Public Private Partnership

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Presentation on Public Private Partnership by Mr Kumar Bijoy

Presentation on Public Private Partnership by Mr Kumar Bijoy

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  • 1. Public Private Partnership Kumar Bijoy Financial consultant [email_address] 09810452266
  • 2. Background…
      • “ What takes the government 50 years to achieve can be done by the private sector in a tenth of the time”
      • - Milton Friedman .
      • “ Non-Government is Effective” (A Sarkari- Asarkari)
      • - Binoba Bhave
  • 3. Terminology…
    • PSP: Private Sector Participation
    • PFI: Private Finance initiatives
    • PPP: Public Private Partnership
    • PPPP: People Public Private Partnership
  • 4. Agenda…
    • PFI: a precursor for PPP in 1992 by conservative govt. in UK
    • PFI was for reduction of Public Debt
    • Quest for “Value for money” got central focus (Tony Blair-1997)
    • PPP was developed in response for the quest i.e. “ Value for Money ”.
  • 5. Definition…
    • IMF/OECD:
    • “ Public-private partnerships refer to the private sector financing, designing, building, maintaining and operating infrastructure assets traditionally provided by the public sector.”
    • Government and a private corporation combine to provide a public service through the creation and use of new assets for a set time period
  • 6. PPP…example
    • Highway example – usual arrangements
    • Government borrows money or Tax Public, pays to get a Highway built, Public uses the facility for free but pay in form of Increased Tax
    • PPP
    • Private firm borrows money, builds Highway, Public pay fee to use the highway, Firm hands over the property to Govt. after say 20 years
  • 7. PPP… global examples
    • Canada
      • The 407 ETR toll road in Toronto, Ontario
      • The Royal Ottawa Hospital in Ottawa, Ontario
      • The William Osler Hospital in Brampton, Ontario
      • The Viva bus rapid transit network in York Region, Ontario
      • Confederation Bridge construction in Prince Edward Island
    • India
      • NISG , Hyderabad..
  • 8. PPP… global examples
    • United Kingdom
      • Private Finance Initiative
      • The maintenance of London Underground (since 2003)
      • National Air Traffic Services (since 2001)
      • Some National Health Service (NHS) hospitals and other agencies
      • Firrhill High School
      • Williamwood High School
  • 9. PPP… global examples
    • United States
      • California Fuel Cell Partnership (CaFCP)
      • California State Route 125 , San Diego, California
      • Central Park , New York City
      • Chicago Skyway Bridge, Chicago , Illinois
      • Indiana East-West Toll Road , ( Interstate 80 / Interstate 90 ), Northern Indiana
      • Southern Indiana Toll Road , ( Interstate 69 , proposed ), Martinsville to Evansville, Indiana
      • Las Vegas Monorail , Nevada
  • 10. PPP…why?
    • Aging infrastructure
    • Shrinking Govt. budget
    • Constituent demands
          • PPP = AN answer, and Not the answer
  • 11. PPP…challenges ahead to bring P & P together
      • “ Failure to Communicate”
    • “ We Don’t Speak the Same Language ”
    • – “Business Speak”
          • • Customer Satisfaction
          • • Return on Investment
          • • Risk/Reward Evaluation
    • – “Public Speak”
          • • Responsibility
          • • Accountability
          • • Risk Avoidance
  • 12. But Are These Really Different?
    • BUSINESS GOVERNMENT
    • Customer Satisfaction Responsibility
    • Return on Investment Accountability
    • Risk/Reward Evaluation Risk Avoidance
  • 13. Private Sector Strengths
  • 14. Private Sector Strengths
    • Management Efficiency
    • Newer Technologies
    • Workplace Efficiencies
    • Cash Flow Management
    • Personnel Development
    • Shared Resources (Money?)
  • 15. Public Sector Strengths
    • Legal Authority
    • Protection of Procurement Policies
    • Broad prospective/balance the competing goals to meet public needs
    • Personnel – dedicated but constrained
    • Capital resources
  • 16. Successful Partnerships
    • The Secret is to Balance the Strengths of Both Sectors
    • The Experience Of One Sector Helps Another
  • 17. Advantages of PPPs
    • Maximizes the use of each sector’s strength
    • Reduced development risk
    • Reduced public capital investment
    • Mobilizes excess or underutilized assets
    • Improved efficiencies/quicker completion
    • Better environmental compliance
    • Improved service to the community
    • Improved cost effectiveness
    • Shared resources
    • Shared/allocated risks
    • Mutual rewards
  • 18. Risk Factors for PPP…
    • Lack of political leadership, vision and strategy
    • Not implemented in a context of wider change/ administrative reform
