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					       Decentralization and Local Governance, Civic
      Engagement and Capacity 2015 CoP Joint Event
            “The Principles of Partnerships”

       Public-private partnership:
     partnerships for service delivery

                     Olena Maslyukivska
December 9th, 2005
1. General overview of the concept of PPP
   for service delivery w/ focus on
  –   PPP and pro-poor public service delivery
  –   PPPs value added
2. Review of the countries of Central and
   Eastern Europe and the CIS
  –   national policies
  –   legislative and institutional framework
      •   for the establishment of municipal PPP
      •   for public service delivery and local development
1. General overview
of the concept of PPP
 for service delivery
Need for PPPs
•   Governments cannot meet the
    continually growing demand for
    services by acting alone
•   There is a need to look for support
    from other sectors of society
•   PPP is one of the most promising
    forms of such collaboration

PPP - a spectrum of possible
 relationships between the
 government and other
 organisations that are not
 government to carry out a
 project or provide a service
       UNDP (2004) Tools for Pro-poor municipal PPPs
    Spectrum of Possible Relationships
between Public and Private Service Providers
                               Broadest Definition of “Public-Private Partnerships”

            Agreeing           Traditional                               Passive Public
          Frameworks             Public                   Joint           Investment
         Local Agenda 21       Contracting              Ventures          Equity, Debt
           Community             Design               Co-ownership        Guarantees
            Visioning             Build              Co-responsibility      Grants
  Fully                                                                                              Fully
 Public                                                                                             Private
 Sector                                                                                             Sector
                       Passive             Service                 Build,          Agreeing
 Building                                                                                          For-profit
                       Private            Contracts               Operate         Frameworks
Awareness                                                                                         Non-profit
                     Investment            Operate               and Invest        Regulatory
                     Gov’t bonds          Maintain                  BOT             Dialogue
                                            Lease                Concession        Covenants

                      Public                Investment Responsibility            Private

      Provider                                  Government Role                                 Enabler &

Bradford S. Gentry
Yale/UNDP Programme on Public-Private Partnerships
PPP and pro-poor public
service delivery
•   The community has a direct role to play
    in PPPs as a direct beneficiary
    –   Expresses the price the community would
        pay for an acceptable level of service
    –   Oversees services provided
    –   Catalyzes local population participation in
        decision making
    –   May take the role of the private partner to
        reach the poorest consumers
   Indirectly community shapes the policy
    for the urban environment
PPP’s value added compared to
other existing modalities

• Combines the advantages of both sectors:
   – social responsibility, environmental
     awareness and public accountability of the
     public sector
   – finance, technology, managerial efficiency and
     entrepreneurial spirit of the private sector.
• PPPs offer an alternative to full privatisation
• Promotes the transfer of knowledge, know-how,
  management skills and new technologies.
Skepticism about PPPs and
responses (see article by Hensley & Suryodipuro )
1.       Increased prices for services
     –     efficiencies
     –     cost-recovery strategy
     –     targeted subsidies
2.       Poor communities exclusion
     –     Wide spectrum
     –     Public participation
3.       Often complex requiring more efforts and
         capacity compared to “Business as usual”
     –     Cost-benefit analysis
     –     Reaction to crisis vs. “vision”
4.       Generally takes longer to procure than
         traditional projects
    2. Review of national policies
     legislative and institutional
                    • EU accession countries (Bulgaria, Romania
                      and Turkey)
•   key findings    • Western Balkans (Albania, Bosnia and
•   current trends    Herzegovina, Croatia, FYR Macedonia, Serbia
•   challenges        and Montenegro, Kosovo (Serbia and
•   recommendations   Montenegro))
•   conclusions     • Western CIS (Belarus, Moldova, Russia and
                    • Caucasus (Armenia, Azerbaijan and Georgia)
                    • Central Asia (Kazakhstan, Kyrgyzstan,
                      Tajikistan, Turkmenistan and Uzbekistan)
European Union                          1/2

• There is no uniform PPP definition
  for the EU, nor a wide policy
• Common characteristics
  – Utilization not only private sector ability
    to raise finances but also its
    management and experience
  – Risks are allocated to the party better
    equipped to manage them
  – Need to combine the EU funding and
    private finance
European Union                   2/2

