Over the past decade, efforts towards the development of more general sets of guidelines for PPP contracts have been made at different fora and at different levels. At the national level, some countries with well-developed programs such as the UK, South Africa, Australia and Chile, have made efforts to introduce more transparent accounting and reporting practices for PPPs. Other organizations such as the OECD, the European Commission, the IMF, the World Bank and Regional Commissions of the UN have issued guidelines and recommendations on the introduction of more transparent accounting and reporting practices for PPPs. As an example, the World Bank Group publishes a guidelines framework for the disclosure and contractual arrangements of PPPs. The Regional Economic Commissions of the UN have developed guidelines for promoting good governance for PPPs (ECE, 2008; ESCAP 2011).9
In the area of accounting for PPPs, International Public Sector Accounting Standards (IPSAS) has put forward international standards. In the field of budgeting for PPPs in particular, international standards have been promoted through IMF's Fiscal Transparency Code and OECD Principles for Public Governance of PPPs. At the same time, fiscal treatments of PPPs continue to vary across countries. For example, some countries such as Australia and the United Kingdom follow accounting standards based on IPSAS and recognize typical government-funded PPPs on their accounting balance sheets. But many other governments do not currently recognize PPPs on their balance sheets or treat investment in PPPs as public investment in fiscal data. Some present fiscal data only on a cash basis and do not have a balance sheet prepared according to any particular standard. The IMF is currently piloting a PPP Fiscal Risk Assessment Model (P-FRAM) to help developing countries assess the potential fiscal costs and risks arising from PPP projects. It is important that information from this project, including that relating to data on contingent liabilities, is disclosed in a timely manner to provide effective guidelines to policy makers.
The commitment of world leaders in the Addis Ababa Action Agenda (AAAA, paragraph 48) to hold "inclusive, open and transparent discussion when developing and adopting guidelines and documentation for the use of PPPs, and to build a knowledge base and share lessons learned through regional and global forums" is an important step to bring these various strands of work together and develop a more systematic approach towards the development of guidelines for PPPs. However, as long as there is no agreed upon definition of PPPs, even in a broad sense, guidelines will necessarily fall short of developing a commonly accepted and understood set of criteria used to determine measurement, recognition, presentation, and disclosure of material items (in particular risks and fiscal implications) related to the implementation of a PPP. Agreeing on a broad definition of PPPs would therefore be a natural point to initiate these discussions.
In the meantime, the G20 finance ministers have provided another important input into the global discourse on PPPs by welcoming the "WBG PPP Guidelines and the OECD/WBG PPP Project Checklist".10 The OECD/WBG PPP Project Checklist puts forward a concise questionnaire on a wide range of issues, including on the process for accounting treatment of PPPs in terms of classification as on- or off -balance sheet assets/liabilities. In addition to the previously mentioned Framework for Disclosure for PPP Projects and recommended PPP contractual provisions, the WBG PPP Guidelines comprises a comprehensive Infrastructure Prioritization Toolkit, a Report on Recommended PPP Contractual Provisions and a report on "Partnering to Build a Better World: MDBs' Common Approaches to Supporting Infrastructure Development". While a careful consideration of the recommendations contained in these documents is beyond the scope of this paper, a cursory look suggests that there are certain proposals (among many sensible ones) that could benefit from a broader and more inclusive dialogue as envisaged in the AAAA.
Example, as pointed out by Shrybman and Sinclair (2015), the report on Recommended PPP Contractual Provisions contains proposals that fail to take into account the lessons from failed PPPs, especially with respect to the allocation of risk between the public and private partner. The proposal that certain risks, which are outside the control of the public sector - such as labour protests - are assigned to the government merits further critical debate. At the same time, it is questionable why the public sector should compensate the private sector for costs associated with regulations that may be essential to achieving the SDGs (e.g., the reduction of greenhouse gas emissions, measures to protect public health). Indeed, if PPPs are to be used as a major vehicle to achieve a certain set of SDGs, such as those related to infrastructure and economic growth, contractual arrangements for projects should not penalize the public sector for putting in place policy frameworks that help achieve other goals.
