The following is a consolidation of responses to a survey of members of the ESCAP "PPP Network".
A. Lack of ownership of, and support for PPP programmes
1. Lack of political ownership and no real champion of PPPs from the top political leadership. Even though the top political leaders talk about PPPs now and then but uptil now no one has really taken ownership of the PPP program here and given it the drive it needs to go forward.
2. Inability to complete PPP transactions due to transition or changes in the heads of government/ local government agencies. There are cases when the new administration's unwillingness to support the projects or programs of the previous administration results to delays in the processing and sometimes even causes the abandonment/rejection of projects.
3. Lack of support and cooperation from the bureaucrats in the line ministries and implementing agencies. This is due to lack of understanding of what PPPs are, turf issues, not wanting to lose control over 'their' projects and vested interests (corruption, kickbacks) in getting public funds for their projects.
4. Power Relationships is major concern as skewed power relationships are a major obstacle to the development of successful relationships. Governments in developing countries usually tend to assume core responsibility of the joint initiative and take charge of the weaker partner. In case of relationships with private party with technical strength, there are issues relating to power relationships of a more serious nature with regard to who assumes the leadership role.
B. Lack of awareness/ poor understanding about PPPs by politicians/ decision-makers
1. Lack of understanding about Public Private Partnership in government that the risk management, concession agreement and sharing of obligations between concessioning authority and concessionaire should be prepare considering win - win situation between the two parties which many times leads to one sided contract to which the private investor feel less confident for investing.
2. Government' understanding of PPP as a process of Privatization: Private sector carries all risk associated.
3. Policy of the Government: Although few projects have been implemented on PPP basis & several projects are being implemented on PPP basis, there is no clear policy in the Government framework to adopt PPP in the implementation of Infrastructure projects. This is due to lack of awareness on the policy makers. For example the ten year development program of the Government does not specifically recognize PPP as a means of implementing infrastructure projects.
4. Long gestation time for projects: The procedure of implementing PPP Projects takes more than two to three years. This results in frustration, especially among Political leaders.
C. Lack of capacity in public (and private) sector (at the working level) concerning project development and implementation
1. General observations on capacity
a) Overall need for PPP capacity building of key public sector persons in key line ministries/implementing agencies.
b) Lack of Expertise in Public sector: Lack expertise in PPP sectors among the government agencies many times leads to failure of the projects.
c) Weak PPP Institutions: Even with a PPP/BOT Policy in place, PPP institutions (public agencies, government corporations, local government units) are still the major determinant for a PPP Project to successfully progress from development to actual implementation. The weaknesses are usually the following - a) unclear implementation, regulatory and/or monitoring mandates, b) un-sustained PPP-competency building programs; c) fast turn-over of PPP specialists due to better opportunities in the private sector side; d) politics and political influence given institutional leadership changes following political developments in the country
d) Lack of sector expertise among private investors/ developers. For example, no past experience which many times leads to failure of the projects during operation period.
e) Small number of experts in government
f) Traditional way of implementing infrastructure projects due to lack of awareness about public private partnerships among government officials which requires more capacity building about PPP.
g) Lack of expertise in Government/ Public Sector to deal with PPP projects and advise Government.
h) One category of imperfections relates to the fact that many developing countries lack the administrative and regulatory capacities to provide an adequate environment for PPPs.
i) Lack of specific knowledge on how to conduct PPPs a much more targeted approach to address the market imperfection in developing countries.
j) While it is agreed that on PPP which is a new concept in most of the Asian economies and the government agencies are not fully equipped with the knowledge, there are numerous examples where the investors have tried to maximize their gains capitalizing on this weakness of government rather than working on a win-win formulae. Especially in railways, one of the lessons learned has been that PPP projects which have strategic investors have a better chance of seeing the successful completion.
