Actual challenges of implementation of PPP projects in Czech

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					Actual challenges of implementation of PPP projects in Czech Republic
Zuzana Khendriche Trhlínová
University of Economics of Prague, Czech Republic

Jaroslava Kadeřábková
Western Bohemia University, Pilsen, Czech Republic

    Czech cities and regions are starting to use more and more new managing methods based
on partnership with private sector as well as with the NGO and other civic association. This
process is relatively recent and the integration of the PPP model to general practice still meets
a lot of constraints. The objective of this contribution is to present the framework of the
development of the partnership between public and private sector in Czech Republic and to
show some experiences learnt from the actual implementation process. Special attention is
paid to the main barriers of the more intensive PPP projects preparation and realization on
national, regional and local level.

    Data mentioned in the presentation are based on the results from the territorial researches
that were made by cooperation of two universities – department of regional studies of the
University of Economics of Prague and department of public administration, Western
University of Pilsen. The aim of the research projects was to study and to analyse the actual
issues of the management of regional and local development in different regions in Czech
Republic on the interdisciplinary approach. The different points of view of the attitudes
towards partnership between public and private sector were also analysed in these researches.

    Czech Republic has with the comparison with other EU countries quite limited
experiences with PPP projects. The implementation of PPP models in local and regional
development processes is mostly in the phase of preparation from the point of view of
legislative framework as well as conceptual framework. There are many reasons of the tardive
preparation of PPP projects in Czech Republic, between others it’s the lack of political
support to this types of projects as well as the negative experience from the past (in the
nineties there was an unsuccessful tentative to construct part of the motorway between west
and east of Czech Republic on the principles of PPP models).

    The demand to realise the PPP projects in CR grows in the framework of the EU
programming period 2007-2013. It is considered that the private sector will play an important
role in co-financing development projects. This tendency is reflected in newly elaborated
concept of the Ministry of Local Development that indicates that the PPP projects will play a
very important role in Cohesion Policy during the 2007-2013 period.

    On the national level there are five pilot PPP projects that are being prepared now and that
will be guaranteed by the state (railway modernisation, motorway enlargement, construction
of the accommodation infrastructure for prisons and justice areas). The experiences from
these pilot projects will be used in future legislation and strategic concepts.

    While the big PPP projects guaranteed by the state will be lanced in 2008 there are already
some experiences gained at local level. The interest for the realisation of the PPP projects is
for several reasons more required by local self-government unites. The major factors of this
situation is the increasing demand for the high quality public services and goods in the
framework of the limited financial possibilities, implementation of more strict European
standards in some public services that some municipalities are not able to cover (e.g. water
treatment) and the insufficient financial means to co-finance development projects in some,
especially rural, areas.

    Czech Republic has also a very specific settlement structure with many rural communities
and with small and medium sized towns. At the same time the municipalities received many
competences without adequate financial resources during the decentralisation process that was
realised from 1990 to 2003. The municipalities solved this problem first by selling the
municipal property and then by the loans during in the nineties but these possibilities are
nowadays limited. That’s why the local self-government bodies are addressing themselves
more and more to the private sector to create functional cooperating structures.

    Mostly all municipalities started their cooperation with private sector by the provision of
the basic public needs as a waste collection, public lighting, public green areas regeneration,
parking areas and other technical services. In addition to these classical projects the local
governments are becoming to cooperate with private sector more intensively also in different
types of development projects like brownfields regeneration or ensuring of social and health

    Between one of the first successful examples of PPP projects realised in rural areas
belongs the revitalisation of brownfields in small village in the West of the CR called Zadní
Chodov. Local administration preferred to realise the project of building revitalisation with
the cooperation with private sector that permitted to avoid the territory speculation that could
occur in the case of selling the terrain to private hands. Municipality has still the possibility to
influence the functional use of the building with positive impacts to the local environment.

    Dynamic development of these types of projects in rural areas is waited in next years
especially in the context of the financial help for local development from Structural Funds
(especially LEADER initiative). The preparation and the realisation of the PPP projects is
nevertheless depended mainly on the local administration capacity to implement PPP projects
and also on the level of the partnership and communication within the local community. The
successful PPP projects are nowadays realised particularly in the localities and regions that
are characterised by intensive local actors initiatives and functioning partnership networks.
The special role in preparation and realisation of the PPP projects in rural areas plays also the
so-called “Local Initiative Groups” that are present and active only in some regions of Czech

    Although the big interest for the PPP projects is more pointed in rural areas, there are also
the big cities that are ready to launch the projects based on PPP model. Between the projects
that are being prepared or discussed is e.g. project of the congress centre in the town of Zlín,
projects of the sport and cultural centre in the town of Brno or paid access for the individual
transport to the Prague centre (in discussion).

   In spite of the progress made in creation of the needed legislative and institutional
environment for the PPP projects implementation there is still many barriers that limit the

more intensive use of this model. First of all it is insufficient legislative context. The PPP
projects are now prepared and realised in the framework of the Concession Law (adopted in
2006) and the Law on Public Contracts (adopted in 2006). The existence of these two acts is
very important but there are still many legal exceptions that reduce the transparency of PPP

    Another problem is the absence of the clear division of competences between national
level and regional and local level in delivery of some public services. One of the example is
the domain of the cooperation of the municipal police bodies (that are responsible to the
municipalities) and private organisations ensuring the security services as well as speed
measurement. Even the law doesn’t directly interdict these types of cooperation activities,
some towns were recently punished for the cooperation with private sector in installation of
radars and communication of driver’s data.

    Significant limit of PPP project preparation and realisation is also the knowledge and
experience of local self-government unites. There is often a lack of specialized persons enable
to prepare the good contracts with the risk elimination, to prepare and realise longstanding
investment projects, to prepare professional strategic plans etc. The local representants are in
many cases aware of the long-term responsibility of the PPP projects. The local
representatives aren’t sure about the citizen’s mandate to make future financial charges and
they often prefer the decisions linked with their political cycle interest.

    The important barrier of the PPP projects realisation is also lack of the internal as well as
external communication and in many municipalities absence of long-term partnership
networking strategy. Many citizens, associations and other actors are afraid of the corruption
that could be linked with the PPP projects. Many municipalities don’t pay a special attention
neither to the information dissemination about the basic principles of PPP projects neither to
the common discussion with the citizens and civic association. This distrust to the effective
impacts of the PPP projects is multiplied by the relatively high level of corruption in Czech
Republic as well as by negative experience from the activities of local pressure groups.

    Creation of the essential environment that will permit successful realisation of PPP
projects depends on many factors and needs involvement of many actors on all level of public
administration management. There are many important steps to be made: stabilisation of
external context (legislation, competencies, public finance stability), continuing the process of
the public administration modernisation (especially continuing formation and expertness
increasing on all level of public administration), application of new methods of the
management quality in public administration, strengthening of communication and
partnership between public sector, private sector and citizens, elaboration of a consistent
approach for partner consultation and many others arrangements. However the real stimulus
for the development of PPP projects is linked with the political support, especially on national
level. Wide political and economic discussion with former experts is still needed in Czech

   More extended use of PPP projects can bring in future an important positive effects in the
reduction of the price and the growth of the amount and quality of public services and goods.
Czech Republic has still a long way to achieve these goals even over some individual
successful PPP projects. The future effective PPP projects implementation is depend on the
change of the approach towards the cooperation between the public and private sector of the
whole society and the creation of the high transparent milieu.