2.1.  PRINCIPLES OF GOOD GOVERNANCE IN PPPS

Good governance matters…

As stated in Part I, governance matters in PPPs if governments are to climb the maturity curve. This process requires putting into place the enabling institutions, procedures and processes surrounding PPPs in order to fully benefit from PPPs. This means also helping governments to play a critical role in the process and involving citizens as well as other stakeholders. Many governments, regional, international organisations and NGOs now recognize the importance of governance for economic development.5

…Even while it is not an easy concept to define.

Governance refers to the processes in government actions and how things are done, not just what is done. It covers the quality of institutions and their effectiveness in translating policy into successful implementation. Institutions are in general understood to be the bodies setting formal rules (property rights, rule of law etc.) while taking into account informal constraints (beliefs, traditions and social norms) that shape human interactions.

Good governance involves some key principles…

(c)  Transparency: the degree of clarity and openness with which decisions are made;

(d)  Accountability: the extent to which political actors are responsible to society for what they say and do;

(e)  Fairness: the degree to which rules apply equally to everyone in society; and

(f)  Efficiency: the extent to which limited human and financial resources are applied without waste, delay or corruption or without prejudicing future generations.

…That are played out in different arenas…

There are also a number of governance arenas where these issues play out:

1.  Government: executive stewardship of the system as a whole;

2.  Public administration: where policies are implemented;

3.  Judiciary: where disputes are settled;

4.  Economic society: refers to state-market, public and private sectors;

5.  Political society: where societal interests are aggregated;

6.  Civil society: where citizens become aware of and address political issues; and

7.  Sustainable development: where environmental concerns are included.

…While taking into account the following objectives.

Taking these elements we can say that good governance objectives in PPPs refer to the following:

(a)  A fair and transparent selection process by which governments develop partnerships;

(b)  Assurance that value for money has been obtained;6

(c)  An improvement of essential public services especially for the socially disadvantaged, and adequate training for those to be involved in the new partnerships;

(d)  Fair incentives to all parties and fair returns for risk takers, combined with the achievement of commercial success;

(e)  Sensible negotiation of disputes that assures continuation of services and prevents the collapse of projects and consequent public waste; and

(f)  Enhanced security in the face of the new threats and for a general improvement in the safety of services provided under PPP arrangements.

Observing these objectives and principles will lead to economic benefits…

Good governance in PPPs also matters from an economic perspective:

 (a)  An effective procurement regime means that government institutions are able to buy goods and services of higher quality at lower prices;

(b)  Mechanisms that secure well-governed projects will heighten the support of society for PPPs and give policymakers the confidence to provide the necessary political support for the PPP process;

(c)  Projects which are well planned and are based on the full agreement of all parties engaged, following a proper and ongoing consultation, have less of a chance of unravelling, thereby avoiding costly litigation;

(d)  A public administration that conducts its purchasing in an open manner contributes to the increased confidence of suppliers in the reliability of the administration as a business partner; and

(e)  Good governance and efficient institutions are strongly linked to increased competitiveness and faster rates of economic growth and development.7

…But governance objectives are not being promoted enough…

Initially the PPP was considered to be a financial mechanism to place expenditures off the balance sheet. As a financial and technical issue, there was also a tendency not to consult the public and other stakeholders.8 More recently a shift can be detected from using PPPs for financial reasons to using them for greater efficiency or to create added value. Indeed, as 'value for money' objectives have become increasingly commonplace, it becomes increasingly clear that much more can be done so that PPPs can increase social, economic, and environmental development.9

…And a new initiative is needed to integrate good governance criteria into PPP processes.

Based on these observations, along with the need to bring the stakeholders back into PPPs to maximise their social, economic and environmental impact, the UNECE took an initiative to:

(a)    Organize a series of consultations with stakeholders including trade unions and businesses on good governance in PPPs;

(b)  Explore through cases studies of PPPs concerns related to corruption, limited consultations with stakeholders, lack of participation of members of the public in the decision-taking on PPPs, etc.;

(c)  Discuss ways that PPPs could be made more accountable; and

(d)  Prepare several drafts of the Guidebook on Promoting Good Governance in PPPs and hold major international forums to discuss and finalize these principles.10

This led to the UNECE Guidebook on Promoting Good Governance in PPPs …

Out of this process involving dialogue and widespread consultation in many different forums, the UNECE has prepared the good governance principles in PPPs, which focuses on:

•  Policy

•  Capacity-Building

•  Legal framework

•  Risk-Sharing

•  Procurement

•  Putting People First and

•  The Environment.

…Based on good governance principles.11

In each of these areas, governments can integrate the following good governance standards into their PPP practices:

•  Participation

•  Decency

•  Transparency

•  Accountability

•  Fairness

•  Efficiency and

•  Sustainable Development.

Sources and Further Information

(i)        ECOSOC, Environmental Policy and International Competitiveness in a Globalizing World: Challenges for Low-Income Countries in the UNECE Region, 2007.

(ii)       Hyden, G., Court, J. and Mease, K., (2004) 'Making Sense of Governance: Empirical Evidence from Sixteen Developing Countries', Boulder, CO.: Lynne Rienner.

(iii)      ODI Briefing Papers, Governance, Development And Aid Effectiveness: A Quick Guide To Complex Relationships, March 2006.

(iv)      OECD, Conference on Improving Governance and Fighting Corruption:  New Frontiers in Public-Private Partnerships, 14-15 March 2007, Brussels, Belgium.

(v)       OECD, OECD Guidelines for Managing Conflict of Interest in the Public Service, 2005

Human Rights

1.  Businesses should support and respect the protection of internationally proclaimed human rights.

2.  Businesses should make sure that they are not complicit in human rights abuses.

Labour Standards

3.  Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

4.  Businesses should uphold the elimination of all forms of forced and compulsory labour.

5.  Businesses should uphold the effective abolition of child labour.

6.  Businesses should uphold the elimination of discrimination in respect of employment and occupation.

Environment

7.  Businesses should support a precautionary approach to environmental challenges.

8.  Businesses should undertake initiatives to promote greater environmental responsibility.

9.  Businesses should encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

10.  Businesses should work against corruption in all its forms, including extortion and bribery.

_____________________________________________________________________________________________________

5  Amongst the bodies include: International Monetary Fund (IMF), World Bank Institute (WBI), Organisation for Economic Co-operation and Development (OECD), the International Centre for Not-for-Profit Law (ICNL).

6  "Added value", also 'value for money', means higher quality for the same money or the same quality for less money. See, Public-Private Comparator, PPP Knowledge Centre, at The Netherlands Ministry of Finance, p. 113.

7  Douglass C. North (1990): Institutions, Institutional Change and Economic Performance, Cambridge University Press.

8  It has been observed that good governance has not been a main priority of Governments in PPPs, given their primary goal in using PPPs is for budgetary factors. Indeed, the Build-Operate-Transfer (BOT) Group of the Economic Commission for Europe, in analysing the early experiences with the private financing of infrastructure in the 1990s, noted that most advisers tended to ignore the importance of good governance, and specifically the need to take into account the wishes of the stakeholders (local citizens, NGOs, employees/trade unions, civil society, media, etc.) in PPPs.

9  See Guidelines on PPPs, prepared by the UNECE Build-Operate-Transfer (BOT) Group, Geneva, 2001.

10  A set of recommendations on good governance in PPPs was elaborated by the UNECE PPP group a draft of which was reviewed and endorsed at the International Conference (Tel Aviv, Israel, 5-8 June 2007).

11  The aforementioned good governance principles for PPPs are bolstered by The UN Global Compact, which encourages substantive action in regard to the following ten principles: