collectively increase the amount of private financing mobilized by 25-30 percent over the next three years, up to 2020. 10. The MFD paradigm responds to the G20 interest in attracting private investors to the infrastructure and other sectors. This is especially true for long-term institutional investors, such as pension, insurance, and mutual funds, as well as sovereign wealth funds.3. As is, Organization for Economic Cooperation and Development (OECD) pension funds (which amount to an estimated US$30 trillion) and insurance funds face staggering gaps and potential insolvency unless they can obtain higher yields on their savings. Many long-term institutional investors are seeking to work with hedge funds and private equity funds to deploy their assets under management (AUM) to infrastructure portfolios for these higher yields. 11. The World Bank Group (WBG) has developed a common framework for MDBs to increase levels of private investment in support of development.4 Support to scale up private-finance mobilization is being focused around: (i) strengthening investment capacity and policy frameworks at national and subnational levels, (ii) enhancing private sector involvement and prioritizing commercial sources of financing, and (iii) enhancing the catalytic 1 The World Bank and IMF. 2017. “Maximizing Finance for Development: Leveraging the Private Sector for Growth and Sustainable Development.” See also African Development Bank et al. 2015. “From Billions to Trillions: Transforming Development Finance – Post- 2015 Financing for Development: Multilateral Development Finance.” 2 Third International Conference on Financing for Development: Time for Global Action. 2017. Addis Ababa, Ethiopia. 3 Jan Walliser. 2018. “Foresight Africa Viewpoint – Africa’s Partnership with the G-20: Compact with Africa in 2018.” Brookings Institute. 4 This is currently being piloted in Cameroon, Côte d’Ivoire, Egypt, Indonesia, Iraq, Jordan, Kenya, Nepal, and Vietnam. 3 role of MDBs themselves.5 By doing so, the World Bank can leverage the private sector for economically beneficial, sustainable investments that contribute to development goals while optimizing the use of scarce public resources given limited fiscal space, capacity, and governance. Box 1: MDBs’ Commitments on how to Crowd in Private Finance 1) Work with client countries to help them strengthen their governance of sustainable infrastructure, including around planning, prioritizing, budgeting and disclosure. Efforts to support countries by means of project preparation facilities and capacity building will be further enhanced. 2) Review the range of credit enhancement products and expand where feasible. 3) Review and strengthen internal incentives for mobilization of private sector financing. MDBs will also work to align incentives so as not to crowd-out private sector financing where it would be appropriate. 4) Identify additional opportunities to work together and provide complementary advisory and financing products where appropriate. 5) Pursue opportunities for standardization, harmonization, and standard-setting, where appropriate. Source: “Joint MDB Statement of Ambitions for Crowding in Private Finance” (emphasis added) 12. Addressing the public sector’s fiscal needs in such a way is particularly important for Latin America, where a significant infrastructure gap is holding back the region’s ability to end extreme poverty and boost shared prosperity. 6 Greater private sector involvement would also help ensure that the public sector is not pushed into unsustainable levels of debt and contingent liabilities. To encourage private investment in LCR, however, the public sector needs to work to improve transparency, accountability, and financial reporting regimes. c) The Need for Good Governance to Help Address Latin America’s Financing Gap. 13. Weak governance and an insufficient availability of public resources have contributed to a widening gap between the demand and supply of private sector funds for development investment. The IMF (2017) documents the pressing need to improve governance and curb corruption in LCR to provide a stable investment environment more conducive to private sector involvement in development finance.7 Addressing these concerns would help mitigate many of the risks threatening the region’s economic recovery, as well as directly address the need for greater quality and quantity of infrastructure throughout the region. 14. Worldwide estimates of the gap in infrastructure investment range from US$3-6 trillion, in large part due to limited private investment in the sector. Of the US$3 trillion currently invested in infrastructure, only US$400 billion currently comes from the private sector. LCR is no exception in respect to the need to invest substantial resources in infrastructure to maintain reasonable levels of growth (the investment gap is estimated at US$ 5 G20-IFA Working Group. 2017. “Principles of MDBs’ Strategy for Crowding -in Private Sector Finance for Growth and Sustainable Development.” See also World Bank. 2017. “Forward Look: A Vision for the World Bank Group in 2030 – Progress and Challenges.” 6 World Economic Forum (WEF). 2018. The Global Competitiveness Report 2017-2018. 7 International Monetary Fund (IMF). 2017. Regional Economic Outlook. Latin America and the Caribbean: Stuck in Low Gear . October 13. 4 180 billion per year).8 Such investment would also be necessary to address dissatisfaction with the quality of existing assets, which is lower than that in advanced economies and Asian countries with high rates of growth. Investment in infrastructure averaged 2.4 percent between 1992 and 20139. Estimates of the additional investment required approximate 2.0– 2.5 percent of GDP, or US$120–$150 billion a year (based on the region’s 2013 GDP).10 Figure 1: Global Competitiveness Report (2017-2018) Infrastructure Pillar: Score 1-7 (Best) 7 6 4.9 4.8 4.7 5 4.3 4.3 4.2 4.1 4.1 4.1 4 3.9 3.8 3.8 3.8 4 3.6 3.3 3.2 3 2.6 2.6 2 1 Source: World Economic Forum 15. LCR’s infrastructure gap complicates the World Bank’s twin goals of ending extreme poverty and boosting shared prosperity. Unmet infrastructure needs have been consistently identified across the World Bank’s portfolio as a top constraint to growth and doing business. Findings from an Inter-American Development Bank- (IDB) sponsored online survey11 of attitudes of 33,500 Latin American and Caribbean citizens toward sustainable and inclusive infrastructure highlight the importance of infrastructure developments to well-being. 16. This gap has grown as traditional sources of financing for infrastructure have reduced relative to needs. Fiscal deficits and an increasing debt-to-GDP ratio have lowered the prospects for increased funding for investment projects from public funds. In addition to the constraints on public funds, the potential of traditional bank lending has diminished as a result of the financial crisis and a sterner regulatory environment that curtails the horizons over which banks can lend. Furthermore, the extent of the gap is such that ODA is incapable of addressing it. This is problematic, given the critical role that the quantity and quality of public infrastructure plays in the 2030 Sustainable Development Agenda. 17. The lack of available financing calls for new sources for the required funds . Attention has increasingly been paid to the private sector as the source with the greatest 8 Mobilizing Private Finance for Development in Latin America and the Caribbean Abousleiman, Issam A.; Thompson Araujo, Jorge (World Bank, Washington, DC, 2018) 9 Investment in other regions and countries was significantly higher: 8.5 percent in China, 5.0 percent in Japan and India, and about 4.0 percent in other industrial economies (Australia, Canada, Croatia, the Republic of Korea, and New Zealand, and among others). 10 World Economic Forum (WEF). 2018. The Global Competitiveness Report 2017-2018. 11 Tracy Betts. 2015. “Filling the Infrastructure Gap in the Americas – What do People Really Want?” Inter-American Development Bank. 5 untapped potential. Institutional investors have seen the amount of assets under their management increase over the last few years to their current level of US$106 trillion. Current returns on a substantial proportion of these assets are lower than optimal levels, given the returns promised to many of their investors. It is estimated that more than US$10 trillion are currently invested in negative interest rate bonds, US$24 trillion in low-yield government securities, and US$5 trillion sitting in cash, all waiting for better investments with higher returns. Institutional investors are thus seeking higher yielding investments in an attempt to match the level of returns promised earlier to beneficiaries or policyholders, when financial markets were delivering higher returns. The infrastructure sector is seen as a good option to offer such a return (Chile is one of a handful of countries worldwide in which institutional investors are active in the sector), in addition to giving investors the opportunity to diversify their portfolios and to achieve a better time horizon match. 18. What is holding the private sector back is public sector opacity and poor financial reporting regimes. Just as important as the infrastructure investment gap is the low effectiveness and efficiency of project delivery—inherently governance issues.12 Firms across LCR point to a number of governance-related issues dampening investment opportunities and diminishing the region’s investment climate. Such issues, identified through recent World Bank Enterprise Surveys13, include pervasive corruption, lack of government transparency, onerous tax rates and administration, high rates of informality, complicated business licensing and labor regulations, and political instability. 