2. Specific areas (planning, marketing, risk assessment and management, monitoring etc.)
a) No clear mechanism in the Planning/Finance departments to decide on which projects should go the PPP route and which will be funded through the public sector funding.
b) Risks of PPP Projects: Risk factors are very important issues in PPP projects. Careful analysis needs to identify all risk factors and mitigate them before implementing the projects.
c) A second market imperfection is political and other non-commercial risk in developing countries. Risk, in the sense of truly unforeseeable events, is in practice closely related with county's administrative and regulatory capacities.
d) Limited use of risk mitigation instruments. Given the complex nature of risk mitigation instruments, intensive information campaign must be undertaken to enlighten PPP stakeholders on the benefits of tapping such instruments.
e) Lack of proper marketing technique/mechanism to market PPP projects.
f) [Need for transparency in project development and procurement]. Under present PPP projects governments often try to give monopolistic rights to the investors, thereby protecting their interests. This might work under the present low demand circumstances but may not when the demand is huge. There is chance of customer retaliation against the government for providing monopolistic rights (for example, no second airport in the vicinity).
g) [Need to clearly specify design standards, maintenance etc. in Concession Agreements]. Short duration concessions may be able to cap the returns to the investors but they can be ineffective if no sufficient investments are made by the concessionaire in the short durations leading to deterioration of the infrastructure.
h) Increased service quality should be the key requirement both for government and private infrastructure providers. Performance standard and contractual guarantees should evolve from these quality requirements.
i) Lack of awareness [capacity] among Government officials in implementing PPP Projects: In implementing projects & allocation of risks the officials tend to think on the traditional lines of procurement. More awareness [capacity] is needed. Most of the time Government officials view private sector investors with a suspicious eye. This is sometimes due to past bad experiences. Therefore if the officials are educated how other countries have successfully implemented & how they monitor PPP Projects it is very useful. Post monitoring capabilities are very essential.
D. Absence/ inadequate coverage of PPP legal regime/ institutional framework
1. No PPP specific legislation in place that will guarantee the sanctity of PPP contracts if there is a change in government. This apprehension is from the private sector.
2. Lack of PPP Law: PPP Law/Act needs to be adopted based on the experience of previous Public Sector Infrastructure Guidelines.
3. Lack of Solid Policy and Legal Framework for PPPs that can stand Legal Scrutiny: PPP procurement and award being legal processes, said policy and legal frameworks (BOT Law, PPP Guidelines, Executive Orders, etc) are subjected to various legal interpretations as they are invoked during actual PPP procurement/awarding processes. All other stakeholders not happy with the result (losing bidder, agency or local government unit not consulted, landowner not paid enough, environmental advocacy groups not consulted, etc) can go to courts, exhaust appeals processes, secure restraining orders or even go to media - all to the detriment of the project proceeding as planned and spelled out in the contract. As the project is put on hold (for years!) given pending legal questions, the projects costs continue to escalate thereby threatening its viability and scaring off lenders.
4. Politicized Project Planning and Prioritization: This is mainly a function of "politicized" character even of the formal venues (inter-agency committees, approving bodies, boards, etc.) where PPP project plans and priorities are approved.
5. Lack of Detailed Sectoral PPP Guidelines: While most countries have general BOT/PPP Laws/Guidelines, Executive Order, these are not translated into sector specific templates or specifications covering key critical PPP areas or concerns (e.g. financial structures, risk sharing, unbundling, etc.) that are unique for every sector or sub-sector. For example, the BOT contract for a light rail project cannot be exactly replicated in another rail or transport (highway, expressway) project, even if the basic project structures are similar. Relatedly, the so-called "best practices" in other sectors are not necessarily best for another.
6. Lack of regulations (Acts/ Policies) in most of the infrastructure Sectors which provides less confidence among the investors.
7. Legal framework. In countries that already have legislation related to public-private partnerships, there is a need to review the effectiveness and comprehensiveness of such legislation and, when necessary, enact new legislation to remedy any defects. N1. Building confidence with Private sector: The law on private financing in Build and Operation of Infrastructure is in place. Private sector is yet to gain confidence on existing legal provision. They have pointed out that there is a need to examine all relevant laws for contradicting provision and remove it with suitable amendment. In order to build confidence, Private Sector have made request to the government to establish lenders security enforcement rights in the country.
8. Legislative frameworks, polices and operational strategies. Many developed countries have legislation to interface with the private sector. However in the developing world, there is failure, to have proper legislation relating to public-private partnerships. As a result, such arrangements develop on an ad hoc situation for PPP.
