Sri Lanka agency ensures equitable risk transfer in Public Private Partnerships
ECONOMYNEXT – Sri Lanka’s National Agency for Public Private Partnerships will ensure equitable allocation of risk between the public and private entities in a project, its chairman Thilan Wijesinghe said.
A central agency for PPPs was necessary to provide a third source of financial resources to stimulate capital formation, he told a recent forum.
The National Agency for Public Private Partnerships (NAPPP), attached to the Ministry of Finance, is also responsible for project risk assessment and the equitable allocation of risk between the public entity and the private entity.
Wijesinghe said oversight of the Ministry of Finance is essential to ensure fiscal cost and fiscal risk and recourse to the national capital budget, if any, is optimized.
Line ministries under which a PPP comes and the private sector also require a single facilitation point, he said at the L. S. De Silva Memorial Lecture held by the Chartered Institute of Logistics and Transport (CILT).
The NAPPP will also help tap into technical assistance funds for feasibility studies, Wijesinghe told the forum on the need for a Public-Private-Partnership Framework and cooperation in transport and logistics:
It will also help provide viability gap funding in infrastructure projects that are need to provide public services but are not financially self-sufficient owing to long gestation periods and inability to charge user fees at market rates.
Wijesinghe said a PPP was a special contractual arrangement between a public sector Ministry, corporation or authority and a private company for providing a public infrastructure asset or service.
The contract ensures an appropriate transfer of risk to the private party which bears investment and management responsibility on a long-term basis.
In a PPP, the private partner is typically tasked with the design, construction, financing, operation and management of a capital asset to deliver a service to the government or directly to private end users, he said.
The private partner will receive either a stream of payments from the government or through charges levied directly on the private end users, or both, for the investment and associated risks.
A project involving an outright sale of freehold title or long-term lease of any government asset or where the government provides a direct sovereign guarantee to the lending institution of the private partner’s debt cannot be called a PPP, Wijesinghe said.
Nor ones where the government or any of its institutions finances by itself, either through public funds, loans or grants, the procurement of a good or service.
Projects where the government retains whole-of-life asset risk is also not a PPP, where such risk is retained with the private partner, Wijesinghe said.
(COLOMBO, 27 November 2018)