19. Transparency and good governance are increasingly seen as critical ingredients in economic development. The Worldwide Governance Indicators (WGI) on voice and accountability, rule of law, control of corruption, and others are directly associated with economic development. More specifically, these composite indicators make the case that more open and well-functioning political systems provide citizens with greater opportunities to hold their governments to account to deliver better policies and public services; such outcomes allow for transparent, rule-based societies that are more conducive to private sector investment.14 20. Cuentas Claras 2018 surfaces these issues and aims at identifying public sector enhancements in accounting, transparency, and financial reporting regimes that can better help “crowd in” the private sector. Such interventions include anti-corruption initiatives, targeted support for accountability institutions, standardization of data disclosure, improved and more comprehensive government accounting and corporate financial reporting, enhanced domestic resource mobilization (DRM), rationalization of business and labor laws, mitigation of fiscal risks, state-owned enterprise (SOE) governance, and the overall strengthening of the public-private interface. 12 Global Infrastructure Initiative. 2017. Singapore 2017 Summit: New Solutions for Global Infrastructure . McKinsey & Company. 13 Business environment obstacles for firms taken from World Bank Group Enterprise Surveys for Dominican Republic (2016), El Salvador (2016), Honduras (2016), Nicaragua (2016), Bolivia (2017), Ecuador (2017), and Paraguay (2017). 14 Daniel Kaufmann and Aart Kraay. 2017. “Measuring the ups and downs of governance.” 6 21. Cuentas Claras 2018 also aims at unearthing tangible examples of the way in which specific governance interventions have allowed for increased private sector investment, to serve as case studies to be adapted and piloted elsewhere in the region . With a focus on these specific, actionable recommendations, it proposes ways of piloting such approaches throughout LCR in an effort to broaden and deepen the region’s “crowding in.” 22. Cuentas Claras 2018 contributes to the World Bank’s twin goals, as well as the LCR regional strategy and GGP strategic objectives. Identifying ways of leveraging the private sector for development financing is critical to the Bank’s ability to achieve its ambitious goals for 2030; it will be nearly impossible for the Bank to achieve the SDGs by relying on public funding alone. Promoting MFD will help contribute to the World Bank’s LCR draft regional strategy, which includes Supporting the Foundations for Growth Recovery as one of two priority areas. Greater private sector involvement will address fiscal imbalances; foster private sector development, innovation, and jobs; and strengthen infrastructure services. Finally, it directly contributes to achievement of the GGP’s principal objective of helping build capable, effective, accountable, transparent, and inclusive institutions that promote effective service delivery, facilitate private sector growth, and earn the confidence of citizens. B. Summary Conclusions Arisen from the Cuentas Claras Conference 23. The Cuentas Claras 2018 marked a milestone in bringing together, on the one hand the World Bank Group, the OAS and the Government of Panama, and on the other, representatives from a wide range of institutions both in the private and public sectors to discuss issues related to the need to increase transparency and accountability in government in order to leverage more private sector financing. a) Development Context, challenges and possible solutions 24. LCR needs to grow faster, and in a more sustainable and inclusive manner. Key challenges preventing more sustainable growth include not only i) the low regional productivity and competitiveness, ii) a lack of access to finance, iii) inefficient infrastructure, but also, and arguably most importantly, iv) poor governance. Neither the public sector nor the private sector alone can address the challenge of generating inclusive growth. A concerted and coordinated effort based on transparent rules is required. 25. WBG is intensifying efforts to help countries address the challenges of financing development with a new approach: Maximizing Finance for Development (MFD). This systematic strategy requires the WBG to help countries finance development resources without taking on too much fiscal risk by drawing more on private financing and sustainable private sector solutions to provide value for money and meet the highest socio-environmental and fiscal responsibility standards. 26. The success of this new approach depends on i) whether governments create effective environments that are conducive for businesses, ii) whether they can address market failures, and iii) whether they can build transparent, rules-based societies that further enable private sector investment. 7 b) Corruption as a binding constraint 27. Not only is corruption a social injustice, but it is also one of the scourges that is gnawing away at the ability of governments to provide services effectively and efficiently. This weakens the business environment in many of our countries in LCR, thus preventing the creation of jobs and the achievement of sustainable development. 28. Governments must show themselves to be faithful and honest administrators of the reduced public resources available to them before they can be entrusted with the additional funds that they seek from the private sector. 29. Transparency and accountability are fundamental elements for development as they foster the trust and confidence not only on the part of citizens but also that of investors. 30. However, there are three key issues to keep in mind about the fight against corruption: • First, that the fight against corruption is not one that is the sole responsibility of governments. The private sector should play a big role. • Secondly, there should be zero tolerance for corruption. We should not be resigned to accepting any level of corruption however minimal this is. • Thirdly, governments should avoid the temptation of increasing regulation and bureaucracy solely as a means of combatting corruption. A good balance should be struck between strengthening government procedures on the one hand and keeping an agile operational environment on the other. c) Addressing Governance in infrastructure 31. This session was focused on the governance-related issues that dampen private investment opportunities in infrastructure. Poor governance of infrastructure includes (but is not limited to): incomplete long-term planning and strategies, opaque accounting practices, poor coordination across levels of government, unstable regulatory frameworks, limited monitoring of infrastructure performance (including value depreciation), weak institutional capacity, financing sustainability, uninformed appraisals and decisions, political economy dynamics, corruption and/or capture, and a lack of consultation with the broader community during project preparation. d) Leveraging the use of modern technologies 32. The conference also highlighted the tools that are increasingly available to various actors in the fight against corruption. The session on technological innovations that can be used in enhancing transparency, combatting corruption and stopping illicit financial flows effectively highlighted the way in which technology: • Facilitates the investigation of illicit financial transactions and cases of suspected corruption; • Allows for more transparent, efficient and effective procurement of public goods and services; 8 • Provides an effective platform for building coalitions with civil society for holding public officials to account for the use and management of public resources; and • Has the potential to reduce the need for human intervention in government transactions and thus the opportunities that this creates for corrupt practices. e) Transparency in the private sector. 33. The WBG is committed to playing a key role in promoting improvements in the business environment and investment climate in the region as it is an essential prerequisite for the MFD approach to succeed. There are success stories in LCR of governments taking the necessary steps to create solid and transparent frameworks to rally private sector investment: • Argentina’s Renovar: The example of Argentina taking the necessary steps to create and environment for the reemergence of its power sector. A description of IFC and other institutions that helped organize a transparent and clear framework for renewable-energy auction, including setting up the process to attract international bidders. • Colombia’s 4G Auctions: The steps that Colombia took to create one of the most ambitious infrastructure programs to date and crowd-in private sector investors; and how, with the help of the WBG, they created the right framework for this program to succeed. Transparency should also not be limited to the public sector. There is also a need to strengthen corporate governance in the private sector at the company level. Given that the lack of transparency at that level can also harm the prospects of increased investments by the private sector. f) Ensuring compliance in the private sector 34. The recent corruption scandals have also rendered companies more cautious on the counterparts they do business with. The conference has highlighted: • increasing attention paid to conducting integrity due diligence; • the risk of penalties, sanctions, and potential debarments in the event of fraud or corruption in business relationships; • and best practices for setting up robust and meaningful controls and compliance systems. Certainly, the best compliance programs should include some basic features such as customization to specific industry, operational and geographical circumstances, the need to develop a deep understanding of company’s operations and interactions with government officials; integration within the company’s business processes; setting the tone at the top in order to strengthen the compliance culture; and ensuring adequate consequences for any breaches of the compliance program. g) Addressing challenges in PPPs 35. Risks involved with the lack of transparency: fosters private sector corruption, leads to market inefficiencies, dampens investment opportunities. Private sector requires accurate and 9 timely information on how governments will operate not only tomorrow, but 20-30 years down the line (need to develop and maintain a strong, pro-market reputation and institutionalize long-term planning). WB is developing tools to help mitigate some of these risks arising from a lack of transparency. A recommendation arisen from the discussions was the need ensure a proper division or responsibilities between the assessment of risks in PPP contracts and the implementation of the projects. 