Decentralization and Local Governance, Civic Engagement and Capacity 2015 CoP Joint Event “The Principles of Partnershi

1. Decentralization and Local Governance, Civic Engagement and Capacity 2015 CoP Joint Event “The Principles of Partnerships” Public-private partnership: partnerships for service delivery M.Sohail Olena Maslyukivska Belgrade December 9th, 2005

2. Outline • General overview of the concept of PPP for service delivery w/ focus on • PPP and pro-poor public service delivery • PPPs value added • Review of the countries of Central and Eastern Europe and the CIS • national policies • legislative and institutional framework • for the establishment of municipal PPP • for public service delivery and local development

3. General overviewof the concept of PPPfor service delivery

4. Need for PPPs • Governments cannot meet the continually growingdemand for services by acting alone • There is a need to look for support from othersectors of society • PPP is one of the most promising forms of such collaboration

5. Definition PPP - a spectrumof possible relationships between the government andother organisations that are not government to carry out a project orprovide a service UNDP (2004) Tools for Pro-poor municipal PPPs

7. PPP and pro-poor public service delivery • The community has a direct role to play in PPPs as a direct beneficiary • Expresses the price the community would pay for an acceptable level of service • Oversees services provided • Catalyzes local population participation in decision making • May take the role of the private partner to reach the poorest consumers • Indirectly community shapes the policy for the urban environment

8. PPP’s value added compared to other existing modalities • Combines the advantages of both sectors: • social responsibility, environmental awareness and public accountability of the publicsector • finance, technology, managerial efficiency and entrepreneurial spirit of the private sector. • PPPs offer an alternative to full privatisation • Promotes the transfer of knowledge, know-how, management skills and new technologies.

9. Skepticism about PPPs and responses (see article by Hensley & Suryodipuro) • Increased prices for services • efficiencies • cost-recovery strategy • targeted subsidies • Poor communities exclusion • Wide spectrum • Public participation • Often complex requiring more efforts and capacity compared to “Business as usual” • Cost-benefit analysis • Reaction to crisis vs. “vision” • Generally takes longer to procure than traditional projects

10. 2. Review of national policieslegislative and institutional framework • key findings • current trends • challenges • recommendations • conclusions • EU accession countries (Bulgaria, Romania and Turkey) • Western Balkans (Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Serbia and Montenegro, Kosovo (Serbia and Montenegro)) • Western CIS (Belarus, Moldova, Russia and Ukraine) • Caucasus (Armenia, Azerbaijan and Georgia) • Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan)

12. European Union 1/2 • There is no uniform PPP definition for the EU, nor a wide policy • Common characteristics • Utilization not only private sector ability to raise finances but also its management and experience • Risks are allocated to the party better equipped to manage them • Need to combine the EU funding and private finance

13. European Union 2/2 • Changes in legislation and institutional support on the level of each member state • PPPs are established as one of the tools which are available to the government • Still poor level of understanding ofPPPs among public sector officials

14. PPP institutional developmentin EU Member states (Adapted from PwC Report 2004, WB Report 2004)

15. Legend

16. PPP institutional developmentin EU New Member states (Adapted from PwC Report 2004, WB Report 2004)

17. Three PPP Models in OECD countries on the degree of centralization of PPP institutions in the overall state structure • Highly centralized (Canada) – SuperBuild Corporation and Ministries • Highly decentralized (France, Portugal) – PPPs – individual government departments and local authoritative responsibility • Mixed centralized and decentralized (Ireland, UK, Italy, Netherlands) – one PPP national unit with functions of knowledge dissemination, PPP use promotion, national policy development, project support, etc.

