Infrastructure Development in Nigeria: PPP Lessons from Hong Kong

Introduction

Center for Ethics and Sustainable Development seeks to increase understanding, effective implementation and sustainability of PPP and PPIP development policies, programs and projects by providing intellectual leadership, advisory and analytical services to the infrastructural development community.

This edition is a review of McKinsey report, on an international current study on PPP that incorporates a (Rail plus Property development) R+P business model

What can Lagos state and Nigeria learn from Hong Kong’s approach to public transit?

Lagos state and Nigeria as a whole have infrastructural deficit that requires innovative approaches to resolve. One of such is learning from relevant success stories and in this case, from Hong Kong’s public transit development. What does Lagos have in common with Hong Kong for her to learn from her approach to expanding and building public transit? Nigeria’s land area is bigger than that of Hong Kong. Lagos has population bulge like Hong Kong. But Lagos is more densely populated. Both Hong Kong and Lagos have infrastructure deficit and are using Public-Private Partnership (PPP) model of procurement.

(Source- World fact, 2015)

Lessons for PPP or PPIP practitioners

1. Infrastructure development using PPP model must deliver significant financial and social benefits to the area. This should include excellent transit, new and vibrant low and medium cost neighbourhoods, opportunities for real-estate developers and small businesses, and the conservation of open space.
2. Project must operate on a self-sustaining basis, without the need for direct taxpayer subsidies.
3. Cheap fare for rail and road
4. Comprehensive future-proofing and value capture of project that enables the use of Rail plus Property (R+P) business model. For new rail lines, the government provides MTR with land “development rights” at stations or depots along the route. To convert these development rights to land, MTR pays the government a land premium based on the land’s market value without the railway. By capturing part of the value of the land and property around railway lines, MTR generates funds for new projects as well as for operations and maintenance. That is why it does not need government subsidies or loans.
5. Ensure that PPP or PPIP contract includes integrated urban development plan. Planners and government agencies seek to make every new railway line or extension into a corridor where well-planned; high-quality communities can flourish. Where revenue generating amenities are provided for passenger to meet their daily needs. Buying coffee in the morning, checking email and accessing information over free Wi-Fi, getting laundry done, or picking up dinner.  With pedestrian corridors linking railway stations to surrounding buildings and parks, R+P developments anchor compact, pedestrian-friendly, and appealing communities.
6. Well maintained alternative routes for tolled-roads and rails. The underserved poor must have  alternatives,
7. The government’s mandate that MTR operate according to prudent financial principles gave both sides a stake in finding a financially sustainable model for developing the city along railway corridors.
8. Encouraging commercial and residential development near transit hubs, for example, is something that many cities can do.
9. Profit-sharing deals with developers, partial ownership of new developments, and on-site property rentals can all yield revenue to help pay for new investments in transit. These approaches can ease the financial strain of expanding public transit while making cities better places to live and work (McKinsey, 2016)

In conclusion, Hong Kong with a larger land area but less population than Nigeria has made infrastructure provision an avenue for harnessing financial and social benefits. PPIP has the potential of delivering immense social benefits. Incorporating a contextualized form of the R + Development model will significantly increase these benefits. Policy makers at the state and federal level should consider this method of infrastructure development. This is essential for sustainable development in Nigeria as it is not just a partnership that caters to the interest of the private sector and the public sector but also to the concerns and needs of all stakeholders including men, women, and the sick and other vulnerable groups.

References- Lincoln Leong, (2016) “An international current study on PPP that incorporates a (Rail plus Property development) R+P business model”. McKinsey Report.