36. Unsolicited bids from the private sector are never good candidates for PPPs. When a firm designs a project itself, there are series issues of information asymmetries at hand. This is particularly the case at the subnational level (as subnational entities generally have low capacity). If governments do end up doing this, they should at least make the process competitive. h) Demystifying Political Risk Insurance: Mitigating Non-commercial Risk in LCR 37. Private investors could channel billions more dollars towards sustainable projects in developing countries yet concerns about committing to long-term infrastructure projects or entering into new and unfamiliar markets and sectors have been factors preventing them from doing so. • Innovative applications of non-commercial risk insurance and credit enhancement products can help investors alleviate concerns about committing to long-term infrastructure projects or entering into new and unfamiliar markets and sectors. • We learnt about MIGA’s mission to help private investors manage political risk and navigate emerging markets. • Non-commercial risk mitigation products play a key role in MFD by promoting FDI in LCR and helping investors obtain access to funding sources with improved financial terms and conditions. • Non-commercial Risk Insurance and Credit Enhancement products can de-risk private sector investments. • Panama Metro project: great regional example of applying credit enhancements. C. Looking forward and opportunities 38. The main conclusion of the conference is that the key constraint in funding development is not the lack of finance in itself but it is the weaknesses in governance that limit the availability of such funds for development. If you build the relevant institutions, the funds will flow, and any key actions to do this should include the strengthening of financial reporting regimes to provide information for decision-making and managing risks. 39. The Panama Accord, with its 3 pillars and 9 actions, should help guide future actions in the region on how to promote greater collaboration between the public and private sectors for the sake of improving transparency and building the institutions that will help improve trust and confidence. 10 Annex I – Panama Accord Cuentas Claras 2018 - Transparent Government: Leveraging Private Sector Partnerships Panama Accord: Promoting Better Governance to Mobilize Finance for Development in Latin America & The Caribbean June 13,2018 11 Preamble Good governance and accountable institutions are critical for poverty reduction and development effectiveness. There is a clear correlation between aggregate measures of governance and per capita income across countries. The ability of governments to effectively provide public goods, to support an environment that can generate jobs and growth, to address market failures and to engage citizens in the process remains fundamental – and allows for transparent, rule-based societies that further enable private sector investment. Given that countries in the region have a significant financing gap in development spending, and that development finance alone cannot address this gap, efforts to improve governance by creating an enabling investment environment are bound to foster increased levels of private investment in support of their development goals. Efforts to improve the investment climate in the region through enhanced transparency and accountability are more likely to succeed if there are robust and reliable fiscal and financial reporting regimes, and transparent mechanisms for the development of public policy. Transparency is a fundamental prerequisite for building trust among citizens. Governments should increase their efforts to provide all stakeholders with relevant and accurate fiscal and financial information that can help improve the efficiency and effectiveness of public spending and make them accountable for their decisions. A lack of transparency and accountability in the private sector – particularly around issues of beneficial ownership, tax evasion, and corruption – erodes confidence in national institutions and deprives citizens of capital needed for economic growth. The critical interface between the public and private sectors means that enabling transparency is a ‘two-way street’, requiring mutually reinforcing efforts to create an accountable institutional environment. Civil society plays an equally critical role, engaging the citizenry to participate directly in holding governments, as well as private companies engaged in public procurement, accountable. Therefore, the Panama Accord aims to guide the public sector in promoting the use of socially responsible private capital and thus contribute to economic development. The overarching objective of the Panama Accord is to galvanize all stakeholders — governments, private sector actors, and civil society — to seek ways to enhance their collaboration and improve governance to maximize finance for development. This Accord would be supported by a set of actions, as detailed below, to: 12 1 – Improve Quality and Transparency of Fiscal and Financial Information The availability of reliable, comprehensive, and timely financial information in a relevant and accessible format is key for Governments and Investors to support informed decisions for identifying, mitigating and managing risks more effectively. To achieve this, the following actions by governments, in collaboration with the private sector, are intended: • Support the production of high-quality financial reporting and disclosures by national and subnational governments (including state-owned enterprises) through the adoption of international accounting and financial reporting standards and codes. • Boost the use of technological tools and platforms for government procurement and spending. • Enable easy access to relevant, timely, actionable, and accurate government information including the adoption of international standards of open government and open data. 2 – Strengthen Accountability Government accountability is essential to leverage private sector financing. Strengthening internal control environments, anti-corruption measures and arrangements for the external scrutiny of government business are all critical to enhance accountability. Moreover, the agility and transparency with which governments conduct their business contributes significantly to their perception as good business partners. An optimal balance should thus be sought to ensure agile government processes while strengthening accountability. In order to strengthen accountability, and thus foster higher levels of confidence by the private sector and citizens in government, the following lines of action are foreseen by governments: • Put in place good practices to strengthen corporate governance (including state-owned enterprises and Public-Private Partnership frameworks). • Adopt transparency, accountability and anti-corruption initiatives, while maintaining an agile public sector. • Prevent and combat tax evasion, illicit financial flows and money laundering. 3 – Enhance Stakeholder Collaboration A better coordination and collaboration among government, private sector actors and civil society is critical to mobilize and catalyze private capital for development projects, and to promote better public policy through greater engagement of civil society. To attain this goal, it is necessary to: • Develop mechanisms that facilitate consultation among stakeholders. • Promote open and transparent collaboration between governments and the private sector to improve policies and address implementation gaps. • Strengthen the norms, standards, and processes to ensure the inclusion of civil society. 13 Panama Accord: Promoting Better Governance to Mobilize Finance for Development in LAC Improve Quality and Transparency Strengthen Enhance Stakeholder of Fiscal and Financial Accountability Collaboration Information Support the production of high- quality financial reporting and Put in place good practices to disclosures by national and strengthen corporate Develop mechanisms that subnational governments (including governance (including state- facilitate consultation among state-owned enterprises) through owned enterprises and Public- stakeholders the adoption of international Private Partnership frameworks) accounting and financial reporting standards and codes Promote open and transparent Adopt transparency, collaboration between Boost the use of technological accountability and anti- governments and the private tools and platforms for corruption initiatives while sector to improve policies and government procurement and maintaining an agile public address the implementation spending sector gaps Enable easy access to relevant, timely, actionable, and accurate Strengthen the norms, Prevent and combat tax evasion, government information standards, and processes to illicit financial flows and money including the adoption of ensure the inclusion of civil laundering international standards of open society government and open data 14 Annex II – Media Coverage International media: El País Internacional Rendición de cuentas para atraer al sector privado en América Latina Agencia Xinhua ESPECIAL: GBM, OEA y Panamá impulsan rendición de cuentas en América Latina Agencia EFE El BM y la OEA promueven un frente común por la transparencia en América Latina y el Caribe América Economía Banco Mundial, OEA y Panamá impulsan acuerdo para combatir la corrupción Miami Herald https://www.miamiherald.com/opinion/op-ed/article214481624.html Central American media: La Estrella – Panama La OEA y el Banco Mundial rubrican Acuerdo de Panamá Metro Libre – Panama Banco