Public Private Partnership This Game is a Doubles Match

1. Public Private PartnershipThis Game is a Doubles Match JULY 2010 Sudesh Prabhu sudesh.prabhu@sybase.com

2. A New Game A Public-Private Partnership is a contractualagreement between a public agency(federal, state or local) and a private sector entity. Through this agreement, the skills and assetsof each sector (public and private) are sharedin delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility. This Game is a Doubles Match

3. Private Sector Strengths Management Efficiency Newer Technologies Workplace Efficiencies Cash Flow Management Personnel Development Resources

4. 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

5. Successful Partnership • Maximize the use of each sector’s strength • Reduce project/development risk • Mobilize excess or underutilized assets • Improve efficiencies/quicker completion • Improve services and cost effectiveness • Share resources; Share risks • Mutual rewards

6. Six keys to success • Statutory and Political Environment • Organized Structure • Detailed Business Plan • Guaranteed Revenue Stream • Stakeholder Support • Pick Your Partner Carefully

7. The Value over longer term Profit from price premium Profit from referrals Profit from reduced operating costs Company Profit Profit from increased purchases Base Profit 0 1 2 3 4 5 6 7 Year Customer acquisition cost Source: Harvard Business Review

8. What PPP should Not be used for • To circumvent fiscal constraints for infrastructure investment • PPPs can, but should not, be used to solely • By-pass expenditure controls • delay borrowing • delay or move public investment • move debt off the government balance sheet • Can lead to Public Sector left bearing most of the risk involved, facing potentially large fiscal costs over the medium term

9. Managing for Success Classic Model: Design-Build-Finance-Operate • Arrangements where the private sector supplies infrastructure assets and services that traditionally have been provided by the government. • Main characteristics: • Private execution and financing of public investment • An emphasis on investment and service provision by private sector • Risk transfer from government to private sector

10. Managing for Success Committed Model: JV/Special Purpose Entity • An SPE is an entity that is created, through the transfer of assets, liabilities, or rights, to carry out a well-specified activity or series of transactions • These activities are directly related to the specific purpose for which it was formed • SPE’s can be in non-financial and financial corporate sector • In public sector, SPE activities are often instrumental to public private partnerships, BOOT schemes, or joint ventures

11. Managing for Success Risk Transfer, Leasing, and Ownership • Risk transfer from government to private sector has significant influence on whether PPP is more efficient and cost-effective alternative to public investment and government provision of services • Have to assess risk transfer and ownership by looking at: • Risks in owning asset • Risks in operating asset • Establish economic owner of asset by asking who bears the ultimate risk or most of the risks associated with ownership • And how does government, then impute a financial lease through which government acquires the asset when and if required

12. Introduction to NEGP • National eGovernance Program’s goal is the provision of improved, more convenient government services countrywide through on-line delivery at local service centers. • Fully recognized as key part of national development plans. • Involves central and all state governments. Is led centrally and implemented locally. • Is a Implemented over 8-year period (FY2006-2013) at acost of roughly USD 4 billion. • Supported by USD 1 billion World Bank project in two phases

13. Span of Scope Central State Integrated Services to Citizens (G2C) • Income Tax • Passport, visa and immigration • E-Posts • Land records • Property registration • Road transport • Agriculture • Municipalities • Panchayats • Police • Employment Exchange • Education • Health • Food Distribution & other welfare programs • Common Services Centres: Single-window public service delivery points eventually reaching all the 600,000 villages in India • State Wide Area Network SWAN: fiber optic connectivity up to block level • Countrywide State Data Centers • All India Portal • National E-Governance Gateway Services to Business (G2B) • Excise • Company affairs • Commercial Taxes • EDI (customs & foreigh trade) • E-BIZ • E-Procurement Other • National ID • National GIS for planning • Treasuries • E-Courts

14. Governing Principals • Measurably improved citizen/business service delivery • Ownership by line ministry/ state department • Acceptable BPR (Business Process Reengineering) & change management plan • Emphasis on poor & rural communities • Use of PPP (Public Private Partnership)

15. Responsibility with Government

16. Summing Up: Mantra for Success • Good projects • Choose right projects (strategy, prioritize) • Do PPPs for the right reasons (value for money, include in medium-term budget framework) • Good laws • Introduce a clear and consistent legal framework • Integrate proposals and guarantees with budget cycle • Clarify roles and responsibilities • Good institutions • Management and oversight framework • Good accounting and reporting