Read BÀI H?C KINH NGHI?M T? MÔ HÌNH LIÊN K?T H?P TÁC Ð?U TU NHÀ NU?C ­ TU NHÂN (PPP) ? C?NG HÒA NAM PHI text version

LESSONS-LEARNED FROM PUBLIC ­ PRIVATE PARTNERSHIP MODEL OF SOUTH AFRICA

Pham Phan Dung Director General, Banking and Financial Institutions Department Ministry of Finance

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CONTENTS

I. Overview of South Africa's Economy II. South Africa's experience with PPP III. Lessons-learned from South Africa's experience

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I. Overview of South Africa's Economy

One of the largest African economies, accounting for 25% of entire Africa's GDP. Average GDP growth 3.5%/year since 1999. In 2006, GDP was USD 577 billion GDP per capita USD13,000 USD/person. Inflation on the downward trend, 5% in 2006. Budget deficit decreased from 5.1% of GDP in 1994 to below 1% of GDP in 2007. Exchange rate 7 Ran/USD. Population 45 million, unemployment 30%; 50% of people living below poverty line; pandemics, especially HIV . 3-tier administrative structure: Central government, provincial government, district government with strong decentralisation and budget autonomy. By 1994, South Africa was in a severe crisis with alarming government debts. The government encouraged ministries and local governments to seek resources for development investment.

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II. South Africa's PPP experience

SA gradually applies PPPs (equivalent to socialisation of investment in infrastructure in Vietnam) to improve performance of public service delivery agencies, ease the investment and management burden for the state and implement social policies. Total capital for PPPs between 1989-2005 was around 6.4billion Ran (appr. USD1 bil.). In the coming period, 25 billion Ran equivalent to 10% social investment in infrastructure will be through PPPs. This model is applied in many public areas: construction, operation and maintenance of public agencies' office buldings, toll roads, railways, airports, tourism (exploitation of world's heritage), hospitals (including upgrading and new construction), delivery of state's support to the poor, research institutes, even prisons for prisoners with serious offence.

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1. PPP deals

PPP is a deal between organisations of public sector (including local government) and private sector; the private sector will take financial, technical and operation risks in designing, financial arrangements, construction and operation of projects Two types of PPPs: (1) The private sector contracted to deliver some functions of the public sector and local government; (2) The private sector assigned to use assets of the public sector and local government for commercial purposes. In other cases, PPP is a combination of both. The private sector is paid fees by the state or allowed to charge fees or user fees for services delivered under PPPs 5

Advantages of PPPs

Private investors are responsible for design, construction, operation, maintenance, ensuring highest efficiency. Public sector is not exposed to investment and operation risks but pays fees for service delivery or transfers property rights and fee-collecting service delivery to the private sector for the commited period of time specified in the PPP contract. Making use of advanced technology, reducing management burden to focus on key work and contributing to implementation of local socio-economic development policy Creating employment, realizing social responsibilities to the poor.

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Disadvantages of PPPs

Negotiations take time for having to strike balance between public and private interests Possible issues during implementation are unpredictable, exposing parties to disputes Implementation of PPPs are guaranteed by Company Law, Law on Public Expenditure Management of central and local budgets PPP contracts should be in the project list of 3to 5-year plans.

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Funding PPP contracts

PPP projects are financed by public and private capital. Public capital consists of land, bond issues, budget (mainly in the form of subsidy for FS: hire of design consultants...). Private capital includes: equity and bank loans MOF set up a project development fund to support hire of consultants, identify technical specifications, draft concessions and promote negotiations.

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PPP management unit (PPP Unit)

In April 1997, SA government set up an interministerial group to develop policies and legal framework for PPP model. In December 1999, SA government approved an Initial legal framework for PPP projects In April 2000, MOF issued Decision on PPP projects (guiding Law on Public Financial Management 1999). In 2000, PPP Project Unit under MOF was established.

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PPP Unit's responsibilities

Assists MOF and DOFs in effective management of PPP projects. Central role in assisting implementation of PPP contracts. Studies, identifies projects with potential benefits for both public and private sectors. Provides technical assistance to public agencies in conducting FS, procutement and project management. Studies, revises legal environment for PPP contracts: revises legal framework; develops implementation manuals; provides training; disseminates information on projects; supports the black community in PPP contract implementation.

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PDF: Project Development Facility

In 2003, MOF set up Project Development Facility under PPP Unit headed by Director General of PPP Unit. PDF is responsible for providing funds for development of PPP projects. 100% funded by the government. Objective: assists in PPP project appraisal, develops FS (on the public side); draft PPP contracts between public and private sectors; supports appraisal of bidding documents, hires consultants (on the public side) and provides technical assistance to assess sustainability, social impact and environmental impact...

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Some projects

(1) Gautrain Rail Link (2) Toll Highway and mountain roads (3) Department of Commerce Head Office (4) General Hospital and Rehab Centre (5) Vaccine research and production Institute (6) Prison Project

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III/ Lessons-learned

Private sector incentive mechanism in place; clear legal regulations; PPPs can apply to many different areas The state needs to have financial resources for project developmentm FS and provide financial support to preparation of bidding documents for bidders It's important to develop sound legal framework, especially contract law; compelement provisions on decentralization and use of budget. Further research on models applied in other countries is necessary Coordination between ministries and agencies (MPI, MPT, MOC, MOF) in studying possibility of applying PPPs in Vietnam is crucial Make use of research and TAs provided by organisations (WB, APEC...) to apply PPPs so as to diversify forms of investment and involve the private sector in infrastructure investment in Vietnam

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Thank you !

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Information

BÀI H?C KINH NGHI?M T? MÔ HÌNH LIÊN K?T H?P TÁC Ð?U TU NHÀ NU?C ­ TU NHÂN (PPP) ? C?NG HÒA NAM PHI

14 pages

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