By: Prof. Marcellina Chijoriga and Mr. Petro Komba

University of Dar es Salaam Business School (UDBS)

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EFFECTIVENESS OF PUBLIC PRIVATE PARTNERSHIPS

(PPPS) IN THE INFRASTRUCTURE SECTOR

IN TANZANIA

10TH ORSEA CONFERENCE 2014

OUTLINE

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1. INTRODUCTION 2. LITERATURE REVIEW

WHAT IS PPP- Definitions, Reasons and Benefits for Implementing PPPs

PPP TRENDS AND EXPERIENCE PPP FINANCING AND OPERATING MODELS

3. RESEARCH FINDINGS 4. CONCLUSION AND RECOMMENDATIONS

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1. INTRODUCTION

INTRODUCTION

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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.

Definition, Effectiveness Measurements, Empirical Evidence,

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2. LITERATURE REVIEW

What is PPP - Definition

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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

Formal “Classical” and Informal PPPs

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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

Privatization Vs PPPs

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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.

REASONS FOR IMPLEMENTING PPPs

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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

Benefits of PPPs Vs Govt doing it alone

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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.

Sector Adoption of PPPs

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Transportation and Infrastructure: - Roads , Bridges; Airports and Sea/lake ports; Rail, Urban Transport and Parking;

Water and Wastewater:- Utility Companies Electricity and Gas: Power Generation and

Transmission SystemsHealth: Construction and Management of

Hospitals and SchoolsPublic 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

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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.

PPPs Experience - International Context

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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

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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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•Generic Financing Options

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PPP FINANCING AND OPERATING MODELS

Choice of Financing Option Based on Project Development

and Risk Levels

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High

BOT BOOT BOO

Low Degree of Privatization High

Risk

Strategic interest

Scope of Competition

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Has Implementation of PPP been Effective?

What are the Challenges in Implementation?

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3. RESEARCH FINDINGS

MAPPING OF PPPS

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Measurement of Effectiveness of PPPs

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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.

Challenges In Implementing PPPs

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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 investorsLong 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

CONCLUSION

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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.

RECEOMMENDATIONs

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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

THANK YOU LISTENING

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ASANTE SANA KWA KUNISIKILIZA