Resilient Infrastructure PPPs - Contracts and Procurement: The Case of Japan

Report
from World Bank, GFDRR
Published on 22 Dec 2017 View Original

Japan is highly exposed to natural disaster risks ranging from earthquake, tsunami, cyclones, floods, and landslides to volcanic eruptions. Japan’s experience in structuring resilient infrastructure public-private partnerships (PPPs) offers insights on how disaster and climate risks can be managed under PPPs.

Key Challenges in Incorporating

Resilience into Infrastructure PPPs Resilient economic infrastructure plays an increasingly significant role in mitigating natural disaster risks, including hydrometeorological and geophysical hazards, especially in the contexts of climate variability and change. Most of the countries face the following key challenges in incorporating resilience into infrastructure PPPs: (a) contractual allocation of natural disaster risks between the public and private sectors; (b) management of long-term contracts under uncertainty; and (c) commercial viability and uncertainty in the cost implications of resilience investments.
Building on the theoretical approaches outlined by Public-Private Infrastructure Advisory Facility (PPIAF)1 , the World Bank’s Global Infrastructure Facility (GIF) and the Tokyo Disaster Risk Management (DRM) Hub have initiated a knowledge project on “Resilient Infrastructure PPPs—Contracts and Procurement” to harness the knowledge and expertise gained from PPP projects in selected countries to help the governments of low- and middle-income countries to prepare and structure disaster-resilient infrastructure PPPs.

Policy and Legal Frameworks for PPPs and Disaster Risk Management in Japan

Underpinning Resilient Infrastructure PPPs with DRM Policy and Legal Frameworks

To promote infrastructure development via PPP, the Japanese government enacted the Act on Promotion of Private Finance Initiative (PFI Act) in 1999 and established a PPP/PFI Promotion Office, which has developed guidelines on risk allocation and contracting. Although the PFI Act does not specifically focus on DRM, public authorities embed the DRM legislations in bidding documents and technical specifications to ensure development of risk-informed infrastructure (figure 1). Instead of standardization, the bidding documents of each project and their contracts provide detailed DRM specifications considering the nature of each project and its geophysical and hydrometeorological characteristics. Also, when DRM policies and legislations are amended, private operators are required to comply with such amendments.