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 The 4 th factor in our options analysis is Political Risk. For the purpose of this exercise, we define political risk as the reliability (or lack thereof) of political support for the option being examined. In the case of Malawi, this was an important factor in scoring options that involved a longer-term role for the Privatisation Commission in the PPP program. While such options scored highly in the Use of Existing Resources factor (the professional resources in the PC are considered to be quite good) the options did not fare well in the Political Risk test because: (a) donor support for the PC is expected to end at the end of 2007; and (b) although the PC has privatization revenues sufficient to continue in operation for as much as 1-3 years beyond 12/31/07 and has identified some transactions it considers important to complete before ceasing operations, the political support for continued PC operations appears to be relatively uncertain. It is a long-standing policy of IP3 not to involve itself in political disputes that might compromise the independence of our analysis and recommendations. Accordingly, we did not allow the political battle over the future of the PC to influence our analysis. We waited for an indication that both donor and Government had taken a decision as regards such continued support (or lack thereof), and until such a decision became apparent we continued to consider a longer-term role for the PC in the PPP program. In fact, we prepared a version of this report that was distributed internally for discussion. The report envisioned a PC with a mandate expanded to include PPP along with Privatization, passage of a new law (or amendment of an existing law) covering both PPP and Privatization, and the PPP Unit being located within the expanded PC on a long-term basis. We also prepared this version of the report and distributed it for discussion purposes. We waited for a decision by donor and Government, regarding the future role of the PC in the PPP program, before we released this final report. The decision became apparent in a Retreat of decision makers that was held at the end of March 2007. Based on the session notes subsequently circulated by the Facilitator of the event, we concluded that both donor and Government had taken the decision not to involve the PC in the PPP program on a longer-term basis. There does appear, however, to be support from both donor and Government to involve the PC in the PPP program on an interim basis, and we have prepared this report accordingly. If political support for a longer-term role for the PC were to increase, and there is some possibility of that happening after PwC presents its final report to Cabinet, then the total scores of longer-term PC participation options would improve. In particular, an increase of such options’ Political Risk score from the present level of 1 (indicating high political risk) were to increase to a neutral score of 5, then at least one of the longer-term PC participation in PPP options would rise to the top 5 in rank. If the score for Political Risk were to become positive, maybe 6 but certainly if 7, then at least one of the longer-term PC participation in PPP options would attain a ranking among the top 3 and would therefore require detailed analysis and consideration thereof. The 5 th factor used in our multi-criteria weighted options analysis, which is international best practice for policy and legal options analysis, is Value for Money. Once the option passes the Affordability test, then the most important aspect of deciding whether or not government should make the investment is the relative amount of service provision that will be made available by the investment. The concept is similar to the private sector’s Return on Investment, THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 30
Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report but in the case of government the focus is more on how much service delivery will be made available than on what financial return can be achieved. The last two factors address the issue of whether there are international experiences that show the option being considered has been tried and it was successful, and whether the option being considered, while perhaps not yet tested in the international market, might be part of a recognized international trend for PPP. In the charts below, we present the results of the multi-criteria options analysis: Multi-Criteria Analysis Scoring Matrix Enact No PPP Legislation (4 Options) Option 1 1 1 2 2 2 3 3 3 4 4 4 Factor Score Weight Rank Score Weight Rank Score Weight Rank Score Weight Rank 1 9 7 63 3 7 21 8 7 56 8 7 56 2 9 6 54 3 6 18 4 6 24 4 6 24 3 8 5 40 2 5 10 5 5 25 7 5 35 4 8 4 36 5 4 20 5 4 20 5 4 20 5 5 3 15 5 3 15 5 3 15 5 3 15 6 7 2 14 7 2 14 3 2 6 7 2 14 7 5 1 5 3 1 3 2 1 2 5 1 5 Total 227 101 148 169 The results above indicate that Option 1 is significantly more attractive than the other options. A detailed discussion of Option 1 is presented later in this section. Enact a New PPP Act (5 Options) Option 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 Factor Score Weight Rank Score Weight Rank Score Weight Rank Score Weight Rank Score Weight Rank 1 4 7 28 3 7 21 2 7 14 2 7 14 5 7 35 2 4 6 24 3 6 18 2 6 12 2 6 12 5 6 30 3 8 5 40 8 5 40 9 5 45 9 5 45 7 5 35 4 4 4 16 3 4 12 2 4 8 2 4 8 8 4 32 5 3 3 9 4 3 12 3 3 9 2 3 6 7 3 21 6 1 2 2 1 2 2 1 2 2 1 2 2 1 2 2 7 5 1 5 5 1 5 5 1 5 5 1 5 9 1 9 Total 124 110 95 92 164 THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 31
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