    • Poor costing or lack of resources – creeping commitments
    • Inappropriate definition of project goals and scope
  • 19. Risk Factors for PPP…
    • Automation without process reengineering
    • Hurried implementation
    • Management of change-resistance from vested interest
    • Use of untested fancy technology
    • Inadequate attention to monitoring and evaluation
  • 20. Six Keys to Successful PPPs
    • Statutory and Political Environment
    • Organized Structure
    • Detailed Business Plan
    • Guaranteed Revenue Stream
    • Stakeholder Support
    • Pick Your Partner Carefully
  • 21. Managing for Success – Six Keys
    • The Environment
      • Statutory authority and regulations
      • Political leadership must be in place
      • – Leading Political Figure
      • – Top Administrative Officials
      • – “The Will to Change the System”
      • – A Strong Policy Statement
  • 22. Managing for Success – Six Keys
    • Organizational Structure
      • Dedicated group (tied to the purpose of the partnership)
      • Dedicated and Trained personnel to monitor implementation
      • Best Value vs. Lowest Price
      • – Difficult to Administer but…
      • Need for Good Governance
      • – To assure an open and fair procurement process
      • – Consolidate staff = easier to monitor
      • – Independent authority (domestic/internal or international)
  • 23. Managing for Success – Six Keys
    • Detailed Business Plan
        • Performance goal oriented - Allow for innovative plans
        • Best Value vs. Lowest Price
        • Plan/Contract should include:
        • – Specific milestones and goals
        • – Reporting of metrics and frequency
        • Risk Allocation
        • – Shift to the private sector can raise costs
        • – Identify best prices to retain, which to shift
        • Dispute Resolution Methodology
        • Workforce Development?
        • – Develop in-country resources/small businesses
  • 24. Managing for Success – Six Keys
    • Guaranteed Revenue Stream
      • Funds to Cover the Long-Term Financing
      • – Tolls/Fees (real or shadow)
      • • Intelligent transportation systems
      • – TIF or other form of a Tax District
      • – Long-Term Maintenance Contracts
      • – Availability Payments
      • – Underutilized Assets
      • – Concession Model (limited application)
      • – Creative Approaches
  • 25. Managing for Success – Six Keys
    • Stakeholder Support
      • Public Sector Employees
      • Private Sector
      • Labor Unions
      • End Users
      • Competing Interests
      • 􀂃 Requires:
      • – Open and frank discussion between sectors
      • – Knowing the FACTS (no myths)
      • – Translating each other’s language
  • 26. Managing for Success – Six Keys
    • Pick Your Partner Carefully
      • This is a long-term relationship
      • – Verify experience (technical capability)
      • – Verify financial capability
      • – Best Value vs. Lowest Price
      • Remember each sector’s motivation
      • – Genuine need (market value to the project)
      • – Political / statutory environment
      • – Reasonable return on investment and manageable
      • risks
      • – Timely and effective execution vs. development costs
  • 27. Managing for Success
    • The Most Critical is
    • Component One:
    • Strong LEADERSHIP makes
    • all the other factors come together
  • 28. PPP models:
    • Public develops – Pvt. Operates & maintains
    • Public & Pvt. jointly develops and maintains.
    • Pvt. Develops and Public finances the gap
    • Pvt. Develops and Public only facilitates
    • Public and Pvt. Work independently but in coherence.
    • Pvt. Develops, Public facilitates and People monitor the development and pay charges for use (PPPP)
  • 29. Extend of participation of the private sector
  • 30. PPPs becoming a global business across developed & emerging markets
  • 31. selected group of OECD and developing countries… Top Countries: PPPs in Highways Cumulative sum of # projects & estimated costs since 1985 Country Number of Projects Project Cost (US$ billion) United States 74 42.7 United Kingdom 37 30.5 China 53 21.6 Spain 47 21.1 Mexico 78 20.4 Italy 3 18.5 Germany 34 17.1 Republic of Korea 18 16.2 Japan 1 14.4 Greece 11 11.8 Brazil 44 11.4 France 8 10.2 Portugal 15 9.8 Australia 12 8.6 Malaysia 18 7.8 Canada 22 7.7 Russia 2 6.6 Chile 24 6.3 Argentina 20 3.7 Ireland 14 3.0 Denmark 1 2.7 South Africa 6 2.3 Czech Republic 2 2.2 Indonesia 6 2.1 Thailand 3 2.1 0 50 100 150 200 250 300 350 Developed World Latin America and the Caribbean East Asia and Pacific Europe and Central Asia South Asia Sub- Saharan Africa Middle East and North Africa Number of Projects Project Cost ($bn) Number of Projects – Project Cost (US$ billion) Regional distribution
  • 32. Thank you