Public Private Partnerships (Ppp) Models For National Single Window

Copyright 2008 Private & Confidential

HighHigh--level Symposium Onlevel Symposium OnBuilding Regional CapacityBuilding Regional Capacity

For Paperless TradeFor Paperless Trade

24 Mar 200924 Mar 2009Jonathan Koh

Director, Solutions & Consulting


PublicPublic--Private Partnerships (PPP) Private Partnerships (PPP) Models for National Single WindowModels for National Single Window

Case studies from Singapore, Mauritius, Case studies from Singapore, Mauritius, Ghana"Ghana"

Copyright 2008 Private & Confidential 3

Our Our ExperienceExperience

Country Project Implemented Business ModelSingapore TradeNet / TradeXchange 1989 PPP

PPP

PPPSelf Funded

World Bank / IADBBuild-Operate-

Transfer

PPP

PPP

PPP

Self Funded

Saudi Arabia SaudiEDI 2005

India Port Community System (India Port Association

2007

Madagascar Madagascar (GASYNET) 2007

Ivory Coast Ivory Coast TradeNet 2008

Mozambique Mozambique TradeNet On-going

Mauritius

GhanaPanama

Qatar Qatar Customs Clearance Single Window

On-going

Mauritius TradeNet 1994

Ghana Community Network 2000Automated Data Collection System (Panama Canal Authority)Panama Customs

2004

2008


Recommendation 33 Recommendation 33 ––3 concepts of SEW3 concepts of SEW


The Singapore The Singapore TradeNetTradeNet


TradeNetTradeNet®® -- 1989 to 20071989 to 2007• World’s first nationwide trade documentation system• Single point for trade-related transactions with the Government• Integrates ALL 35 controlling units’ requirements• 100% of the total Trade Permit applications are processed by the TradeNet®

system. • Handles approximately 30,000 permit applications per day, amounting to some 9

million transactions a year. • Used by approximately 2,500 companies with 8,000 users.• TradeNet® Version 4.0 implemented in October 2007.

Before After


• In 1985 – Severe recession hits Singapore• Establishment of a high-powered Economic

Committee - chart new strategies to improve its economic competitiveness.

• Recommends - expedite the use of IT to improve trade competitiveness.

• In 1986, Hong Kong revealed that it was creating a trade oriented EDI system called HotLine (now TradeLink), which further strengthened Singapore’s resolve to implement our own TradeNet.

• The Trade Development Board was given the task of mobilizing the trade community and became the coordinating point among various agencies such as Customs and Excise, Port of Singapore Authority, and Civil Aviation Authority of Singapore.

Singapore Trade Facilitation JourneySingapore Trade Facilitation Journey


• A TradeNet Steering Committee was created to oversee the process in 1986.

• Dec 1986, then Minister of Trade & Industry – Mr Lee Hsien Loong publicly announced the TradeNet project, to be completed in two years.

• Jun 1987 – RFP Issued. • 18 Mar 1988 - Singapore Network Services

(now CrimsonLogic) was created to own and operate the TradeNet system

• Jan 1989 – TradeNet was launched• TradeNet Initial Investments /

Development was funded by the Government – in excess of US$10M

TradeNetTradeNet –– BeginningsBeginnings


• SNS as a “Special Purpose Vehicle”• Ownership –

– 55% - Trade Development Board– 45% - Statutory Boards related to info-comms

– Port of Singapore Authority – Civil Aviation Authority– Singapore Telecoms

• Operate as a “Valued Added Network” (VAN) operator

• Allowed to charge a transaction fee to cover operating costs under a concession from Government

• SNS went to develop further nationwide community EDI networks – MediNet, LawNet, BizNet, etc

Operating and Sustaining Operating and Sustaining TradeNetTradeNet


SNS SNS CrimsonLogicCrimsonLogic TodayToday

• We survived 21 years !!

• Global Operations with > 600 Staff


The Next Generation The Next Generation TradeNetTradeNet --TradeXchangeTradeXchange

• First IT Public-Private Partnership (PPP) in Singapore

• CrimsonLogic was appointed by the Singapore Government as an independent contractor to develop, operate and maintain as well as drive the adoption of this project.

• Other than TradeNet®, the Singapore Government is not involved in the provision of the TradeXchange®services

• Launched Nov 2007

• Prospective no. of users: 90,000


The Mauritius The Mauritius TradeNetTradeNet


Mauritius Mauritius TradeNetTradeNet –– BeginningsBeginnings

• After the success of the Economic Processing Zones (EPZs) mainly in the textile industry, plans to strengthen the economy through the further diversification of economic activities

• Decision to increase investment and services in IT

• Recommendations to that end by the World Bank in 1993, followed by several studies

• One of the feasibility studies: establishment of an network to facilitate the processing of trade documents by electronic means

Source: Jean-Claude Montocchio, INCOM Consultant


Mauritius Mauritius TradeNetTradeNet –– BeginningsBeginnings

• An extensive analysis was carried out by the public authorities in Mauritius

• Adopted the Singapore TradeNetas a model

• Following detailed system studies and intensive industry discussions, it was evident that a Value-Added Network (VAN) operator is needed to operate the TradeNet and other IT Communications services.

