Development of Policy, Legal, and Insitutional Framework for - ppiaf

Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi
Final Report
It will be essential to ensure that PPP Unit should report directly to the Office of the President &
Cabinet (OPC) with delegated powers through the MoF (see suggested relationship in Figure 1
at the end of this Executive Summary) The most effective PPP Units manage, directly or
indirectly, sovereign financial risk and utilize the “powers of the purse” thus in Malawi, some
kind of formal relationship with MOF is highly recommended while still having linkage to the
highest level of political support, under the Office of the President and Cabinet. Given the
above-described objectives and criteria, a critical issue is the need for the PPP Unit to ultimately
be placed within the Ministry of Finance (MoF)or to set up as a semi-autonomous body.
In Figure 1, we show the recommended “post-interim” structure, in which the PC’s current , but
later descending privatization activities are continued within the new PPP Unit, and the Head
of Unit reports to the Minister of Finance, who in turn is accountable to the Office of President
and Cabinet at the broad policy level. Interaction between the Unit and MoEPD is included
because the Unit can only accept projects that have been approved by MoEPD for inclusion in
the annual Public Sector Investment Program (PSIP) and with MoTPSD because the PPP
program is a component of the private sector development (PSD) program for which MoTPSD
is the lead agency.
PPP Institutional Framework and the Regulatory Regime
Having a strong and effective regulatory regime is a necessity to attract large-scale private
sector investment. To date, the regulatory regime in Malawi is insufficient to attract private
capital and efficiency in key sectors. Current regulatory arrangements do not adhere to many of
the criteria set down internationally for regulators. Regulatory officials in Malawi are
technically competent in their fields, but are lacking in security, continuity, independence,
and/or insulation from economic influence. Prospective private operators and investors will
“price” the added risk created by this inadequate regulatory environment, causing their
targeted rates of return on investment to be higher than many potential PPP projects can offer.
This places greater strain on PPP projects, which must be structured to be affordable to both
consumers and government, bankable in the sense that private capital can be attracted, and
financially efficient so as to enable Government an acceptable value for money.
The standards currently applied in regulating energy and telecommunications will not meet
international standards for PPPs. In transport, there is currently no independent regulator;
regulatory functions are fragmented across the Ministry of Transport and Public Works
(MoTPW), Maine Services Directorate (MSD), Department of Civil Aviation, and the National
Road Safety Council, etc. There are proposals to set up a TransRA in order to provide
independent regulation, along with an independent Civil Aviation Authority (CAA), but at the
present time transport regulation rests within Government, thereby subjecting it to political
influence.
The international PPP investor has a choice of many different countries in which they can invest
and regulation is one of the deciding factors. A country that can score well on the following
factors might attract significant international private investment:
A stable, free market driven economy;
Open and active financial and capital markets;
THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 8