Changing landscape of PPP units governance

There has been published a lot regarding PPP Units governance, role and best practices. Common exterminator has been permanent evolution of PPP Units landscape and emergence of practices, which fit the current public administration and needs in particular country, rather than development of a single best practice that would rampage across the globe.

Stanford published research paper “Public Private Partnership Agencies, A Global Perspective” defines three types of PPP agencies: (a) Review Bodies; (b) Full service Agencies and (c) Centers of Excellence. While Review Bodies do have a more of a Regulatory function, Service Agencies do have Advisory role and Centers of Excellence have Capacity building mandate. Obviously these roles tend to be more structured and mixed up in different governance structures within the global landscape.

PPP Days 2010 has featured interesting developments in this area as a result of financial crises and also perhaps a natural development of PPP markets. Some of the trends are perhaps emergence of regional PPP units covering specific well defined region, emergence of strong federal PPP Units in Brick countries looking at country, state and municipal PPPs markets and governance major shift in single country focused PPP Units.

Three countries (South Africa, United Kingdom and Russia) have been featured in this regard during PPP Days 2010 in a specific session and number of other PPP Units during the course of the event including Indian PPP system, Korean PIMAK, EU EPEC, Canadian Partnerships BC, Brazilian Federal PPP Unit etc. Interestingly there are common trends to development of PPP Units alongside PPP market development.

Financial crises and South Africa PPP Unit: the demerger of regulatory and advisory roles, greater independence on Treasury. This was presented at PPP Days by the Head of PPP Unit at Treasury, William Dachs. SA context of financial crises did bring major change of government and while presidential support to PPPs remained strong, the government and line ministerial leadership in this field was very weak. Financial crises initiated some progress in terms of IPPs to respond to energy crises, set up of a hospital PPP program and strong support still for the transport related PPPs. Key driver at SA PPP governance is at the moment the separation of Advisory from Regulatory function when driving the deal flow. PPP Unit will move away from Treasury in to a new Government Component under the brand name of Partnerships SA, will be 100% government owned and will have mainly project development function. The regulatory function will be exercised by Director General NT.

Financial Crises and PPP governance in UK is taking opposite root that the one in SA. As presented by Director of PUK Eduard Farquaharson there are two important policy measures stipulated by financial crises: recent establishment of TIFU and planned set up of Infrastructure UK within UK Treasury, which will consolidate regulatory and policy team, TIFU and PUK and exercise clear responsibility from developing and supporting delivery of an infrastructure strategy for the UK. TIFU standing for “The Infrastructure Finance Unit” has been lunched as a “funding mechanism” to ensure successful financial close of UK PPP projects. While it did only support Great Manchester Waste deal with TIFU loan, it is deemed to have much bigger impact just by being available for financing of PPPs.

Very substantial impact had financial crises on Russia and its impact on PPP perception in Russia. Russian federal PPP Unit is located within Russian Development Bank the “Vnesheconombank” and led by Alexandr Bazhenov. Alexander explained during PPP days that the situation in Russia has changed dramatically. While prior financial crises Russia did look at PPPs as an important, but not essential tool, given rich surpluses in budgets, this has changed with financial crises and PPPs are now considered essential for the development. This is reflecting on status and role of PPP Centre within “Vnesheconombank”, giving the PPP unit mandates in capacity building, advisory of choice, and financing of PPPs.

Looking at the developments showcased on Russia, UK and SA makes one wonder, how often and how quickly are some countries able to reflect the governance of the PPP units to current market needs and how slow are some other countries in making small changes to support proper role of PPP units in terms of governance, policy, staffing and financing.