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 Current Legal Framework Impacting on PPPs In order to set up an environment suitable for implementing PPPs in this country Malawi has over the recent past, commissioned a number consultants to design appropriate legal and policy framework. Utho Capital Partners were contracted to undertake a situational analysis of the prevailing environment in Malawi in order to determine what needed to be done to improve the PPP legal and institutional framework. Utho Capital Partners provided a comprehensive review of the operational environment. We have reviewed their work as well as that of PricewaterHouseCoopers. PWC also undertaken a similar analysis with particular emphasis on recommending strategies that were to benefit the pace of the privatisation programme. This report benefits from their respective reports. In addition, to the work undertaken by Utho Capital Partners and PWC we also collected and reviewed a number of laws, by-laws and policy documents in order to identify any bottlenecks that currently exist in Malawi’s legal framework that would make PPPs especially difficult to implement. 1. The Constitutional Framework The Constitution stipulates that the Government’s paramount duty shall be to promote, safeguard, and advance the welfare of the people of Malawi. The Constitution also commits the Government to long-term investment in health, education, economic and social development. This has clear implications on the amount of investment needed to fulfil these commitments. As discussed above, there does not appear any reasonable likelihood that the Government can meet these commitments. The obligations on the part the Government are clear. Equally clear is the fact that pursuing private enterprise, whether by the Government or the private sector or in association, is not prohibited. ISSUE: Supremacy of the Constitution Any Act of the GoM or any law enacted that is inconsistent with the provisions of the Constitution shall to the extent of that inconsistency be invalid. Thus, any law that would seek for instance, to detract from the commitments articulated in the Constitution could potentially be declared invalid. This needs to be borne in mind in the preparation of the new PPP legislation and the amended Privatisation Law. 2. Privatisation - Public Enterprises (Privatisation) Act By virtue of the Public Enterprises (Privatisation) Act, the Privatisation Commission is the sole authority in Malawi to implement the privatisation of any public enterprise. Although the privatization programme started off impressively, progress has slowed down. The Privatisation Commission engaged PwC to recommend mechanisms for increasing the pace of the programme. PwC’s final report, delivered in June, 2004, contained a total of 291 recommendations covering all aspects of the privatisation programme and some touching on other areas of Malawi’s economic landscape. Overall, the recommendations sought to create an environment that THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 88
Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report would be conducive to the smooth carrying out of the privatisation programme. Some of those recommendations propose improvements to the Privatisation Law. ISSUE: Adequacy of the Privatisation Legal Framework Work is underway that seeks to amend the Privatisation Legal Framework. The advisers have drawn up a Bill which incorporates PPPs as one of the privatisation methods. This is at an advanced stage. In addition, the advisers handling this assignment have produced a Draft Privatisation Policy Document, Draft Privatisation Bill, Draft Privatisation Regulations, and Draft Privatisation Implementation Manual. All these provide for PPPs within the general framework of the Privatisation Programme. Whether the country requires to develop a totally new legal framework or merely build on the strength of existing legal frameworks is a matter that seems to have been settled. The proposal to go ahead with a bridging arrangement that entailed building on the capacity already present at the PC had been premised on the wish to move with speed. Holding other factors constant, the majority opinion favoured the development of a completely new legal framework. There are several advantages for this approach. The legislation would: create a comprehensive framework to deal with the entire PPP project lifecycle; provide a direct legal basis for PPP contracts; provide a general framework that specifies the rights of the private sector; clarify the “rules of the game” for various government entities; and address some of the concerns of the private sector and the lenders. The draft Privatisation Bill and other ancillary documentation whilst referring to PPPs are not adequately comprehensive to supplant the need for a new PPP umbrella legislation. PPP-specific legislation will cover various critical aspects of the PPP transaction including authorising the public authority to award PPP projects and providing a uniform treatment to issues that are common to PPP projects, such as: 1. Describe the form and extent of PPP in infrastructure projects; 2. Define a process for selecting projects that can be offered to the private sector; 3. Provide guidelines on project preparation so that technically feasible and financial viable projects are prepared; 4. Specify the selection process, and criteria, ensuring that the process is fair, objective, transparent and time bound; 5. Propose an approach for dealing with un-solicited proposals and direct negotiations for selection of the private sector; 6. Provide an indicative risk-sharing framework, so that risks are allocated to the party best positioned to influence the factors affecting the risk and ensuring the interest of all stakeholders is safeguarded; THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 89
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31 March 2007 Mr. Constantine Chiko
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Development of Policy, Legal, and Insitutional Framework for - ppiaf

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