Abstract
The developing and the least developed states have been most impacted by environmental and other calamities. Many governments have proved inefficient in tackling this problem, by imposing burdensome regulations and simply lacking proper expertise. This has led to the emergence of the failing framework essentially aimed at addressing disaster risks. The Public Private Partnership (PPP) has become an optimal solution for state authorities to handle such catastrophes in partnership with private actors. The cooperation includes construction of proper infrastructure and provision of public services for the purpose of enhancing their quality, and based on a contractual agreement. The principal objective of the legislature is to adopt proper legislation that would efficiently address the disaster management or mitigate the associated risks.
Comprehending the notion of DRR proves crucial for all participant – state authorities, private actors and non-governmental entities. There is a foundation that the personal and financial losses of environmental disasters may be decreased most effectively specifically by expenditures in Disaster Risk Reduction (DRR). This may cover controlling environmental calamities; efforts to minimize the effect of the peril; and attempts to better develop communities’ preparedness to such dangers in the event of environmental crises. Such actions must constitute the primary element of improvement. This provides to the private sector an exceptional opportunity to contribute to the reduction management development.
The ability to provide assistance in addressing the environmental crises poses a crucial signal for the international partners. It is vital to implement a strategic understanding of Disaster Risk Reduction into the region’s relief, and to employ private actors to the most possible extent. The solutions should foster the maintenance of their own development based on robust risk mitigation systems. Different approaches in implementing PPP legislation and practice is analyzed in this paper. The jurisdictions cover Kyrgyzstan, Fiji, and India.
PPP unit and risk management unit consist of the ministries. Accordingly, Ministry of Economy and Antimonopoly Policy are in charge of PPP policy and project evaluation, established PPP unit. Ministry of Finance establish risk management unit. Risk management unit coordinates and involves in PPP projects, tender documents, and contracts which require financial support from the government budget. For other PPP projects, they will provide opinions associated with risks. Line ministry may, inter alia, develop or list prospective PPP projects, prepare tender documentation, select a private entity.
In accordance with the Hyogo Declaration and the Hyogo Foundation for Action, there has been established a Domestic Response Plan outlining the scope of involvement of the public and private sectors in addressing the environmental calamities in the course of 2005-2015. This Plan envisages (i) the creation of the domestic governmental foundation aimed at preventing the natural crises; (ii) the enhancement of the cautionary scheme; (iii) augmenting the knowledge potential and technology capacity in the establishment of secure climate resilient to natural crises; (iv) alleviation of the prerequisites and determinants that foster the emergence of environmental catastrophes.
Additionally, the DRR policy was an integral element of the Country Development Strategy 2009-2011, whilst the preceding Plan was subject to the Prime-Minister’s approval. It focused, inter alia, on the development of the civil protection scheme, and the establishment of the burning salvage support. The Action Plan served as the principal paper to attract foreign capital in the PPP-related projects.
Legal issues
The PPP Law only allows 30 days for private sectors to prepare their proposals.
This period is crucial in building a consortium among various industries, recognizing roles, and allocating risks and rewards . Given the complexity of projects, it must be longer. It is recommended to develop guidelines for PPP procedures due to lack of experience in the area.
It is necessary to set proper tariff for a project that relies on user fees. Under the Kyrgyz PPP Law, the tariff setting procedure is not clear. Also, the tariffs for some services, especially electricity is too low to make the operational costs. Hence, the Kyrgyz government should be careful setting the appropriate tariff rate that can sustain private business and life of citizens. It could provide grants or service fees to private sectors to ensure profitability of the project.
Another obstacle is limited access to information. Disclosure of necessary information is essential. It is also important to explicit the cost and time that will be needed for a private sector to go through public information access procedures.
Kyrgyzstan has very high expectation in PPP methods in implementing expected undertakings. At the same time however, there is seemingly no clear strategy on national development plan and infrastructure priority.
