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P. 1
PPP

PPP

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Published by Raqibul Hasan Robin

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Published by: Raqibul Hasan Robin on Dec 12, 2010
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12/12/2010

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1. INTRODUCTION
A Public-Private Partnership (PPP) is a long-term contractual agreement between agovernment agency and private partner for the delivery of goods or services. As partners, eachparty shares in the potential risks and rewards inherent in the delivery of the goods or service,including financial risks and responsibilities, and quality assurances for the taxpayer. Public-Private Partnerships are not privatizations because the government entity involved in theagreement retains control and ownership of the project. In some types of PPP, the cost of usingthe service is borne exclusively by the users of the service and not by the taxpayer. In othertypes (notably the private finance initiative), capital investment is made by the private sector onthe strength of a contract with government to provide agreed services and the cost of providingthe service is borne wholly or in part by the government. Government contributions to a PPPmay also be in kind. In projects that are aimed at creating public goods like in the infrastructuresector, the government may provide a capital subsidy in the form of a one-time grant, so as tomake it more attractive to the private investors. In some other cases, the government maysupport the project by providing revenue subsidies, including tax breaks or by providingguaranteed annual revenues for a fixed period.
 
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2. CHARACTERISTICS OF PUBLIC PRIVATE PARTNERSHIPS
1. the participants, their goals and expectations
The number and composition of public and private participants in partnership projects are notsubject to definite rules, they differ from one case to the next. In spite of these differences,however, partnership participants have much in common:
 
Participants from the public sector are predominantly representatives of localgovernment (local authorities or enterprises with intermediary functions set up by localauthorities). Federal or central governments may also be involved, but usually only asinitiators or in a supportive role.
 
Private-sector partners are financially powerful actors like property developers and realestate companies, large groups of companies engaged in a broad range of urbandevelopment sectors, institutional investors such as banks and insurance companies, or awide variety of firms operating in sewage and waste disposal.
2. Areas of activities, projects and spatial preferences
Public private partnerships can occur in a wide spectrum of local activities and services: in thetransport sector, in municipal sewage and waste disposal, in urban and regional development, inhousing construction and environmental protection, as well as in the operation of cultural,educational or recreational facilities. PPPs may be set up for all public (local authority) servicesas long as there are no statutory obstacles to full or partial privatization.Where partnerships are actually established (in what fields and in which spatial areas) and forwhat purpose depends, as international experience has shown, on one crucial factor: whether theprivate partner can earn a profit from a satisfactory return on his investment or because of sufficient public subsidies. This is obvious, especially in town planning and urban development.Public private partnerships can mostly be found in specific locations. On the macro-level theyare frequently limited to a few attractive large cities and centers of economic growth; on themicro-level, they tend to be city centers or areas which are attractive from an urban developmentpoint of view and/or already privileged areas. As a rule, private developers show an interest ineconomic crisis regions or areas with low commercial demand only when the public sectoroffers attractive incentives, particularly of the financial or planning-regulation type, and when,despite the problems they face, the areas concerned, appear to possess the potential for economicand commercial growth.
 
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3. Types of cooperation
There is no binding rule on what form public-private partnerships must take. Indeed, thisapproach characteristically comes in many shapes and forms. Whatever differences there are,however, three types of cooperation may be distinguished, varying in function and according tothe degree of institutionalization involved.
 a.)
 
 Informal mode of cooperation among local business and public leaders (so-called “handshake partnerships”)
In the majority of cases, partnerships of this type are not in charge of specific projectand services. They tend to operate as initiators and coordinators in the context of comprehensive planning and development strategies. Participants are for the most partinfluential representatives of industry and commerce or their associations, as well astop-ranking civil servants or local politicians. This type of cooperation may be based onstatute or simply on personal relations between participants.
b.)
Cooperation based on agreements and contracts
 This is the most common form in all countries under survey. The subject matter of thesecontracts is the roles and responsibilities of partners, their specific tasks and duties, theirinput as regards personnel, funding and equipment, as well as the distribution of potential risks. The content of contracts is determined by the concrete project, its goalsand procedure, but it also depends on the negotiating competences and skills of thepartners.Contract-based PPP quite often follows specific models developed for the provision of specific services or the implementation and financing of public sector activities’ byprivate actors. These model contracts are quite frequently applied with regard to publicutilities, waste management and transportation, and range from so-called “operating”and “management models” to “facility management” and “leasing”. Subject of the“leasing model” are infrastructural facilities or buildings which are built and financedby a private partner before leasing them to a local authority.
 c.) The merger of public and private interests into joint cooperation
 
This mode of partnership is quite rarely employed, except in France. More than 1000Societies d’Economie Mixte (SEMs) operates in a variety of fields: in property and urbandevelopment, in housing and commercial projects and in the provision and managementof public facilities.

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