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1 October 2004. International Association of Development Funds Second Conference on FINANCING MUNICIPALITIES & SUB-NATIONAL GOVERNMENTS The Role of Specialized Local Funds and Financial Intermediaries. Working Lunch: Making Projects Bankable - The Legal View. The legal environment (1)
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1 October 2004 International Association of Development FundsSecond Conference onFINANCING MUNICIPALITIES & SUB-NATIONAL GOVERNMENTS The Role of Specialized Local Funds and Financial Intermediaries
WorkingLunch: Making Projects Bankable - The Legal View The legal environment (1) • Concession Law / PPP Law / Public Procurement Law / No Law ? • Where do innovative projects fit within the existing law ? • The "traditional" approach and risk transfer • Is a PPP Law the answer ? The EC still debating the issue, France has said yes • Competitive dialogue • Should Management Contracts be treated as simple Public Procurements ? • Is a law necessary ?
WorkingLunch: Making Projects Bankable - The Legal View The legal environment (2) • Division of power between municipalities and central governments • Water as a municipal activity • Water as a national jurisdiction (extraction from multi-jurisdictional sources, environmental legislation, price controls) • Can municipalities be trusted by central governments to award PPP Contracts for water ? • Can municipalities influence required legislative change to promote water projects ?
WorkingLunch: Making Projects Bankable - The Legal View The existing municipal water company • Does it remain or is it wound up ? • Retrenchment of municipal employees • Existing debt • Municipal participation in Special Purpose Project Company
WorkingLunch: Making Projects Bankable - The Legal View The contractual structure (1) • Are the traditional typologies of water contracts (concession, BOT, lease, management contract, service agreement) useful ? • Towards the sui generis contract
WorkingLunch: Making Projects Bankable - The Legal View The contractual structure (2) • Performance-based Contracts • Simplicity versus complexity • The importance of baselines • The ability to measure performance • Should operators write their own performance criteria and penalty / incentive regime ? • Penalties must not be excessive / Incentives can never be enough
WorkingLunch: Making Projects Bankable - The Legal View The contractual structure (3) • Can a contract "evolve" from one structure to another over time, or must it stop and be re-procured at each milestone ? • Is this simply a procurement / transparency issue ?
WorkingLunch: Making Projects Bankable - The Legal View The regulatory regime • Is an independent regulator only a dream ?
WorkingLunch: Making Projects Bankable - The Legal View Conclusion • If water is a priority, the legal / contractual / regulatory regime is not the problem but only the solution • The true problem is financing
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