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

Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi
Final Report
III.
POLICY FRAMEWORK – DRAFT NATIONAL PPP POLICY
III.A. Definition of Public-Private Partnership
A “public-private partnership” is a commercial transaction between a public institution and a
private party in terms of which the private party:
(a)
(b)
(c)
(d)
performs an institutional function on behalf of the state; and/or
is allowed the use of state property; and
assumes substantial financial, technical, and operational risks in connection with the
performance of the institutional function and/or use of state property; and
receives a benefit for performing the institutional function or from utilizing the state
property, either by way of:
(i) consideration to be paid by the institution, which derives from a revenue
fund or, where the institution is a national government business enterprise or
a regional or local government business enterprise, from the revenues of such
institution; or
(ii) charges or fees to be collected by the private party from users or customers of
a service provided to them; or
(iii) a combination of such consideration and such charges or fees.
A public-private partnership is not privatization because it does not involve the transfer of
ownership and control of state assets to the private sector.
The essence of PPP is the allocation of project risk to the parties best equipped to manage those
categories of risk. Generally, political risk is allocated to the public sector partner and
commercial risk is allocated to the private sector partner. By allocating risks in this manner, the
success of the commercial transaction and its future operations are assured. In practice, there
are always some categories of risk in which both partners must share management
responsibility.
In Malawi, the legal definition of privatization includes concessions, which generally in
international practice are regarded to be PPP. Rather than change this definition, which would
require amending the Public Enterprise (Privatization) Act, this Policy provides that concession
agreements made for existing infrastructure will be regarded as privatization, while any
concession agreements made for new infrastructure will be regarded as PPP.
The rationale for PPP in Malawi is that it will accelerate infrastructure development by
leveraging public financial resources with private investment, and it will increase the quantity
and quality of public services to improve the quality of life for Malawians. All Government
institutions should use PPP whenever possible in conducting economic and/or procurement
activities requiring public expenditure. When proposing new projects to be included in
national budget and the related Public Sector Investment Plan, all Project Sponsors (the
government body that has proposed the project) shall include an appraisal of whether the
project should be a PPP.
THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 19