Thursday, 18 June 2015

Opinion Piece- Chile’s PPP program:

In the reading resources and video lectures, I was fortunate to learn the role of public private partnerships in reducing countries’ infrastructure gaps, the PPP frameworks and institutions including how they work best for the intended objective.

According to the World Bank, implementation of Public private partnership programs and projects have seen a rise since the last two decades or so and are becoming complementary solutions to traditional public procurements contributing a significant percentage in infrastructure investments even though designing, structuring and implementing them  remains a challenge and a complex issue, still.

In that regard, I discovered that the success of PPP programs in Chile is more comprehensive and compelling to learn from, particularly for developing world, and I feel worth re-mentioning here.

Firstly, Chile not only enabled the PPP program by a decree but also defined the PPP framework well.

Secondly, they updated the decree in to a concessions law to accommodate the challenges they faced along their way, and through the law they set out the institutional responsibilities and processes for developing and implementing PPPs. They formed a Concessions Unit in the Ministry of Public Works (MOP) that act as an implementing agency for all PPPs in the country. They then authorize this unit to manage the PPP programs from start to the PPP’s lifetime with clearly-defined processes.

Thirdly, the National Planning Authority is tasked to review and approve the technical and economic analysis of the project employing the advisory of technical groups.

Fourthly, the Ministry of Finance is tasked to approve PPP tender documents before they can be published, any changes made during the tender process, and any significant changes made through the lifetime of the contract. To manage these oversight responsibilities, the Ministry of finance established a Contingent Liabilities Unit, which reviews all projects in detail prior to approval, and calculates the value of the government’s liabilities initially and throughout the contract.

Fifthly, the Treasury makes all the payments established in the PPP contract in accordance with the procedures and milestones stipulated in the PPP contract.

Finally, they formed a technical panel to resolve disputes that emerge during the implementation of the project. If the solution proposed by the technical panel does not resolve the problem, the parties are allowed to escalate their complaints to the Arbitration Commission or the Appeals Court of Santiago.

In conclusion, in my opinion, a clearly defined PPP framework, institutional responsibilities, processes and top government commitments, builds the confidence and trust of the private sector in Chile to put their capital, to projects of total investment value of USS$14 billion to public private partnership arrangements for a longer term, and ultimately a success for Chile.

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