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

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Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report Use of the Privatisation Commission as Interim PPP Vehicle The Public Enterprises Act empowers the Privatisation Commission initiate concessions. Nearly all PPP transactions involve some form of a concession agreement. Technically, such concessions are intended to apply only to existing facilities, not new facilities, so it might be considered a bit of a stretch in the privatization legal framework to ask the PC to undertake BOO, BOT, and BOOT transactions that involve new facilities. One way to solve this could be to amend the Public Enterprises Act to insert PPP language that gives clear authority to enter into concession arrangements involving new facilities. But such amendment processes take a lot of time and effort, while we are looking for something that will enable a PPP program to mobilize quickly. In Uganda, the Public Enterprise Reform and Divestment program is making its transition from privatization to PPP and the Government of Uganda is not “splitting hairs” over the theoretical difference between PPP and privatization. Rather, they are focusing on the practical factors: (a) why go through all the effort of making a radical shift away from privatization to PPP when the transition is a natural global trend and should be achievable through a legal process that does not require throwing out the old to create the new; (b) the institutional apparatus and already appropriated budgetary funds are already in place for the setup conducting privatization, so why not use that instead of trying to set up a PPP apparatus overnight; and (c) the skill sets required to do privatization are very similar to the skills required to do PPP so why not let the privatization professionals do PPP transactions? We agree with this approach and recommend that the Public Enterprises Act, with its authority to enter into concession agreements, and the already established and funded Privatisation Commission, be used as an interim vehicle to mobilize the national PPP program until the full policy, legal, and institutional framework can be put into place, which will take at the very least 6 months and most likely a year or even 18-24 months. Major new undertakings by any government invariably take longer than expected. Synopsis of Suggested Approach To recap: we recommend mobilizing the national PPP program by issuing regulations under the Public Finance Management Act, which will make Accounting Officers the nucleus around which stakeholder agency PPP Nodes can be developed, and will make the Ministry of Finance the home for a national PPP Unit. That is our recommendation, and is the approach that underlies the institutional design described in detail later in this report. The institutional design envisages a structure that will start off relatively small, and will grow as PPP deal flow increases. The design also envisions the immediate designation of a core group of selected professionals in the PC who will be responsible for operating the PPP program within the PC as an interim measure, and would be transferred to the PPP Unit when it is established and funded. The Issue of whether or not to Enact a New PPP Act We now turn to the issue of whether a new PPP Act is necessary. It certainly is not necessary to enact such a new law just to mobilize the PPP program. Regulations under the PFMA can do that quite effectively. But what about the longer-term considerations? Will the national PPP THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 16
Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report program flourish under an enabling legislation that is so far down the hierarchy of legal instruments, as compared with a new law? What will potential investors think when they see that the program is based on regulations and not law? A regulation can be changed at will at any time, with little or no consultation with the law committees of the Ministry of Justice and Parliament. The PFMA specifically allows the Minister responsible for finance to pass regulations pursuant to the Act. By implication it also allows the Minster to repeal or change such regulations at will. Maybe something more is needed to send a signal of stability and support to the market. In the countries in which PPP has flourished under regulations alone, there is a political and economic culture that is naturally receptive to PPP activity. In some countries, e.g. the United States, the culture is so naturally accepting of PPP that there is no national coordinating body or legislation. But can one say the same of Malawi? Probably not, so we have provided a draft PPP Act in the Appendices to this Report for Government to consider if it decides such an Act is needed. In other countries, national PPP legislation has been enacted for one or more of the following reasons: The legal capacity of the various “spheres” of government to contract with the private sector for long-term service provision is inadequate and/or unclear; The political culture will not tolerate any vertical, hierarchical, decision-making structure so a national law is needed to underscore government’s commitment to the PPP process, and provide guidance as to how one should do PPP, but does not impose strict decision-making systems involving centralized approval; or Government considers the need to maintain strict control over the PPP process to be too important to relegate to PPP regulations, so a national umbrella law is passed to impose such control at the highest level. Existing Capacity to Contract with Private Sector In this consultancy, we have carefully examined the capacity of the various “spheres” of government to contract with the private sector for the long-term provision of services. We do not see any constraints to such activity sufficient to require a national umbrella act to fill the gaps or correct the inconsistencies, which are minimal and can be rectified through internal adjustments rather than a national initiative. National gap-filling laws of this type are being used in Eastern Europe (the national concession laws) to provide a solution to major inadequacies in the contracting authority legal framework. Malawi does not have that degree of inadequacy. On the contrary, the legal framework for such contracting authority is relatively well developed. So the first scenario presented above in our checklist for national legislation does not apply to Malawi. The second scenario does not apply either, as we have already shown in our examination of the PPP regulations scenario. We see no indication of substantive resistance to a central decision-making body, as long as that body is seen as facilitative and not just another layer of bureaucracy. THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 17
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Development of Policy, Legal, and Insitutional Framework for - ppiaf

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