• The VAN would be a tripartite joint venture company involving public and private sector representatives and a foreign technical partner. It would also operate autonomously and has to be self sustainable in the long run.

• The Mauritius Network Services Ltd. was incorporated on 15th April 1994 as a private company.


Structure of Mauritius Network ServicesStructure of Mauritius Network Services

• The Mauritius system – also called TradeNet – is a joint venture between :- Mauritian public and private sector interests (representing

the main actors of the economy), and - a foreign partner providing know-how and experience

• Original Shareholders of Mauritius Network Services Ltd. were: - Maurinet Investments Ltd. (60% of equity)

- 53% held by 4 Mauritian public bodies, and - 47% held by the Chamber of Commerce & Industry

- Singapore Network Services Pte. Ltd.) (40% of equity) • Joint-venture functioning 100% as a private concern • Equity (± USD 1 million) provided by shareholders• Currently, as at 2009, the shareholdings held by CrimsonLogic has

been reduced.


• Self-sustainability perspective right from the start

• Activities financed from 2 sources:

- a software single-user license of $ 1300 at the outset

- a service fee of USD 5.- per declaration sent thru’ MNS

• Highly successful and profitable activity:

- share value multiplied by eight since 1994

- yearly dividends = ± 90% of funds invested

Success of Success of Mauritius Network ServicesMauritius Network Services


The Ghana The Ghana Community Community

Network (GCNET)Network (GCNET)


Ghana Ghana Community Network Community Network –– BeginningsBeginnings

• In the 90’s, a national reform drive Government’s vision for a Ghana that is open to the rest of the world to attract FDIs and promote business competitiveness.

• The Government of Ghana launched the Ghana Gateway project for which it solicited support from the World Bank.

• Official delegations visited New Zealand, Singapore, Mauritius, and Malaysia.

• The Singapore and Mauritius visits particularly fascinated the delegation that saw in the TradeNetthere - an approach that provides the dual benefit of:– speeding up trade transaction without jeopardizing

Government revenues, while – streamlining the processes of trade transaction by

bringing the various members of the trading community into an integrated network.

Source: Luc De Wulf, TradeNet in Ghana


Ghana Ghana Community Network Community Network –– BeginningsBeginnings

• An Inter- Ministerial Gateway Oversight Committee was set up to oversee the this ambitious initiative.

• After review of proposals from various software and systems integrators, Crimsonlogic was invited to provide the EDI system, having earlier successfully transferred this technology to Mauritius

• It was, however, not prepared to commit investment funds directly for the development of the EDI. Development funds was assumed by SocieteGeneral de Surveillance S.A. (SGS), which played the role of the strategic investor and lead technical partner.

• Ghana also adopted the Customs Management System that was designed for Mauritius and that was smoothly interfacing with the initial TradeNet from Singapore.

• As part of the arrangements, a new company was created and charged with the implementation of both the TradeNet and the Ghana Customs Management System (GCMS). This company was given a de facto Build Own and Operate (BOO) contract.


GCNetGCNet

• Ghana Community Network (GCNet) was created as a JV company :– SGS (60%)– Customs Excise and Preventive Service CEPS (20%)– Ghana Shippers Council (10%)– 2 local banks (5% each)

• Incorporated in Nov 2000• Mandated by Ministry of Trade and Industry to

implement and manage the GCNet system• 70 employees (including Network, Systems, IT

Security, Ops Support, Call Centre, Training Depts)


Total Revenue - Tema

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

JAN

FEB

MA

R

AP

R

MA

Y

JUN

JUL

AU

G

SE

P

OC

T

NO

V

DE

C

Mio

GH

C

2002

20032004

Success of GCNETSuccess of GCNET

• Immediate substantial decrease in clearance time – factor of 5• Immediate substantial increase in Govt revenue – 35%


PublicPublic--PrivatePrivate--Partnership (PPP)Partnership (PPP)


What is PPP?What is PPP?

Definition and History of PPPs• Basic Principles

– Contracts for performance of services– Payment of fees based on the standards of

performance of services– Payments commence only when services commence– Pricing risk transferred to private sector, with in built

contractual mechanisms for variations

Management Contracts Outsourcing

Joint VentureDBOO

Part PrivatisationDBFO


Rationale For PPPRationale For PPP

PPP is not a • Source of “free” money• Way of financing unaffordable projects• Means of implementing bad projects

• Leverage private sector innovation• Produce optimum risk allocation• Achieve design/build/operate synergies• Yield whole life cost savings• Capture alternative, or residual, values• Allow ministries to focus on their core mission• Frees up agency manpower for operational roles

PPP can


Traditional Procurement Traditional Procurement vsvsPPP Cash Flow Streams PPP Cash Flow Streams

Traditional SchemeDevelopment costs

Operating costs

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Year 30 Contract

EndPPP Scheme Annual payment for facility

service provision (inc repayment of capital)

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Year 30 Contract

End


Costs in Single Window?Costs in Single Window?