The Kyrgyz government is not as affluent to provide financial support to every project. Thus, it is very important to prioritize projects, and only provide support (financially, economically and technically) for top-ranked projects or most urgent ones. There are many services that can be carried out by domestic industries in Kyrgyzstan. It may not be possible for a domestic company to win a PPP project by its own. Joint Ventures or other partnering method should be applied to acquire experiences and knowledge.
Fiji
Fiji has been undergoing significant connection infrastructure projects lately. At the same time, this conduct is described as a “construct-disregard-repair standard” because Fiji’s government has not set up the foundation support in the financial plan.
Nevertheless, there has been certain activity through PPPs or privatizations. In particular, the water authority, together with the roads agency, the public printer and stationery divisions have been corporatized. Additionally, the state owned company “Fiji Dairy” was privatized, whilst preparations for privatizations were made with respect to “Copra Millers”. Further, there has been concluded a support agreement with the Suva and Lautoka harbors. Lastly, several state-owned enterprises had their shares listed on the Fiji Stock Exchange.
Legal nuances
The Fiji PPP Act sets the framework under which public private partnership may be performed. Some rules that are common to all public private partnerships are included in the Act, but the detail is left to the Regulations to allow maximum flexibility to cover the wider range of PPPs that might occur.
The Act provides for Fijian interests to have control of the main PPP company by having 51% of voting interests, the right to appoint at least 50% of directors, or a Fiji Share. The Fiji shareholder may have a right of veto, to be consulted, and to approve certain actions of the public private partnership. It must give effect to the decisions of the Fijian Shareholder, the Fijian Prime Minister. Recommendations are made by an independent tender evaluation team. PPP investors or proponents are allowed to earn a market-based rate of return on their investment. Section 11 of the Act grants maximum flexibility in charges setting, variation of charges, exemptions and collection mechanisms.
With respect to the tendering, the CEO of the Ministry of Public Enterprises under Section 12 may manage and oversee the tender process. The restrictions to the tender evaluation team are designed to separate the political and administrative processes, and to ensure private sector involvement in the evaluation process.
The tender evaluation team participates in pre-qualification procedures, and conduct diligent and impartial appraisal of all tenders. Ranking may not be performed based solely on price. The tender evaluation team must report to the CEO on the tender process and appraisals. It also must give public notice of the highest ranked tender, the price and a general description of that tender. It must expressly state whether it recommends that the highest ranked tender be accepted. The Minister must give the Minister of Finance, the Attorney General, and the relevant Minister an opportunity to consult on the report, recommendations and comments.
The Act also provides that the PPP controlling company remains within the control of the Fiji Nationals or a Fiji Share. The public private partnership may be made up of all kinds of entities, including the State, but must be controlled by a company that is registered under the Companies Act and has direct or indirect control of those entities. The Prime Minister holds the Fiji Share. The Fiji Share does not control either State or private assets, but rather the essential elements of the public private partnership as a whole. The PPP controlling company, and its directors must ensure that obligations protected by a Fiji Share are not breached. In case where the Fiji Shareholder brings a successful action to enforce the Fijian Share rights, the PPP controlling company indemnifies the Fiji Shareholder for costs.
Under section 20, landowners may also participate in PPP projects either as equity partners or through the leasing of their land to the PPP controlling entity.
The use of Government guarantee is limited under the sections 22 and 23 of the Act through prohibition of the use of the State and municipality guarantees in Implementation Regulations and public private partnership documentation.
The Law, in accordance with section 24, provides that where the transfers are effected to some entity that is not a government company, its subsidiary or another government entity, then other authority to transfer is required.
India
The Government of India (GoI) has sought to construct a secure and resistant environment through an innovative and responsive disaster management system premised on the cooperation of the public and private sectors.
