With an estimated $57 trillion in infrastructure investment needed by 2030, public-private partnerships will no doubt continue to be a part of the sustainable development agenda, which will need industrial growth and market connectivity to boost inclusive development.
Governments commonly partner with the private sector on large infrastructure projects as a way to match public policy ambitions with the know-how and project execution of private companies. Yet public-private partnerships are often looked at with a certain degree of skepticism and controversy.
Governments sometimes devote a large amounts of resources to large infrastructure projects and incur significant public debt in the process, in some cases with questionable value for local residents. Citizens and civil society often criticize the often opaque government procurement policies as bad deals for taxpayers and demand transparency.
The World Bank, citing a dearth of literature and guidance on PPP disclosures, released a draft framework of public disclosure practices for PPP transactions last month. The report is intended to guide policy makers on the most effective ways to report PPP project developments as a way to boost transparency and build public trust. It was compiled at the request of the Group of 20 which, alongside the Organization for Economic Cooperation and Development, has embraced anti-corruption as a core advocacy area.
Here are three things to know about the report and its findings.
What is it, exactly, and how should it be used?
The framework is meant to guide by example. It is loosely structured as a series of case studies of 13 national and subnational governments around the world that have substantial experience implementing infrastructure PPPs. The report looks at the experience of those jurisdictions and pulls together a general set of best practices on public disclosure. It offers various matrices of proactive disclosure protocol throughout the life of a project, based on the unique political and economic circumstances of governments and the objectives they hope to achieve through public disclosure.
It is a tool that was primarily designed for policymakers, but is equally relevant to regulators, PPP practitioners, researchers, civil society organization and the general public whose work relates to improving public transparency. The public consultation and comment period runs through Feb. 29. The World Bank said it will then take another two to three months to incorporate the public commentary before releasing a final framework by the middle of the year. With the analysis of those jurisdictions complete, the World Bank said it still has much work to do around designing reporting templates to give governments practical and standardized resources to disclose PPP metrics.
“Ultimately this is a balancing act between what is practical and feasible for governments to do,” said Laurence Carter, a senior director for public-private partnerships at the World Bank. The most common choke point holding up PPP related reporting is a lack of institutional capacity by governments to aggregate and disseminate information, he said. At the most basic level, Carter said, countries wanting to enhance their disclosure practices should expect to upload structured reporting templates into the public domain.
“In our judgment this isn’t about a lack of willingness to disclose,” he said. “Some countries are just not sure how to do it.”
Don’t overthink it
Based on the research conducted for the framework, most countries are moving towards improved disclosure practices.
“This framework is now meant to accelerate that,” Carter said, adding that the level of effort to strengthen those practices shouldn’t be considered too daunting.
The basic pieces governments need to put in place are policies — not necessarily legislation — that encourage public disclosure, a framework for monitoring and evaluating disclosure activity and standard clauses in PPP agreements that governments can include in contracts with private sector partners.
Without those three pieces, public disclosure principals do not tend to be built in early on in infrastructure investments, which eventually leads to heightened skepticism and a breakdown in the public’s trust.
“It’s not that governments are necessarily against disclosure,” said Shyamala Shukla, one of the reporting framework’s principal authors. “But their initial focus tends to be on the technical side of things — getting a bankable project and contract in place, for example.”
Governments tend to start thinking about disclosure requirements only as a next step, once PPP programs have been determined. And while those standards need to be in place from the start of negotiations, they also need to continue through the lifetime of a project.
The power of voluntary buy-in
The report’s authors said that a common question during the comment period is whether the framework will ultimately become a mandatory set of standards, similar, for example, to the Extractive Industries Transparency Initiative in which governments adopt and hold themselves to an agreed upon set of principles.
“We are putting out a framework that is entirely voluntary as well as a set of materials and tools that governments can use, with no intention of making it a certification process,” Carter said.
Governments have too wide of a range of capacities to be held to a common standard and too many disparities arise based on the circumstances of every unique PPP transaction. Instead, the World Bank believes that a stronger degree of buy-in comes from the voluntary disclosure approach.
“It helps governments to better think through when they want to engage in PPPs,” said Carter. For their part, the private sector has a vested interest in taking on practical disclosure practices to bolster their long-term business interests with governments, he added.
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About the author
Naki B. Mendozamfbmendoza
Naki is a former reporter, he covered the intersection of business and international development. Prior to Devex he was a Latin America reporter for Energy Intelligence covering corporate investments and political risks in the region’s energy sector. His previous assignments abroad have posted him throughout Europe, South America, and Australia.