Design & Dev’ment Costs> US$15M to 20M

Cost increases if …• SW (to Customs) • SW (Customs & 20+ OGAs)• SW + Customs Mgt Backend

Time to implementation• 2 years ?

Operating Costs>> US$ 2M per annum

• Operate, Support & Maintenance of SW assets

• Drive Adoption & Training

• Min. 40 to 50 staff

• Continual support for Network, Systems, Security, Training

• Servicing to Trading Community; Customs, OGAs


WhatWhat’’s the Costs the Cost

Country Price Scope Remarks

Singapore TradeNet(1989)

US$12M Trade Facilitation (Single Window) excludes Customs System

Customs backend system not included

New Zealand CusMod System (1996)

NZ$22 million[1]

Customs system only

Korea’s Automated Customs System (1992 - 1997

~ US$24 million[2]

Customs System only

Does not cover Nation-wide Single Electronic Window

Royal Thai Customs System (1997-2000)

Baht 1.0 billion2

(~US$32M)

Customs system only


Russian Customs Development Project

US$133M2 Customs System only


[1] Article “Customs paves way for one-stop border” - http://www.stuff.co.nz/stuff/4097564a28.html[2] “THE ROLE OF AUTOMATION IN TRADE FACILITATION” - OECD Trade Policy Working Paper No. 22, 2005

http://www.stuff.co.nz/stuff/4097564a28.html


Structuring a PPP Contract Structuring a PPP Contract Structuring a PPP Contract –

Typical Special Purpose Vehicle (SPV) Structure

Design & Development

Multi-Year Operations

Market Adoption

SPV – PPP Contractor

Sub-Contracts Sub-Contracts

Government

PPP Contract

Equity Investors

Equity Shareholder Agreement

Credit Agreement

Lenders Debt or Bond

SPV Consultants


PPP PPP ––Managing & Managing &

Transferring RiskTransferring Risk


The hard facts of today's worldThe hard facts of today's world1.1. SW are risky IT projectsSW are risky IT projects2.2. GovtGovt’’ss budget are overburdenedbudget are overburdened3.3. ThereThere’’s no silver bullets no silver bullet

Reference : Project Risks in Singapore’s TradeNet project is well documented in “Managing Risk in IT Projects – Case Study of TradeNet” –Neo & Leong, Journal of Information Technology Management, 1994


Risk AllocationRisk Allocation

Risk Allocation – Traditional Procurement Model

GovernmentRisk Risk

Design Development Operation Asset Renewal

INPUTS


Risk Allocation via PPPRisk Allocation via PPP

Risk Allocation – Typical PPP Model

Government

Design Construction Operation Asset Renewal

SPV

Government Risk

OUTPUTS

Transferred Risk

Transferred Risk

Shared Risk


Transferring RiskTransferring Risk

• Contract and Payment Mechanism determine risk transfer

• Payment to PPP Contractor dependent on performance – Unitary Payment:

Output Specification (allows risk transfer and innovation)

Availability Criteria Performance Standards

Payment Mechanism

Incentives for performance and tool to effect Risk Transfer


Risk TransferRisk Transfer

• Objective:

• Optimal risk transfer will enhance Vfm

• Excessive risk transfer – cost increase, and unbankable in extremes

RISK TAKEN BY PARTY BEST PLACED TO MANAGE IT



The PPP Process for Single Window The PPP Process for Single Window ImplementationImplementation

PPP Project Phases3 to 12 months 12 to 18 months 18 to 30 months

Feasibility Phase Procurement Phase Contract and change management Phase

•Identify possible PPP opportunity

•Establish Project Management Team

•Examine viability of PPP- Define objectives

- Produce outline output based definition of the required service

- Prepare outline public sector comparator

- Test market and bankability

•Produce business case

•Advertise the opportunity

•Hold industry briefing day

•Issue PQQ

•Gain approvals

•Issue ITN

•Evaluate proposals

•Negotiate Contract

•Best and Final Offer

•Select Preferred Bidder

•Gain approvals

•Place Contract

•Implement contract

•Manage Contract

•Conduct PPE


The The CSFsCSFsSuccessful delivery of PPPs for Single WIndow• Critical Success Factors include:

– Coordinated, realistic, efficient approach to procurement

– Commitment from politicians, civil servants and the private sector

– Public sector realism for what the private sector can deliver

– Private sector empathy for what the public sector is seeking

– Legal framework consistent with procurement and project needs

NEW SKILLS NEEDED BY PUBLIC AND PRIVATE SECTORS


Thank you for your time

email: email: [email protected]@crimsonlogic.com

Documents

Public Private Partnerships (Ppp) Models For National Single Window