In order to gradually fulfil the set objective, on 23 December 2015, GoI adopted a Disaster Management Act. The Law is aimed at resorting to full spectrum of necessary measures for addressing the natural disasters in partnership with the private sector. It provides for the avoidance, alleviation to restoration, reorganization, and complete improvement. The Law has established a competent agency mandated to implement proper methods and practices for the legal bodies. This institution seeks to create rules for efficient addressing of disaster risks and maintenance. It further targets to be in charge of administration and application of these rules. It has set certain goals to pursue in partnership with the private sector. In particular, these include: (i) to determine the responsibility scope of the involved companies or those concerned in those fields of competence related to managing the natural calamities; (ii) to establish the scope of involvement and competence of commercial alliances in deploying the private sector to administer the disaster management; (iii) to establish a domestic working group from a private sector to handle this issue. The cooperation is premised on the continuous partnership and communication of all stakeholders involved.
Additionally, there has been in operation the Corporate Disaster Resource Network which assists in monitoring the corporate support in the form of financing or professionals supply needed for crises reaction and readiness.
While the preferred forms of PPP model are the ones where the ownership of underlying assets remains with
the public entity during the contract period and the project gets transferred back to public entity on contract termination, the final decision on the form of PPP is determined using the Value for Money Analysis. These include different contracts.
Performance-based management contracts: Most or all of the operations and maintenance of a public facility or service is given to the private sector. The sectors meant for such form of PPP models include water supply, sanitation, solid waste management, road maintenance.
Modified design-build contracts: In traditional design-build (DB) contract, the private contractor is paid a fixed fee after the completion of the designing and building phase. These contracts yield benefits in the form of time and cost savings, efficient risk-sharing and improved quality.
BOT models: Under BOT contracts, the responsibility for construction and operations rests with the private partner, while ownership is retained by the public sector. The BOT model and its variants are the most common form of PPP models used in India, accounting for almost two-thirds of PPP projects in the country.
Lease contracts: Under leasing agreements, assets are leased, either by the public entity to the private partner or vice-versa. Build Lease Transfer (BLT) or Build-Own-Lease-Transfer (BOLT) or Build-Transfer-Lease (BTL) contracts have been used in India for greenfield projects, which last for 10 to 15 years.
Concessions: Under concession agreements, the responsibility for construction and operations rests with the private partner, while ownership is retained by the public sector. Concession contracts are generally for 20 to 30 years, and the private operator is responsible for all capital investment.
Build own-operate-transfer (BOOT) contracts: Under BOOT, the private partner has the responsibility of construction and operations. Ownership is with the private partner for the duration of the concession — generally 20 to 30 years — after which it is transferred to the public sector. Build-own-operate (BOO) models are not supported due to their finite resources and the complexities in imposing penalties in case of non-performance and estimation of the value of underlying assets in case of early termination..
The Indian government has laid down strong procedures to procure a PPP project. It published separate mandatory disclosures and fair practices, set up a dedicated dispute resolution mechanism, developed new market-based products (e.g., pre-bid rating) and set up a web-based PPP market place.
The Indian government has a progressive financial support system for PPP projects. Some of the key initiatives include India Infrastructure Project Development Fund (IIPDF), Viability Gap Funding (VGF), etc.
The Indian government has undertaken capacity building interventions to develop organizational and individual capacities for the purpose of identification, procurement and managing of PPPs.
Admittedly, there are many leadership actions in effect aimed at fostering the involvement of the private sector in DRR activities. The practical problem is the ambiguity of administration of such actions, and identification of the principal partners.
Conclusion
It is essential to ensure that a standardized approach consistent with the policy and the PPP legislation is developed, recognizing the need to accommodate diversity at project level. Policy guidelines and procedures will need to be developed and finalized to facilitate the implementation of the special applicable laws.
The PPP Unit, in close consultation with public and private sector interests, should continue to give high priority to the delivery of the PPP implementation programs, the development of a standardized approach in terms of tendering procedures, model contracts and documentation, the continuous development and monitoring of the PPP policy, and addressing other significant issues that would enable the wider use of PPPs.
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