Transcript EFFECTIVENESS OF PUBLIC PRIVATE PARTNERSHIPs …

EFFECTIVENESS OF PUBLIC PRIVATE
PARTNERSHIPS (PPPS) IN THE
INFRASTRUCTURE SECTOR IN
TANZANIA
By: Prof. Marcellina Chijoriga and Mr. Petro
Komba
University of Dar es Salaam Business
School (UDBS)
10TH ORSEA CONFERENCE 2014
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OUTLINE
INTRODUCTION
2. LITERATURE REVIEW
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WHAT IS PPP- Definitions, Reasons and Benefits for Implementing
PPPs
PPP TRENDS AND EXPERIENCE
PPP FINANCING AND OPERATING MODELS
RESEARCH FINDINGS
4. CONCLUSION AND RECOMMENDATIONS
3.
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1. INTRODUCTION
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INTRODUCTION
 Globally, the public sector underwent severe period of
change in the last two decades particularly in its operations
and delivering of public services
 Introduction of the Public Private Partnership (PPPs) has
been considered as a more innovative approach for improved
effectiveness in terms increased value for money; improved
service access; reliability; timely delivery; transparency and
accountability of public money.
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2. LITERATURE REVIEW
Definition, Effectiveness Measurements, Empirical
Evidence,
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What is PPP - Definition
 A PPP is a contractual agreement between a public
agency (national, regional, local) and a private sector entity for
the delivery of public infrastructure services or other
basic (social ) services – for long term relationship
 Skills and assets are shared in delivering a service / facility for
the use of the general public.
 Shared risks and rewards in the delivery of the service and/or
facility
 Joint, symbiotic and collaborative provision and financing of
public projects and services
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Formal “Classical” and Informal PPPs
Formal PPPs is “a contract between a public sector institution and a
private party, in which the private party assumes substantial
financial, technical and operational risk in the design,
financing, building and operation of a project”
Informal PPs is where development partners (donors, NGOs,
international development agencies or other civil society) take the
role of the “public” in the partnership with the private
entity.
 Projects are typically more informal and projects can be
characterized by coming together of two sectors or public
institution
 PPP - partnership which exists along the continuum of
the two extremes of Public Procurement and Full
Privatization
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Privatization
Vs
PPPs
 Privatization:
- The Govt get out, or devolve responsibility to private sector;
- Feasible where it can be done commercially;
-Where rewards outweigh risks thus private sector interest;
- All risks of investments and performance are shifted to the
private sector;
- The private sector shoulder the risks and reap the benefits.
 PPPs:
-Where Govt/public must ensure that the service is provided;
- The risks and rewards involved are not attractive for the
private sector (which is profit motivated) to do it alone;
-Where there is scope for sharing the risks and benefits.
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REASONS FOR IMPLEMENTING PPPs
Funding
 Government(public) obligations to deliver public infrastructure services or other
basic services
 Lack of fiscal resources to finance the infrastructure investments
 Direct Government financial support may be limited or not required
 Government support may be needed in risk management
Efficiency
 Private sector projects present limited cost overruns and delays, and lower operating
costs compared to public works contracts
Flexibility
 PPP arrangement allows to design the optimum combinations of Public and Private
financing
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Benefits of PPPs Vs Govt doing it alone
 Creation of Added Value: through synergies between
public authorities and private sector companies, in particular
through the integration and cross-transfer of public and
private sector skills, knowledge and expertise;
 Efficiencies: from integrating design and construction of
public infrastructure with financing, operation and
maintenance/upgrading skills of the private sector;
 Alleviation of capacity constraints and bottlenecks
in the economy through higher productivity of labor and
capital resources in the delivery of projects;
 Accountability: for the provision and delivery of quality
public services through an incentives performance regime.
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Sector Adoption of PPPs
 Transportation and Infrastructure: - Roads , Bridges; Airports
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and Sea/lake ports; Rail, Urban Transport and Parking;
Water andWastewater:- Utility Companies
Electricity and Gas: Power Generation and Transmission Systems
Health: Construction and Management of Hospitals and Schools
Public Sector Real Estates – Construction and Management
Social Housing- Construction an Management
Education – School/University/Collage Buildings and service
Security – Prisons- Constructions and Management
PPPs are not standardized
No “one size fits all”; No “cut and paste” PPP solutions;
Each country’s approach to PPP is:
 Designed to meet the policy objectives of its Govt;
 Developed to complement other public procurement and public
service delivery methods;
 Implemented according to the available public and private sector
resources.
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PPPs Experience - International Context
 Public Private Partnership (PPP) has been in implemented for the past 20 – 30
years in developed countries such as United Kingdom (UK), Denmark,
Canada, Holland, Germany, Spain, United States of America (USA) (Duffield et
al., 2010; Buser et al., 2006; Grimsey & Lewis 2004).
 Countries with active/developing PPP programs include: Australia,
Brazil, Canada, Chile, Czech Republic, France, Germany, Greece, Hungary,
Ireland, Italy, Japan, Malta, Mexico, Netherlands, Poland, Portugal, Slovak
Republic, Singapore, Slovenia, Spain, Taiwan and UK;
 In Africa South Africa had a Legal and Regulatory framework for PPPs for
some time and has over 50 PPP projects national and 300 under municipal level
e.g. Maputo Corridor; water and sanitation –UWASAs
 Mauritius in July 2005 adopted a Legal and Regulatory framework for PPPs.
 Tanzania did adopt in 2009 with the introduction of the PPP policy.
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Measurement of Effectiveness
 Effectiveness of PPPs is measured differently by different
authors.
 Key parameters for effectiveness are adherence to budgetary
provisions, timeliness in project delivery, quality of the
project delivered, project risk transferability, project
accountability (Akintoye et al, 2003)
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PPP FINANCING AND OPERATING
MODELS
•Generic Financing Options
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Choice of Financing Option Based on Project
Development and Risk Levels
High
Scope of Competition
Strategic interest
BOT
Low
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Risk BOO
BOOT
Degree of Privatization
High
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3. RESEARCH FINDINGS
Has Implementation of PPP been Effective?
What are the Challenges in Implementation?
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MAPPING OF PPPS
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Measurement of Effectiveness of PPPs
 Only one project used formal PPP financing and operating
approach, the rest were informal.
 Overall PPPs have not been effective to improve timeliness of
completion, quality of services delivered, risk sharing and
accountability.
 Practice does not meet modern PPPs financing and operating
principles.
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Challenges In Implementing PPPs
 Lack of clear PPP policy – Sector policies missing
 Lack of clear sectoral regulations and guidelines;
 Inactive and underdeveloped private sector,
 Lack of credible and bankable projects to attract private
investors
 Long term financing model
 Lack of competent staff for implementation and management
of PPPs,
 Poor risk sharing mechanism between the public and public
sector.
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4. CONCLUSION AND
RECOMMENDATIONS
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CONCLUSION
 Overall, the PPPs have not been effective,
 Applicability of the Policy and Regulations
 Timeliness on the delivery of service
 Little accountability to the public
 Low Risk sharing and allocation
 Public trust of private sector participation
 Do not meet PPPs financing and operating principles.
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RECEOMMENDATIONs
For improved effectiveness, it is recommended to:
 review of both the PPP policy and the regulatory environment,
 enhance the capacity of the public sector to manage the PPP,
 improved risk allocation and sharing among the parties,
 improved effectiveness,
 improved private sector capacity and participation
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THANK YOU LISTENING
ASANTE SANA KWA KUNISIKILIZA
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