Moreover, certain provisions may reduce incentives for the private sector to ensure optimal performance on their part, such as the recommended policy that the contracting partner, i.e., the public sector, covers 80-85 per cent of the outstanding senior debt of the private partner in the event the private partner defaults. On the other hand, such a generous guarantee would only make sense if it would significantly reduce funding cost for the public sector to a level that would be comparable to government borrowing rates. Yet, this is not the case due to the higher costs of private sector borrowing and the high tendering, transaction and negotiation costs of PPPs as discussed earlier.
It is also interesting to note, that the guidelines suggest that if a dispute cannot be resolved between the contracting authority and the private partner, the dispute shall move to international arbitration and that all international arbitration shall take place under the arbitration rules of the International Chamber of Commerce. This raises questions on two counts: Why cannot the dispute be resolved through the host state's domestic courts rather than international arbitration? Numerous studies have pointed to the flaws in current international arbitration processes. So it is not clear that these rules are preferable over domestic frameworks and regulations for arbitration. Second, why is a "one size fits all" set of arbitration rules, proposed, despite the common view that the choice of a particular set of arbitration rules in preference to others may have a significant impact in terms of costs and duration of the process?11 Moreover, the ICC rules are among the least used international arbitration rules, which makes it curious that they are recommended as the standard framework for investor-state disputes related to PPPs.12
The WB framework for disclosure provides a useful tool for stakeholders to strengthen transparency in PPPs. However, as pointed out by Aizawa (2015), provisions could be even more ambitious, especially in light of the UN 2030 Agenda for Sustainable Development and the AAAA. First, provisions should go beyond country-level PPP disclosure to fully understand the regulatory requirements related to cross border PPPs, such as large-scale infrastructure projects like roads or pipelines. Second, the guidelines are an important start, but could go further in advocating key principles for harmonized PPP disclosure, with a clear statement of a presumption in favour of transparency. Third, cross-sectoral experience provides important lessons that could be taken into account in the disclosure framework. A closer look at public disclosure initiatives like the "Extractive Industries Transparency Initiative", "Publish What You Pay" or the "Open Contracting Partnership", may further promote integrity, transparency, and accountability in PPPs. Fourth, greater efforts are needed to advocate for a common platform for PPP disclosure. Many infrastructure facilities and financial institutions have made important strides in pushing disclosure practices of the private sector on key aspects of how PPPs generate value for money. Yet, standards differ across institutions. Stakeholders should come together to agree on common standards that include and build on the most ambitious existing provisions for disclosure. Lastly, a fourth P - "People"- should complement the focus on the financial and commercial disclosure practices of the implementing partners. People affected by or living in close proximity of major PPPs should be fully enlightened as to the potential welfare implications of any new project (Aizawa, 2015).
Overall, we therefore propose to re-evaluate existing guidelines in light of the 2030 Agenda for Sustainable Development, including its Sustainable Development Goals, as well as the AAAA. The broad challenge would be to frame contractual guidelines in such a way that the PPPs would lead to value for money for the implementing parties and the public at large, and not put undue constraints on governments and other stakeholders in their endeavours to pursue and promote national policies and interventions in support of the 2030 Agenda for Sustainable Development.
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9 Since June 2014 UNECE has been working on developing PPP standards by sectors. It has already drafted health care PPP standards with more sectors in the pipeline (railways, roads, and water and sanitation). Although the health care standards focus on key areas, such as policy and legislative framework, and economic context and affordability, the approach of each section is rather general and only a vague reference to accounting standards is included. This process could perhaps be further strengthened and become more impactful if it drew on existing multi-stakeholder fora within the follow-up to the Addis Ababa Action Agenda and the 2030 Agenda for Sustainable Development.
10 G20 meeting of Finance Ministers and Central Bank Governors, 4-5 September 2015, Ankara, Turkey.
11 There are several other widely recognized arbitration rules, like the International Trade Law Arbitration Rules ("UNCITRAL Rules"), the rules of the International Centre for the Settlement of Investment Disputes ("ICSID")
12 Of the 42 new known disputes in 2014, 33 were filed with the International Centre for Settlement of Investment Disputes (ICSID) (of which three cases were under the ICSID Additional Facility Rules), six under the arbitration rules of UNCITRAL, 15 two under the Stockholm Chamber of Commerce (SCC) and one under the International Chamber of Commerce (ICC) arbitration rules. These numbers are roughly in line with overall historical statistics. See UNCTAD, 2015, "Recent Trends in IIAs and ISDS", IAA Issues note, No.1.