Mundial, OEA y Panamá impulsan transparencia para promover inversiones en desarrollo Latinomérica tienen una brecha anual e infraestructura de USD 180.000 millones Panama On Panamá sede del frente común por la transparencia en América Latina y el Caribe El Economista - Regional Banco Mundial y OEA promueven frente común por la transparencia en América Latina y el Caribe El Banco Mundial empuja la "tolerancia cero" a corrupción en Latinoamérica y el Caribe El Capital Financiero - Panamá Panamá suscribe acuerdo para atraer financiamiento privado a través de la transparencia En Segundos - Panamá Banco Mundial, OEA y Panamá impulsan transparencia para promover inversiones en desarrollo 15 La República – Costa Rica Banco Mundial y OEA impulsan transparencia para promover inversiones en desarrollo BM y OEA promueven frente común por transparencia en América Latina y Caribe La Prensa – Panamá Transparencia, clave para atraer más inversión Telemetro – Panamá El BM apoya la "tolerancia cero" a la corrupción en Latinoamérica y el Caribe Latinoamérica tiene una brecha anual en infraestructura de $180.000 millones TVN Noticias - Panamá Presentan 'Acuerdos de Panamá' sobre transparencia en los gobiernos Panamá América El Banco Mundial apela a la "transparencia" para el "desarrollo" de A. Latina El Espectador - Colombia América Latina, con una brecha anual en infraestructura de US$180.000 millones, según Banco Mundial Crónica Viva - Perú BM y OEA promueven frente común por transparencia en América Latina y Caribe Op-ed Luis Almagro & Jorge Familiar: La Estrella - Panamá El Acuerdo de Panamá: una apuesta a la transparencia y la inversión Milenio - México Una apuesta la inversión y la transparencia Gestión - Perú Una apuesta a la transparencia y la inversión Revista Gestión – Ecuador Acuerdo de Panamá: una apuesta por la transparencia regional Portafolio – Colombia Una apuesta por la transparencia y la inversión 16 Web pages of the government of Panama: Ministerio de Relaciones Exteriores Panamá es sede de conferencia regional sobre transparencia, rendición de cuentas y regímenes de información financiera Ministerio de Economía Grupo Banco Mundial, OEA y Panamá impulsan transparencia para promover inversiones en desarrollo 17 . . © 2017 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution—Please cite the work as follows: “World Bank. {YEAR OF PUBLICATION}. {TITLE}. © World Bank.” All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. 18 More rights for more people Welcome to Panama W elcome to our regional conference on transparency, accountability, and financial reporting regimes The Government of the Republic of Panama and the World Bank Group are pleased that you are able to participate in this conference. This year’s theme for Cuentas Claras is “Transparent Government: Leveraging Private Sector Partnerships.” The World Bank Group recognizes the critical role that the private sector plays in helping maximize finance for development and that the Latin America and Caribbean region is leading globally in its implementation. The conference will help identify specific governance interventions that the public sector can make throughout the region to improve the business environment and investment climate for the private sector. This conference is an opportunity to convene prominent speakers from a variety of institutions – governments, the private sector, standard setting entities, academia, the media, non- governmental organizations, and international organizations – to explore how best to leverage private sector funding into financing development. Presenters and distinguished guests will share and debate ideas on the issues and solutions relating to transparency, accountability, and financial reporting regimes. Once again, it is our pleasure to host this event in the beautiful City of Panamá, known for its innovative partnerships between the private and public sectors. Jorge Familiar Dulcidio De La Guardia Vice President for Latin America and Minister of Economy and Finance the Caribbean, The World Bank Republic of Panamá 3 4 Transparent government: PANAMA 2018 Leveraging private sector partnerships This year’s Cuentas Claras conference, “Transparent Government – Leveraging Private Sector Partnerships,” is organized jointly by the World Bank Group and the Government of Panama. It convenes high-level government officials and policy makers, representatives of multilateral financial institutions, experts in governance, civil society leaders, and journalists from Latin America and the Caribbean (LAC) and the rest of the world. The objective is to foster dialogue on how enhanced transparency, accountability, and financial reporting systems in the private and public sectors can help build trust and confidence, as well as crowd-in the private sector to create markets, leverage government spending, and maximize finance for development. This event aims to promote the exchange of ideas on the policies, strategies and institutional arrangements necessary to address the challenges of enhancing transparency and accountability in the public sector to mobilize private financing for development and promote economic growth in the region. It also aims to identify tangible next steps to strengthen LAC’s enabling environment for enhanced private sector involvement in development finance. The conference includes a mix of plenary and breakout sessions, from theoretical debates to practical applications. We encourage you to actively participate by asking questions, sharing knowledge, and making connections. 5 DAY 1 13 June Time Session Topic 08:30-09:00 Registration and Breakfast 09:00-09:45 Ceremonial WELCOME MESSAGES Gran Salón Jorge Familiar, Regional Vice President for LAC, World Bank Luis Almagro, Secretary General, Organization of American States (OAS) Her Excellency Isabel de Saint Malo, Vice-President of the Republic of Panama Master of Ceremonies Atenógenes Rodríguez 09:50-10:50 Plenary 1 GOVERNANCE, DEVELOPMENT, AND THE ROLE OF THE PRIVATE SECTOR IN LAC Ministerial Panel Chair Jorge Familiar, Regional Vice President for LAC, World Bank Gran Salón Panelists Dulcidio De La Guardia, Minister of Economy and Finance, Panama Lea Giménez, Minister of Finance, Paraguay 10:50- 11:10 Coffee Break 11:10- 12:10 Plenary 2 EXPANDING FINANCE FOR GROWTH IN LAC: THE CASE FOR THE PRIVATE SECTOR Gran Salón Chair Gabriel Goldschmidt, Regional Director for Latin America & Caribbean, LAC, International Finance Corporation (IFC) Panelists Gabriel Barletta, President, Chamber of Commerce, Industries, and Agriculture of Panama Raúl Alemán Zubieta, President of the Board of Directors of Banco General, Panama Felipe Chapman, President & Managing Partner, INDESA Sigrid Simons de Müller, Corporate Board Member, Chair of Women’s Corporate Directors (WCD) Panama 12:15- 13:15 Plenary 3 TRANSPARENCY, ACCOUNTABILITY, AND THE PRIVATE SECTOR: DUE DILIGENCE, DEBARMENT, AND COMPLIANCE Gran Salón Chair Ceri Lawley, Chief Compliance Officer, IFC Panelists Lisa Kristin Miller, Senior Integrity Compliance Officer, World Bank Beth Colling, Vice President & Chief Compliance Officer, CDM Smith Lucas Diez Suarez, Counsel, Business Risk and Compliance, IFC 13:15- 14:15 Lunch (Salón Chagres, in the hotel lobby) 6 Transparent government: PANAMA 2018 Leveraging private sector partnerships Time Session Topic 14:15-15:15 Break-out A1) REGULATION AND THE PRIVATE A2) THE IMPORTANCE OF Session A SECTOR: GOOD REGULATORY PRACTICES COMPREHENSIVE FINANCIAL AND THE CHALLENGES OF THE SHARING REPORTING IN TAKING INVESTMENT A1: ECONOMY DECISION AND MANAGING RISKS Taboga Chair Chair A2: Peter Ladegaard, Global Lead for Xiomara Morel, Practice Manager, Contadora Regulatory Policy and Management, Governance Global Practice, World Bank World Bank Discussants Panelists Andreas Bergmann, Professor, Zurich Mario Emilio Gutiérrez Caballero, University of Applied Sciences and Commissioner, Comisión Nacional de Former Chair of International Public Mejora Regulatoria (CONAMER), México Sector Accounting Standards Board Abbey Stemler, Assistant Professor of (IPSASB) Business Law and Ethics, Kelly School of Aracelly Méndez Núñez, National Business, Indiana University Director of Accounting, Ministry of Juan de Dios Barba Nava, Presidente, Finance (Panama) and IPSASB Member Comisión Nacional de Competitividad, Anthony Pierre, President, Institute of Confederación Patronal de la República Chartered Accountants of the Caribbean Mexicana (COPARMEX), México 15:15-15:35 Coffee Break 15:35-16:35 Break-out B1) State Owned Enterprises (SOE): B2) TECHNOLOGICAL INNOVATIONS Session B WHAT ROLE DO THEY PLAY AND HOW IN ENHANCING TRANSPARENCY, DOES GOOD GOVERNANCE HELP THEM? COMBATING CORRUPTION, AND STOPPING ILLICIT FINANCIAL FLOWS B1: Chair Taboga Robert Taliercio, Practice Manager, Chair Governance Global Practice, World Bank Joseph Kizito, Lead Financial B2: Management Specialist, World Bank Contadora Panelists Elvio Brizuela, General Director for Panelists Public Enterprises, Ministry of Finance, Lisa Bostwick, Senior Financial Sector Paraguay Specialist, World Bank Luciana Guimaraes Drummond e Silva, Ana Carolina Alpírez, Journalist, Ojo con Regional Portfolio Coordinator, Public – mi pisto Open Contracting, Guatemala Private Infrastructure Advisory Facility Leonardo Sales, General Coordinator, Arismendi Leong, Manager, Office of Observatory of Public Spending, Ministry the Inspector General, Panama Canal of Transparency, Brazil Authority Juan Pablo Guerrero, Network Director, Global Initiative for Fiscal Transparency 16:35-16:45 Gran Salón DAY 1 WRAP UP Master of Ceremonies Atenógenes Rodríguez 16:45 Depart for Panama Canal (Miraflores Locks) 20:00 Reception at the American Trade Hotel in Casco Viejo 7 DAY 1 13 June Session Descriptions PLENARY 1 Ministerial Panel: Governance, Development, and the Private Sector in LCR Participant ministers from Latin America and the Caribbean region (LCR) will take the stage with the World Bank Regional Vice-President to reflect upon the state of governance in the region and the participation of the private sector in regional development finance. Each minister will focus on recent