PPPs require a range of stakeholders within and outside government to take on new roles or perform existing roles in improved ways. Often, new entities are created, such as regulators
| Box 1: Impact of Legal and Regulatory Uncertainty on Build-Own-Transfer Wastewater Schemes in the People's Republic of China |
| At this stage, the People's Republic of China does not have overarching privatization legislation. Instead, its build-own-transfer (BOT) schemes and other public-private partnership (PPP) reform strategies are governed by a series of government policy papers. Developing a BOT wastewater scheme is complicated, requiring consideration of issues ranging from land use to the management of water companies, from investment mechanisms to taxation, accounting systems to credit policies of development banks. And the fact that existing policies on land use, taxation, and such considerations are not geared for the sector makes things more difficult. In the case of the 16 Foshan Wastewater Treatment Plants, over 50% of the projects could not be implemented because they conflict with current land use policies. Source: Dueñas, Ma. Christina. 2007. Country Water Action: People's Republic of China, Private Funds for Cleaner Water-BOT Applied in the Chinese Wastewater Sector. February. This article, written by the Asian Development Bank (ADB), was based on the paper prepared by Lijin Zhong fromTsinghua University's Department of Environmental Science and Engineering and Tao Fu from Wageningen University's Environmental Policy Group. |
or PPP units, to manage the process. Government must ask a series of key questions to understand the institutional requirements of the reform strategy. These questions might include:
• Are the institutional and legislative frameworks in place to support sector improvement and PPP, in particular? What are the impediments according to the ministry, users, and utility?
• Do the level of autonomy and accountability of stakeholders match their proposed obligations?
• Are the relevant levels of government prepared to relinquish or revise their roles?
• Are the relevant levels of government prepared to delegate some control to private partners within defined policy and regulatory parameters?
• Does each institution have the funding, staff, training, and equipment required to discharge its functions?
• Does each institution understand its role and know how to develop the procedures for accomplishing this role?
• Is there a key stakeholder-i.e., a champion-with the capacity and the political will to lead and drive the reform agenda forward?
These institutional roles must be clarified at the latest by the time the PPP process is complete. However, the greater the degree of uncertainty about institutional roles during the PPP process, the higher the level of perceptive risk is likely for potential investors. At the same time, there must be some flexibility to refine and update institutional roles as the sector evolves and matures. Increasingly, as decentralization takes root, governments have the additional burden of determining at what level of government each role is best performed.
In the institutional analysis, it is important not to overlook the capacity to support bidding, negotiation, and contract compliance and monitoring. Governments may have unrealistic expectations of the ability of their own organizations in that respect. The stages of the procurement process are discussed in detail in chapter 7.