18. New EU Member States Legal Frameworks • Czech Republic • General policy on PPP adopted in January 2004 • An inter-sectoral PPP team has been established • No specific PPP legislation yet • Review underway (supported by WB) • Hungary • Legal changes ongoing • History of private involvement in roads • Parliament needs to approve larger projects (>€95m) • Draft new PPA • Poland • Draft PPP legislation under development • Public Procurement Law applies to subcontracts in PPP contracts • PPP for contract longer than 3 years requires special approval

19. EU Accession Countries 1/2 • Findings • high degree of public services decentralization • substantial progress in legal reforms in underway • different forms of utilities ownership • Concession law in place • Trends • PPP legal and institutional frameworks are being actively developed (RO: specific PPP law; BU: National Strategy for Bulgaria's regional development for 2005-2015)

20. EU Accession Countries 2/2 • Challenges • a relatively poor (although improving) investment climate • macroeconomic stability • corruption • bureaucratic delays • inefficient judicial system • lack of coordination between state institutions • No clear distribution of competencies between the municipalities  conflicts between local and regional tiers

21. Western Balkans 1/3 • Findings • high degree of centralizationof the governance system • local governments roles in providing public services have both similarities and rather substantial differences • important role of the international institutions • there is no clearly defined PPP policy

22. Western Balkans 2/3 • Trends • most local infrastructure rehabilitation and construction is carried out under contracts to local or international construction companies • solid waste collection, maintenance of green areas and the management of public lightning are delivered by private providers (under competitive bidding procedures) • most big and medium size cities are privatizing service delivery, while some assets of those services remain state-owned • private sector involvement legislation is being developed (PPL)

23. Western Balkans: Challenges 1/3 • The lack of a seamless, transparent, and predictable legal and regulatory framework • very complex and challenging • fragmented and in many ways inconsistent • The lack of consistent and transparent regulations and administrative procedures • compounded by the absence of effective and independent mechanisms for appeal and for public accountability of various government agencies • The lack of effective, efficient, and adequately funded administrative and judicial systems • administration, law enforcement, and the judiciary are marked by a lack of impartiality, accountability, and transparency • court proceedings are very lengthy, unpredictable and costly • rife political interference in court decisions

24. Challenges Western Balkans: 2/3 • Centralization of the public sector functions • the existing public institutions and agencies, have a monopoly on the majority of the public services. • the privatization process of these institutions has been nontransparent and the possibilities of establishing new, private and competitive institutions are restricted by law • Small municipality size prevents the local governments from an economy of scale • Technical facilities of many infrastructure and communal systems are dilapidated • due the poor maintenance and the lack of investment • Private property problems • there is still a great number of citizens being refugees and displaced persons deprived of being able to use their home and their property

25. Western Balkans: Challenges 3/3 • Low level of paying public services • fee collection rates fewer than 50 percent for all community services • while rising service prices in recent years has only furthered consumer dissatisfaction • Constant overlapping of authorities and responsibilities • how to check and supervise the efficient provision of public services at all levels of government • many local government departments were transferred to the respective ministries without a precise division of assets or properties • Hence, they have very limited capacity to invest their own resources • Lack skilled personnel at municipality level

26. Western NIS 1/2 • Findings: • Different degrees of public services decentralization • high (MD, RU, UA) and low (BY) • BY: insignificant role of private sector • No specific PPPs laws but • specific laws govern public-private relationships • Trends • Private share in public services is small but growing (RU, UA) • Needs for investment in the infrastructure drive private sector involvement • IFIs work with municipalities

27. Western NIS 2/2 • Challenges • underdeveloped legal and institutional frameworks • different tiers’ overlapping competencies • lack of transparency • inefficient public spending • corruption • poor conditions of the public infrastructure • lack of local authorities’ autonomy (RU) • frequent changes in legislation (UA)

28. Caucasus 1/2 • Findings • Increased attention towards decentralization of the public services • Trends • Initial steps in decentralization are made • Strive to conform with the European legislation • Positive trends in private sector involvement (AM, GE)

29. Caucasus 2/2 • Challenges • Legislation shortcoming • legislative base remains underdeveloped (e.g. AZ) • existing laws are often contradictory • lack of legal discipline (e.g. GE) • Incomplete and unreliable statistical data • Double subordination and overlapping functions of different levels of government • Lack of governmental revenues • Municipalities lack financial and property resources

30. Recommendations for the region • Need of the supportive regulatory and legislative framework • Necessity to strengthen the “public” side of partnerships • Further decentralization of public services provision • Need to facilitate the communication between multiple stakeholders • Positive public image creation

31. Questions for discussion: • Does the region need PPPs? • What are the major skepticisms about the PPP? • What are the existing strengths and potential pitfalls for PPPs in the region? • What are the driving forces shaping the PPP development in the region?