developments regarding transparency, accountability, and financial reporting regimes in their respective countries. PLENARY 2 Expanding Finance for Growth in LCR: The Case for the Private Sector In order to achieve the Sustainable Development Goals, the World Bank and other multilateral development banks have pledged to catalyze greater development investment and mobilize private capital. A huge financing gap is preventing the region from achieving these ambitious goals; private capital is needed to maximize finance for development. This session will focus on the specific needs of the private sector to increase development investment, such as corporate governance, robustness of legal framework, adequate risk-reward allocation, greater financial data disclosure, regulatory enforcement, and predictability. PLENARY 3 Transparency, Accountability, and the Private Sector: Due Diligence, Debarment, and Compliance Private sector sponsors and stakeholders are increasingly focused on conducting due diligence on their clients, partners, and downstream providers before engagement. Enhanced transparency and accountability are now business imperatives because engaging with the wrong players is bad business practice and can result in significant financial penalties, economic loss, as well as serious reputational risk. This session will address recent trends in conducting integrity due diligence; the risk of penalties, sanctions, and potential debarments in the event of fraud or corruption in business relationships; and best practices for setting up robust and meaningful controls and compliance systems. BREAK-OUT SESSION A1 Regulation and the Private Sector: Good Regulatory Practices and the Challenges of the Sharing Economy With private sector development as the primary engine of growth, and with governmental limits on public spending, “regulation” is becoming a key tool to reach policy objectives. When designed and implemented properly, regulation can create a better business environment, which is favorable for private sector investment and economic growth. However, interactions between governments and the private sector in the regulatory process have delivered different results. On the negative side, issues of regulatory capture have created benefits for special interest groups that have the power to influence the regulatory process 8 Transparent government: PANAMA 2018 Leveraging private sector partnerships and its outcomes. On the positive side, good regulatory practices – such as public consultation, regulatory impact assessment, forward regulatory planning and electronic registries of laws and regulations – have brought transparency, predictability and greater participation to the rulemaking process. Lately, innovations in private sector activity, such as the sharing economy, have posed new challenges to governments and traditional businesses. This session will explore these three issues in which public and private sector collaboration play a key role to improve governance and the investment climate in the region. BREAK-OUT SESSION A2 The Importance of Comprehensive Financial Reporting in taking investment decisions and managing risks Comprehensive financial reporting is key to better managing risk for entry into the market, a crucial factor in helping crowd in the private sector. Efforts to improve the investment environment in LCR through enhanced transparency and accountability will only succeed with strengthened accounting practices in the public sector. Both governments and investors require comprehensive and standardized financial reporting to structure projects and transactions, determine options for channeling private investments into these projects, and provide information for managing risks and assets. BREAK-OUT SESSION B1 State Owned Enterprises (SOE): What Role Do They Play and How Does Good Governance Help Them? This panel will discuss the importance of SOE compliance with International Financial Reporting Standards (IFRS) to the private sector, as well as the monitoring, divulging, and addressing of expenditure arrears and other risks. SOEs are critical to providing services that allow for further economic investment and growth: power generation, water, and transport, to name a few. The mixed ownership and regulatory roles of SOEs can cause conflicts of interest, as does the appointment of government bureaucrats to SOE boards. Board directors are often chosen for their political connections, not professional skills or industry expertise. Politically driven decision-making not only eats away at profits and service delivery, it also serves as a deterrent to greater private investment. In this sense, good corporate governance benefits both public and private firms BREAK-OUT SESSION B2 Technological Innovations in Enhancing Transparency, Combating Corruption, and Stopping Illicit Financial Flows This session will focus on new and evolving approaches to enhancing transparency and addressing corruption in the context of private sector development. Open contracting practices not only deliver better value for money for governments, they also create fairer competition and level out the playing field to allow for new businesses to make bids for government contracts. The adoption of data management, tracking, and analytical tools can shine a light on corrupt transactions, including illicit financial flows. 9 DAY 2 14 June Time Session Topic 08:30-09:00 Breakfast 09:00-09:20 Gran Salón LESSONS FROM DAY 1 AND INTRODUCTION TO DAY 2 Master of Ceremonies Atenógenes Rodríguez 09:25-10:40 Plenary 4 GOVERNANCE OF INFRASTRUCTURE Gran Salón Chair Abel Caamaño, Representative in Panama, World Bank Panelists Juan Luis Flores, Director of Finances, Marhnos S.A. Ian Hawkesworth, Senior Public Sector Specialist, World Bank Akash Deep, Senior Lecturer in Public Policy and Faculty Chair of the Infrastructure in a Market Economy Executive Program, Harvard University John F. Kennedy School of Government 10:40-11:00 Coffee Break 11:00- 12:15 Plenary 5 GOVERNANCE AND THE RULE OF LAW: TRANSPARENCY AND THE PUBLIC SECTOR Gran Salón Chair James Brumby, Director, Governance Global Practice, World Bank Panelists Marco Larizza, Co-Author, WDR 2017, and Senior Public Sector Specialist, World Bank Dorothy Pérez Gutiérrez, Deputy Comptroller General, Chile Manuel Balán, Professor of Political Science and International Development, McGill University 12:20- 13:35 Plenary 6 CHALLENGES IN PUBLIC-PRIVATE PARTNERSHIPS (PPP): PREPARING PIPELINE OF BANKABLE PROJECTS Gran Salón Chair Luc Grillet, Senior Manager for Central America & Caribbean, IFC Panelists David Duarte, Senior Public-Private Partnerships Specialist, Infrastructure, PPP and Guarantees Group, World Bank Henrique Amarante Costa Pinto, Former Secretary of Public Policy Coordination, Presidency of the Republic of Brazil Denise Arana, General Manager Public-Private Partnerships and Privatization Services, Development Bank of Jamaica 10 Transparent government: PANAMA 2018 Leveraging private sector partnerships Time Session Topic 13:35- 14:50 Lunch (Salón Chagres, in the hotel lobby) 14:50-16:05 Plenary 7 DEMYSTIFYING POLITICAL RISK INSURANCE Gran Salón Chair Merli Baroudi, Director of Economic and Sustainability, Multilateral Investment Guarantee Agency (MIGA) Panelists Roberto Roy, Minister of Canal Affairs, Director, and President of the Board of Directors, Panama Metro Marcelo Gorrini, General Manager, Citi Panama Thomas Coenen, Vice President, Global Export and Agency Finance, Citi Jorge Rivas, Senior Underwriter, MIGA 16:10-16:20 Gran Salón PUTTING IT ALL TOGETHER Master of Ceremonies Atenógenes Rodríguez 16:25-16:45 Gran Salón CLOSING REMARKS James Brumby, Director, Governance Global Practice, World Bank Abel Caamaño, Representative in Panama, World Bank 16:45 Closing Reception 11 DAY 2 14 June Session Descriptions PLENARY 4 Governance of Infrastructure This session will focus on the governance-related issues that dampen private investment opportunities in infrastructure. Poor governance of infrastructure includes (but is not limited to): incomplete long-term planning and strategies, opaque accounting practices, poor coordination across levels of government, unstable regulatory frameworks, limited monitoring of infrastructure performance (including value depreciation), weak institutional capacity, financing sustainability, uninformed appraisals and decisions, political economy dynamics, corruption and/or capture, and a lack of consultation with the broader community during project preparation. PLENARY 5 Governance and the Rule of Law: Transparency and the Public Sector Coalitions of actors—civil society, the private sector, different layers or agencies of government—with aligned incentives are often the most effective at promoting transparency, fighting corruption, and ensuring a level playing field for the private sector. Information gaps generate inefficiencies—be it non-competitive procurement, financial mismanagement of public resources, or renegotiations of PPP agreements shortly after auction. However, greater transparency alone is not enough to lead to better development outcomes. Rather, the available information must be easily accessible, understandable, able to reach the intended actors, and actionable. PLENARY 6 Challenges in PPPs: Preparing a Pipeline of Bankable Projects Besides addressing the issue of large fiscal deficits, PPPs can also leverage the innovation, expertise, and management capacity of the private sector into the public sector. Governance reforms are needed to encourage and facilitate the entry of more private firms into PPPs: these include legal, regulatory, institutional, and financial reforms to facilitate the processing and implementation of PPPs. Even more basic is the need for the development of an integrated pipeline of viable, appraised capital projects for public or private sector financing, or a PPP. PLENARY 7 Demystifying Political Risk Insurance Private investors could channel billions of dollars towards development projects. Yet concerns about committing to long-term projects, or entering into new markets and sectors have prevented them from doing so. Fully