Subject to legal provisions of the country, local governments can also undertake PPP projects. Generally (but not necessarily always) such projects are smaller in size and value than PPP projects of the national government. The issues are essentially very similar to those of large-scale projects. Because of their smaller size and project value, they may be much less complicated to implement. However, due to serious capacity and resource constraints of local governments in most developing countries and their limited ability in leveraging policy options, PPP projects by local governments are not very common in most developing countries.
Local governments, however, can consider various infrastructure projects in the urban sector such as markets, bus and public transport terminals, bus rapid transit facilities, municipal water supply and sewerage systems, and solid waste disposal systems. Local governments in many countries of the region such as in Japan and the Philippines have implemented such urban infrastructure projects.
MAJOR ISSUES OF CONCERN… • Risk transfer is a key element in effective PPP design. If a good balance in sharing risk is not achieved, it will result in increased costs and the inability of one or both parties to fully realize their potential. • The general principle is that project risks are allocated to the party that is the best equipped to manage them most cost effectively. For example, political and regulatory risks are more appropriate to the public sector while construction and operating risks are more suited to the private sector. • Unsolicited PPP projects have been implemented in many countries but some countries do not entertain such proposals because of the problems associated with unsolicited proposals, especially the risks they raise for competition and transparency. • There are merits in considering unsolicited project proposals if such proposals are based on innovative project ideas or proprietary technology. The difficulty with unsolicited proposals is however, getting the right balance between such merits of innovative project ideas and the transparency and efficiency gains of a competitive tendering process. • Often the existing conditions in a sector are not conducive to create a multi-operator competitive environment. Transfer of ownership to the private sector and/or private operation may bring some improvements but these measures alone may not be sufficient to achieve the desired level of efficiency gains. Changes in policies, legal and regulatory regimes and practices may also be required to allow multiple operators operating in a truly competitive environment. • The major issues in creating a multi-operator competitive environment conducive can be categorized in three broad groups, which are: 1. Reforms aiming at structural changes of the sector and the market, and removal of sector inefficiencies (due to distortions in resource pricing, obsolete rules, technical standards, etc.); 2. Issues that arise due mainly to a multi-operator operational matters such as network expansion, access to network, inter-connection and inter-operability; 3. Physical/natural characteristics of the sector, particularly those related to the optimum use of the natural endowment such as land, water, mineral and mining resources, and radiofrequency spectrum. |