• Changes in legislation and
  institutional support on the level of
  each member state
• PPPs are established as one of the
  tools which are available to the
• Still poor level of understanding
  ofPPPs among public sector officials
PPP institutional development in EU
Member states (Adapted from PwC Report 2004, WB Report 2004)
                                     Relative PPP experience (water
Country           PPP Unit PPP Law
                                     and wastewater sector)
Austria           ▲▲▲     -          ☺
Belgium           ▲       □□         ☺☺
Denmark           ▲▲      -          -
Finland           -       □          ☺
France            ▲       □□         -
Germany           ▲▲      □□         ☺☺☺☺
Greece            ▲       □□         -
Ireland           ▲▲▲     □□□        ☺☺☺☺
Italy             ▲▲      □          ☺☺
Luxembourg        -       -          -
Netherlands       ▲▲▲     -          ☺☺☺
Norway (not EU)   ▲       -          -
Portugal          ▲▲      □□         ☺☺☺
Spain             -       □□         ☺☺☺
Sweden            -       -          -
UK                ▲▲▲     -          ☺☺☺☺☺
            Need for PPP unit identified and some actions taken (or only a
            regional unit available)
▲▲          PPP unit in progress (or existing but in purely consultative capacity)
▲▲▲         PPP unit existing (actively involved in PPP promotion)
□           Legislation being proposed
            Comprehensive legislation being drafted/some sector specific
            legislation in place
□□□         Comprehensive legislation in place
☺           Discussions ongoing
☺☺          Projects in procurement
☺☺☺         Many procured projects, some projects closed
☺☺☺☺        Substantial number of closed projects
☺☺☺☺☺ Substantial number of closed projects, number of them in operation
PPP institutional development in EU New
Member states (Adapted from PwC Report 2004, WB Report 2004)
                     PPP    PPP   Relative PPP experience (water
                     Unit   Law   and wastewater sector)
   Cyprus            -      -     ☺☺
   Czech Republic    ▲▲     □□    ☺☺☺
   Estonia           ▲      -     -
   Hungary           ▲▲     □     ☺☺☺
   Latvia            ▲▲     □     -
   Lithuania         -      -     -
   Malta             ▲      -     -
   Poland            ▲▲     □□    ☺☺☺
   Slovakia          -      -     ☺
   Slovenia          -      -     ☺☺☺
   Applicant countries
   Bulgaria            ▲    □     ☺☺☺
   Romania             ▲    □□    ☺☺☺
   Turkey              -    □□□   ☺☺☺
Three PPP Models in OECD countries
on the degree of centralization of PPP
institutions in the overall state structure
1. Highly centralized (Canada) – SuperBuild
   Corporation and Ministries
2. Highly decentralized (France, Portugal) –
   PPPs – individual government departments
   and local authoritative responsibility
3. Mixed centralized and decentralized
   (Ireland, UK, Italy, Netherlands) – one PPP
   national unit with functions of knowledge
   dissemination, PPP use promotion, national
   policy development, project support, etc.
New EU Member States Legal
• Czech Republic
   –   General policy on PPP adopted in January 2004
   –   An inter-sectoral PPP team has been established
   –   No specific PPP legislation yet
   –   Review underway (supported by WB)
• Hungary
   –   Legal changes ongoing
   –   History of private involvement in roads
   –   Parliament needs to approve larger projects (>€95m)
   –   Draft new PPA
• Poland
   – Draft PPP legislation under development
   – Public Procurement Law applies to subcontracts in PPP
   – PPP for contract longer than 3 years requires special approval
EU Accession Countries                     1/2
• Findings
  – high degree of public services
  – substantial progress in legal reforms in
  – different forms of utilities ownership
  – Concession law in place
• Trends
  – PPP legal and institutional frameworks are
    being actively developed (RO: specific PPP
    law; BU: National Strategy for Bulgaria's
    regional development for 2005-2015)
EU Accession Countries                       2/2

• Challenges
  – a relatively poor (although improving)
    investment climate
     •   macroeconomic stability
     •   corruption
     •   bureaucratic delays
     •   inefficient judicial system
  – lack of coordination between state institutions
  – No clear distribution of competencies between
    the municipalities  conflicts between local
    and regional tiers
Western Balkans                      1/3
• Findings
  – high degree of centralization of the
    governance system
  – local governments roles in providing
    public services have both similarities
    and rather substantial differences
  – important role of the international
  – there is no clearly defined PPP policy
Western Balkans                            2/3

• Trends
  – most local infrastructure rehabilitation and
    construction is carried out under contracts to
    local or international construction companies
  – solid waste collection, maintenance of green
    areas and the management of public lightning
    are delivered by private providers (under
    competitive bidding procedures)
  – most big and medium size cities are
    privatizing service delivery, while some assets
    of those services remain state-owned
  – private sector involvement legislation is being
    developed (PPL)
 Western Balkans: Challenges                                1/3
• The lack of a seamless, transparent, and predictable
  legal and regulatory framework
   – very complex and challenging
   – fragmented and in many ways inconsistent
• The lack of consistent and transparent regulations
  and administrative procedures
   – compounded by the absence of effective and independent
     mechanisms for appeal and for public accountability of
     various government agencies
• The lack of effective, efficient, and adequately funded
  administrative and judicial systems
   – administration, law enforcement, and the judiciary are marked
     by a lack of impartiality, accountability, and transparency
   – court proceedings are very lengthy, unpredictable and costly
   – rife political interference in court decisions
Challenges Western Balkans: 2/3
• Centralization of the public sector functions
   – the existing public institutions and agencies, have a
     monopoly on the majority of the public services.
   – the privatization process of these institutions has been
     nontransparent and the possibilities of establishing
     new, private and competitive institutions are restricted
     by law
• Small municipality size prevents the local
  governments from an economy of scale
• Technical facilities of many infrastructure and
  communal systems are dilapidated
   – due the poor maintenance and the lack of investment
• Private property problems
   – there is still a great number of citizens being refugees
     and displaced persons deprived of being able to use
     their home and their property
Western Balkans: Challenges                                 3/3
• Low level of paying public services
   – fee collection rates fewer than 50 percent for all
     community services
   – while rising service prices in recent years has only
     furthered consumer dissatisfaction
• Constant overlapping of authorities and
   – how to check and supervise the efficient provision of
     public services at all levels of government
   – many local government departments were transferred to
     the respective ministries without a precise division of
     assets or properties
   – Hence, they have very limited capacity to invest their own
• Lack skilled personnel at municipality level
Western NIS                                    1/2
• Findings:
  – Different degrees of public services
     • high (MD, RU, UA) and low (BY)
  – BY: insignificant role of private sector
  – No specific PPPs laws but
  – specific laws govern public-private
• Trends
  – Private share in public services is small but
    growing (RU, UA)
  – Needs for investment in the infrastructure
    drive private sector involvement
  – IFIs work with municipalities
Western NIS                                2/2

• Challenges
  – underdeveloped legal and institutional
  – different tiers’ overlapping competencies
  – lack of transparency
  – inefficient public spending
  – corruption
  – poor conditions of the public infrastructure
  – lack of local authorities’ autonomy (RU)
  – frequent changes in legislation (UA)
Caucasus                              1/2

• Findings
  – Increased attention towards
    decentralization of the public services
• Trends
  – Initial steps in decentralization are
  – Strive to conform with the European
  – Positive trends in private sector
    involvement (AM, GE)
Caucasus                                          2/2

• Challenges
  – Legislation shortcoming
     • legislative base remains underdeveloped (e.g. AZ)
     • existing laws are often contradictory
     • lack of legal discipline (e.g. GE)
  – Incomplete and unreliable statistical data
  – Double subordination and overlapping
    functions of different levels of government
  – Lack of governmental revenues
     • Municipalities lack financial and property resources
Recommendations for the region

• Need of the supportive regulatory
  and legislative framework
• Necessity to strengthen the “public”
  side of partnerships
• Further decentralization of public
  services provision
• Need to facilitate the communication
  between multiple stakeholders
• Positive public image creation
Questions for discussion:
1. Does the region need PPPs?
2. What are the major skepticisms
   about the PPP?
3. What are the existing strengths and
   potential pitfalls for PPPs in the
4. What are the driving forces shaping
   the PPP development in the region?

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