understanding the potential of innovate applications of political risk insurance and credit enhancement products can help investors alleviate such anxieties. If scaled up effectively, governments can benefit from attracting private funds to support development projects. Helping private investors manage political risk and navigate emerging markets is MIGA’s mission. This session will focus on exploring the application of political risk insurance and credit enhancement products in the LAC context and how the use of such products can be beneficial for both the private and public sectors. PANAMA 2018 Transparent government: Leveraging private sector partnerships Welcome by Jorge Familiar World Bank Vice President for Latin America and the Caribbean Private investment is key to reducing and Public-Private Partnerships (PPPs). Efforts poverty and promoting shared prosperity. to implement anti-corruption and accountability The public sector alone cannot bridge the gap of initiatives are needed, as well as fighting tax evasion what is needed to finance development. and money laundering. That is why this second edition of the “Cuentas We have seen a transformation in Latin America and Claras” conference, organized by the World Bank the Caribbean region following the major progress Group (WBG), the Organization of American States made in reducing poverty and expanding the middle (OAS), and the Government of Panama, chose class. Now, with less fiscal resources available to “Transparent Government – Leveraging Private satisfy society’s increasing demands, there is zero Sector Partnerships,” as its principal theme. Good tolerance for corruption. This also comes at a time governance and institutions that are accountable, when the dizzying pace of technological advances coupled with citizen participation in the running of has led to the quick distribution of information and the State, can lead to more private investment in the public release of much information that in the key development sectors. past had remain hidden. Success in improving the region’s investment Cuentas Claras provides us an opportunity to climate will be more likely with robust and showcase what is being done in the region in terms of reliable fiscal and financial reporting systems. accountability and efficient public spending through Greater transparency and accountability in the stepped up anticorruption measures. It also allows implementation of public policies will help as well. us to identify the main challenges we face in an environment where growth is still weak and where Many of the countries in the region are already most of the countries face a difficult fiscal situation. making these reforms. The World Bank is supporting them with projects like online government to With these challenges in mind, we are presenting the improve fiscal transparency and procurement Panama Accord, which includes steps to improve systems. the quality and transparency of fiscal and financial information, strengthen accountability, and increase On the other hand, recent cases of corruption that collaboration between governments, the private have come to light in the region show that sector, and civil society. much remains to be done. As such, it is necessary to redouble efforts The World Bank is pleased to count on your to implement best practices to participation, ideas, and commitment to make Latin strengthen corporate governance America and the Caribbean a more transparent and in state-owned enterprises (SOEs) prosperous region. Newsletter Cuentas Claras 1 Questions and Answers with Deborah Wetzel Senior Director, Governance Global Practice, World Bank hat does governance have to do While it is impossible to estimate Deborah Wetzel is the World Bank W with private sector financing? how many billions of dollars Senior Director for Governance. The private and public sectors are lost each year to bribery Prior to this, she served as have sometimes been treated as and other forms of corruption, Country Director for Brazil from separate entities that operate it is clear that every dollar March 2012 to July 2015. Her in isolation from each other, lost to corruption is a dollar expertise includes taxation, public but the two have always been diverted away from the public expenditures, decentralization, intertwined. The private sector good, including efforts to fight public sector reform, and anti- depends on the public sector for poverty, improve health care corruption. Ms. Wetzel has a delivery of public goods, such as and strengthen the quality of Doctorate in Economics from the security, regulation, contract education. Corruption hits the University of Oxford and a Master’s enforcement and a conducive poor the hardest – forcing them from Johns Hopkins University, environment for business. to pay a higher share of their School of Advanced International Conversely, the public sector earnings in bribes and often Studies. She is the author of relies on a prosperous private reducing access to and the quality numerous publications on fiscal sector for revenue mobilization of essential services such as decentralization, public finance, and in the procurement of goods health and education. governance, and sub-national and services. The relationship affairs. between the public and private The most damaging long-term sectors is highly interdependent consequences of corruption, and, if we want to increase however, are the erosion of private investment, we need trust in government and the to focus on both the public and diminished legitimacy of public private sectors. institutions. The restoration of trust between the government, A core objective of governance the private sector, and civil reform moving forward must society is essential for triggering be a focus on the public sector a virtuous cycle that enables risks that may prevent investors longer term, sustainable efforts to from entering a country. By confront corruption. This requires identifying the underlying drivers that governments build systems of the enabling environment for that prevent corruption from private activity – such as greater occurring in the first place, and transparency, improved corporate when corruption does occur, that governance, a strengthened it is sanctioned effectively. We regulatory framework, and can all work together to reduce institutions free of collusion corruption by strengthening and corruption – the goal is to openness and transparency, create an investment-friendly and by working to reduce the environment that attracts private acceptance of corruption in all its sector financing. forms. What do you see as the main How serious is the issue of illicit consequences of government financial flows globally? What corruption and government can be done to address these opacity? flows? 2 The restoration of trust between the government, countries, which are likely to engagement are essential vehicles the private face institutional limitations for ‘quick wins’ to improve the in their ability to detect and institutional environment for sector, and prevent IFFs, and where the private sector financing. The civil society is relative resources lost have benefits of investing in a frequent, larger welfare impacts on the open, and transparent process essential for population. of consultation benefits all stakeholders – with firms more triggering a Addressing IFFs requires confident in the fairness of the virtuous cycle international cooperation and ‘rules of the game’ that protect coordination – and the global the capital they put to work inside that enables community has increasingly a country’s borders. Meanwhile, longer term, mobilized around efforts through citizens are more assured that multilateral initiatives to stem governments are spending with sustainable these flows. These efforts their true interests in mind, and the efforts to include supporting countries public sector is further incentivized in meeting global standards to continue to improve to earn the confront for tax transparency and the votes of their constituents and to exchange of information (e.g., further attract capital from the corruption identifying beneficial ownership private sector. sources, the implementation of exchange of information These potential benefits are only procedures, strengthening tax increased by the rapid pace of treaties) and strengthening the technological change – which By their very nature, IFFs are capacity of countries to identify results from an environment of usually hidden from sight and risky transactions that could be increasing interconnectedness, thus are difficult to measure. vehicles for tax avoidance, tax information sharing, and Global estimates are on the evasion, and illicit flows. strengthened systems for order of magnitude of US$1.0 accountability. The increased trillion to $1.5 trillion a year. What do you see that are quick availability of social media That suggests significant lost wins that willing governments tools and platforms is bringing government revenues, market could take to immediately about a new role for citizens distortions, and increases in improve the investment climate and the private sector for inequality driven by offshore and business environment in pushing accountability and wealth. These problems their countries? transparency for both the public are potentially more severe An increased emphasis on and the private sectors and for for low and middle-income transparency and citizen strengthening responsiveness. Newsletter Cuentas Claras 3 Maximizing finance for development aids growth in Latin America and The Caribbean Luc Grillet, Senior Manager, Central America & Caribbean, IFC D uring the Golden Decade from on transparent 2003 to 2013, the LAC region rules is required. made important social gains, This can help make public fueled by high commodity prices spending more efficient, fiscally and government reforms. Extreme responsible, and accountable. poverty (defined as those living on It can help increase public and less than US$250 a day) was cut private sector investments in to 11.2 percent by 2013 and overall health and education. It can poverty (less than US$4 a