9. Complex Dispute Resolution processes of developing countries make private investor less attractive to invest.
10. There is a need for regulation and arbitration mechanism in place for investors' confidence.
11. Regulatory risk. This includes inability to enforce tariff adjustments indicated in the PPP contract, among others.
12. Policy making, regulatory and operational responsibilities of government agencies need to be separated.
E. PPP process not clearly defined
1. Inadequate Potential Project in Pipeline: Proper procedure is to be introduced to identify sufficient Potential PPP Projects in the pipeline.
2. Lack of obtaining all clearances by the private investor/ developer required for the successful implementation of a Infrastructure project/ lack of availability of single window clearances in government for PPP projects which always leads to time as well as cost overrun which has to be in directly bear by the users/ beneficiaries of the project.
3. Unclear allocation of responsibilities among government agencies. There should be a clear institutional framework governing PPPs.
4. Lack of realization of the time required for successful implementation of PPP projects.
5. Governance structures, workable partnerships require a well-defined governance structure to be established to allow for distribution of responsibilities to all the players. Public-private partnerships may run into problems because of ill-defined governance mechanisms in most of the developing countries. Because of this Implementation Gap exists.
F. Non-availability of Model concession agreements
1. Non-availability of model concession agreements.
2. Lack of availability of model concession agreements/ model documents across various sectors specifying the assistance & support to be given by government and the expectations of government/ benefits to the public/ society from the private investors/ developers towards successful implementation of the infrastructure project.
3. Lack of model contract & Bidding documents: In some sectors we have bidding documents & Concession agreements. But when new sectors are to be implemented we have a problem in sourcing such documents.
G. Lack of public sector project development funds
1. Lack of Central TA Fund: A centralized technical assistance (TA) fund needs to be created which can be accessed to drive PPP projects in their initial stages.
2. Lack of government fund to identify PPP projects and carry out feasibility studies.
3. Lack of funds for development of PPP Projects: Although several projects have been initiated for implementation on PPP basis, to bring such projects to the bidding stage, lot of work has to done, like Feasibility studies, Input from Sectoral expertise, preparation of bidding documents etc. These are costly. For example sectoral expertise has to be sourced internationally which is costly. Usually the budgetary constraints have an impact on this.
4. Limited number of bankable projects due to limited or lack of funds for the conduct of pre-investment studies.
H. Difficulties in obtaining long-term finance
1. Debt Financing of Infrastructure Projects due to long gestation period and less confident of bankers for giving loan for more than five years (Standard set by Central Bank).
2. Arrangement of Equity by the developer for the Mega Infrastructure Projects.
3. Government should explore generating funds by securitization of public assets.
I. No provision by governments of incentives/ subsidies/ viability gap funding
1. Lack of a Guarantee Framework: As a resource, government support (subsidy, guarantee or equity) need to be better managed against other sources such as official development assistance (ODA) and private sector finance. In some cases, ODA funds can in fact be used to "guarantee" the viability of a PPP project, without the public sector having to resort to its budget. A guarantee management framework linked to actual agency-level project planning and structuring is therefore crucial.
2. Even where the host country's regulatory environment is adequate, and residual risk has been dealt with, many projects will however have a positive social rate of return, and a negative private one. This gap can be bridged by a public subsidy such as value gap funding, for instance through targeted subsidies to the service providers.
J. Land acquisition difficult and time consuming
1. Acquisition of Land for PPP Projects: In Land acquisition for PPP projects Government should have supportive role.
2. Acquisition of Land/ Government Site cleared from all hindrances.
3. Land Acquisition: Specially in Hilly terrain, unless detailed design is carried out for road, scope and size of the corridor is uncertain. In order to have innovative and robust design, the expectation is that Private sector carries out the detail design after the award of the PPP contract. The detail design of the road corridor after awarding the PPP contract, the acquisition even becomes difficult and time consuming because of people's expectations and demands.
4. Release of Government Land: Release of Government land for projects is cumbersome & results in undue delays. This creates frustration for Investors & project officers. For example a project had to be abandoned after three years since the land was not released.
K. Lack of coordination between central and local governments.
1. Lack of Coordination - Center / Province governments mostly exist in developing countries that causes major setback for such developments.
L. Contagion effects of domestic/ regional economic and political environment
1. Difficult neighborhood is main issue that mostly developing countries are facing today. This makes FDI difficult to obtain.