day) spark improvements in the dropped to 24.1 percent in 2013 business-enabling environment from 42 percent in 2003. The for companies and regional trade. middle class grew significantly It can promote financial inclusion, and the Gini Index of income especially for micro-, small- and inequality dropped sharply. But medium-sized enterprises (SME) the economic slowdown, which and for the population at the started in 2010 and which bottom of the income pyramid. culminated with a two-year And it can open capital markets recession in the 2015-2016 period, to enable long-term and local placed this social and economic currency funding. All this can help progress at risk. shift government spending to the private sector. In the 2017 to 2018 period, the region has resumed a fragile Building on the “Addis Ababa growth recovery trajectory, Agenda for Action” and the albeit with important country- March 2017 report, “Forward by-country variations. LAC Look: A Vision for the World clearly needs to grow faster, Bank Group in 2030—Progress and in a more sustainable and and Challenges”, the WBG inclusive manner. Key challenges is intensifying efforts to help preventing more sustainable countries with a new approach, growth include persistent named Maximize Finance for challenges such as low regional Development (MFD). This new productivity and competitiveness, systematic strategy requires a lack of access to finance, and the World Bank Group to inefficient infrastructure services. help countries maximize their These obstacles, if not addressed, development resources by will increase the sharp income increasingly drawing on private divide in several middle-income financing and sustainable private countries in the region. sector solutions to provide value for money and meet the highest Neither the public sector nor the socio-environmental and fiscal private sector alone can address responsibility standards. It the challenge of generating keeps scarce public financing inclusive growth. A concerted for those areas where private and coordinated effort based sector engagement is not 4 optimal or available, helping the public sector stay away from unsustainable levels of debt and contingent liabilities. The Maximize Finance for Development approach is also at the core of the “Cuentas Claras 2018 – Transparent Government: Leveraging Private Sector Partnerships” conference. As this conference will highlight, the success of this new approach requires governments to effectively provide public goods, to support an environment that can generate jobs and growth, to address market failures and There are several examples of transmission line which could be to engage citizens in the process where the more systematic replicated in other infrastructure – and to allow for transparent, Maximize Finance for sub-sectors. rules-based societies that Development approach, and further enable private sector having “Cuentas Claras,” have Different WBG entities, leveraging investment. started to bear fruit. Allow me to their respective capabilities, are share one example that relates to working together in Panama Given that countries in the region our gracious conference host, the to support large government have a significant financing Republic of Panama, where WBG investments and attract private gap in development spending, has contributed to the deepening sector investment: using scarce and that development finance of Panama’s integration in public resources with a focus on alone cannot address this gap, the global economy and the de-risking projects and addressing efforts to improve governance by strengthening of its position as a market gaps, prioritizing creating an enabling investment trade and logistics hub, whilst at commer-cial finance, and tapping environment are bound to the same time promoting inclusion into new sources of capital. generate increased levels of and enhancing resilience. As for helping growth become private investment in support of more inclusive, IFC is directing government development goals. In the energy sector, with IFC investment towards SMEs and Efforts to improve the investment support, Panama’s private sector low-income housing segments climate in the region through firms are investing in renewable through established financial enhanced transparency and energy and Central America’s first intermediaries. The World accountability are more likely clean gas-to-power project on the Bank meanwhile is providing to succeed if there are robust Atlantic mouth of the Panama policy loan support to facilitate and reliable fiscal and financial Canal. Meanwhile, public funding, making existing Panamanian reporting regimes. with World Bank support, is policies and social programs financing a comprehensive policy more effective in reaching rural IFC, the WBG’s private sector reform and a national energy and Indigenous Peoples, Afro- arm and the largest global efficiency strategy. In Panama, we descendants and other generally development institution can proudly say that the Maximize poorer segments, including dedicated to the private sector, is Finance for Development approach management of embedded fiscal uniquely positioned to help in this is in high gear and helping and environmental risks. endeavor through its investment improve the fiscal sustainability and advisory operations in the and diversification of the energy I’m confident that this conference region, and help leverage the sector, which is fundamental for will help us draw a roadmap to World Bank’s critical upstream providing reliable, affordable and develop and implement new ways and regulatory work with continuous access to electricity. to improve good governance and governments that can open or IFC is also advising the national transparency and leverage the create markets for incremental power transmission company potential of the Maximize Finance private sector investment. on a PPP approach for its fourth for Development approach. Newsletter Cuentas Claras 5 State-Owned Enterprises: Ways to Overcome the Investment Gap in Latin America and the Caribbean Robert Taliercio, Practice Manager, Governance Global Practice, World Bank T he World Bank Group is redoubling its efforts to help countries mobilize slowdown has put the region’s economic and social challenges in financing for development in LAC, perspective: demands for social which can help the region reduce its progress are high, while trust in annual investment gap, estimated at government is low. US $ 180 billion. To continue supporting economic After six years of economic growth while spurring social progress, contraction, LAC returned to positive governments must invest more in growth – our World Economic Outlook productive assets. The financing report indicates that the region grew challenge is clear: according to WBG 1.1 percent in 2017 and that this year estimates, the region faces an annual it will expand by 1.7 percent. However, investment gap of US$180 billion. to ensure that this new phase of Given the necessity of continuing growth advances and social gains are with ongoing fiscal adjustment maintained, governments must invest policies, and the urgent need for more in productive assets. infrastructure investment, it is obvious that public financing can only Given the need to continue to cover a small share of those needs. balance finances, coupled with Thus, to reduce poverty and promote the urgent need for investment in shared prosperity, the region will have infrastructure, it is obvious that to increase returns from existing public financing is not enough. As approaches to public investment and such, to reduce poverty and promote make selected use of more innovative shared prosperity, the region will approaches to crowd in private have to take better advantage of the financing. In both cases, state-owned current public investment approach enterprises could play an important and select innovative ways to attract role in augmenting productivity, private financing. In both cases, state provided specific conditions are met. enterprises could play a larger role in increasing productivity, provided that In bringing in the private sector the specific conditions are met. to address the investment gap, the region has something of an In this way, countries can analyze advantage: it has the largest stock and manage the need to resort to of active public-private partnership financing from the private sector – (PPP) investments globally (in USD but also comply with fiscal, social, terms and as a share of countries’ and environmental responsibilities GDP), most of which are in Brazil, and conserve scarce resources from Mexico, Chile, and Colombia. LAC also the public sector – for those areas has the second largest number of in which private financing makes National Development Banks (NDBS), less sense. Here the question arises, at 63, second only to Asia with 119. what are the most appropriate roles for state enterprises in maximizing The WBG is redoubling its efforts financing for development? to assist country clients to MFD. This approach helps countries The good news is that after six years analyze and manage the need to of slowdown, the Latin America and draw on private sector financing Caribbean region is back into positive and private sector approaches – economic growth territory. The World meeting fiscal responsibility, social, Bank Group (WBG) estimates that the and environmental standards – to region’s growth reached 1.1 percent conserve scarce public sector in 2017 and is expected expand by resources for sectors where private 1.8 percent in 2018, mainly driven by finance makes less sense. An a recovery in Brazil and Argentina. important related question is: what At the same time, the extended are the most appropriate roles for 6 investment and solving private sector At the same time, SOEs must be coordination failures. SOEs can serve credibly managed to avoid all the as important catalysts for providing well-known risks associated with basic infrastructure and other social the parastatal sector: creation services by removing obstacles and of fiscal risks for governments, facilitating public and private sector financial sector instability, market investments. That is, many countries distortions through anti-competitive need to improve the quality of public policies, and risks of corruption. A services (electricity, public and freight recent survey by PwC found these transportation, etc.) and in many concerns very much on the minds of cases, SOEs provide those services, CEOs: “SOEs globally still have some yet performance is often not up to work to do in winning the trust of acceptable international standards. the private sector. The majority of Reforming SOEs so they can improve CEOs in our ‘pulse’ (83 percent) had service delivery performance is thus concerns that government ownership an integral aspect of MFD. distorts competition to some degree. In addition, 67 percent felt that State financial institutions can for government ownership influences SOEs will only example mobilize private resources for infrastructure investments regulation and enforcement in industry.” From a high-level be able to crowd through risk-sharing schemes by assuming some project risks that the perspective, governments should also take care to limit their presence in private sector private sector is not willing to take. In the case of coordination problems, in the economy to some structurally important sectors so as to not crowd investors in a potential investment opportunity may only be profitable if other out the private sector. developing complementary investments—public SOEs will only be able to crowd or private—are also made at the in private sector investors in countries if they same time. For most firms, making developing countries if they are the combined necessary investments well run and focus on the right are well run and is often beyond the means, scope part of the value chain. This points of expertise, or risk appetite of back to the importance of an SOE focus on the right an individual investor. SOEs can reform agenda. In LAC the first undertake investments that the generation of successful structural part of the value private sector does not undertake due reforms were implemented in Chile, to coordination failures. Colombia, and Peru over the past chain 20 years, while other countries Increasingly, SOEs are seeking are still awaiting reforms, as to enter into PPP and concession are important SOE sectors, such arrangements with private sector as energy. Whether it is dealing entities to improve public service with macroeconomic and fiscal SOEs in maximizing finance for delivery and mobilize financing for impacts, corporate governance and development? infrastructure. In many countries, accountability mechanisms, market state-owned financial institutions discipline and competitive neutrality That SOEs have a potentially (SOFIs) are transitioning from angles, or state-owned financial important role to play in MFD is providing direct loans to fund institution reform, the WBG can apparent, given that they remain infrastructure projects to providing help here. Drawing on its global important economic players around guarantees and credit enhancement expertise in SOE reforms in East the world: recent estimates indicate products to mobilize private savings. Asia, Europe, and Latin America, the that in Organization for Economic However, properly designed PPP WBG can be counted on to assist Cooperation and Development (OECD) agreements and more sophisticated countries in reforming their SOEs so countries SOEs accounted for about financial products require substantial that they become a critical channel 15 percent of GDP, while in transition know-how. for leveraging private funds. countries the share was between 20- 30 percent. Not surprisingly, a recent estimate found that SOEs accounted for 20 percent of investment. SOEs can thus play two key roles in MFD: provision of finance to emerging economies and catalysts for investment in emerging economies. The latter is the focus of this note. While SOEs have underperformed in some cases, well-managed SOEs could have a cascading effect, leveraging additional funds for Newsletter Cuentas Claras 7 Improving government capabilities to procure Infrastructure PPPs and attract private sector investments. Fernanda Ruiz Nunez, Senior Economist, Infrastructure, PPPs, and Guarantees Group, World Bank G overnments around the world Several trends emerge from the have turned to PPPs to design, data collected for the Procuring finance, build, and operate Infrastructure PPPs 2018 report. infrastructure projects. The first one is that the higher While PPPs remain a small the income level of the group, the proportion of the procurement of higher the performance in the infrastructure, they constitute assessed thematic areas. What is an important channel to attract more surprising, however, is that private sector financing into while PPP procurement scores are infrastructure projects. However, relatively high across all income a lack of government capabilities levels, preparation and contract to prepare, procure, and manage management are the areas that such projects constitutes an leave considerable room for important barrier to attracting improvement, regardless of the private sector investments. income levels or region. The Procuring Infrastructure Despite the major trend of Public-Private Partnerships all economies lacking in PPP 2018 report is designed to help preparation and contract governments improve their management, performance still PPP regulatory quality. By varies greatly by region. The benchmarking the regulatory high-income economies of the frameworks of 135 economies OEC), and the Latin American and around the world against Caribbean regions, perform at or internationally recognized good above the average in all thematic practices in procuring PPPs, areas. In contrast, Sub-Saharan this assessment identifies Africa and the East Asia and areas for improvement in the Pacific regions have the lowest preparation, procurement, and average scores. management of PPPs; as well as in the management of unsolicited Despite the importance of an proposals. appropriate consideration of the fiscal implications of PPPs, this Procuring Infrastructure Public- is still not a universal practice. Private Partnerships 2018 aims During the preparation of PPPs, to inform the policy debate and Ministry of Finance approval to the decision making process and ensure fiscal sustainability is help governments, the private not required in 19 percent of the sector, and the international surveyed economies. Moreover, development community better only around one-third of the understand the current regulatory economies have regulations landscape for PPPs. concerning the accounting and/or 8 reporting of PPPs, and even fewer key role in limiting corruption, Making performance have introduced some type of providing legitimacy to PPPs information available to regulatory provision regarding the and helping ensure that only the public increases the budgetary treatment of PPPs. viable and bankable projects accountability of all the are realized. Once again, most stakeholders and is crucial A striking finding is that despite economies adhere to international to promote transparency. the fact that a sound appraisal good practices in terms of However, few economies of a project is crucial to bringing disclosure of information to the make this information public. quality projects to the market, public in the procurement phase, Transparency ensures that the less than one-third of these but do not adopt such disclosure project delivers the expected economies have adopted specific practices during the preparation outcomes and quality services. methodologies that ensure phase and contract management. However, only a small fraction consistency across projects. An Among the assessed economies, (13 percent) of the economies even smaller percentage make it is common practice to publish surveyed allow public access those assessments available online. and make available online the to the system for tracking In turn, the private sector often PPP public procurement notice progress and completion of reports a lack of quality projects and the award notice. However, construction works under a PPP in the pipeline as a constraint to only 48 percent of economies contract. Only 10 percent have investing in infrastructure. publish the PPP contracts during established an online platform the procurement phase, and even for this purpose. Similarly, Transparency, as a focal element fewer (30 percent) publish any only a handful of the procuring of good governance, plays a amendments. See figure below. authorities (14 percent) allow the public to track contract performance through a Figure: Transparency in the PPP project cycle (percent, N = 135) designated online platform PREPARATION STAGE or by posting the updated Assessments published online 22% documentation online. Tender documents published online 60% Standardized PPP contract available 36% Recognizing the need to improve PROCUREMENT STAGE good governance in helping Publish PPP procurement notice 99% to crowd-in private finance PPP procurement notice published online 88% for development, Procuring Infrastructure Public-Private Publish PPP award notice 93% Partnerships 2018 is intended PPP award notice published online 82% to continue to gauge regulatory Publish the PPP contract 48% framework adherence to good PPP contract published online 38% practices in the PPP process. Publish PPP contract amendments 30% That will take place by providing CONTRACT MANAGEMENT STAGE comparable data on the Publish PPP construction information 13% enumerated issues in the 2020 PPP construction information published online 10% edition, which may include a possible expansion to provide Publish PPP performance information 14% a more complete picture of PPP performance information published online 14% transparency for PPPs. Source: Procuring Infrastructure Public-Private Partnerships 2018. Note: PPP = public-privated Partnership. To access the report, blog and explore the country data, please go to: Report: Blog: Explore Country Data: Newsletter Cuentas Claras 9 PANAMA 2018 Transparent government: Leveraging private sector partnerships 10