Law on PPPs will enhance investment

End of May this year, the along-awaited law on Public Private Partnerships (PPPs) was officially published. This is a timely piece of legislation that comes to provide a legal framework for big investment projects in which both public and private sectors would act as ‘partners’. To me, the law provokes two fundamental questions: How does it contrast from conventional procurement model? What ingredient will it add to investment climate in the country? Usually, public procurement law regulates public expenditure which unequivocally and equivocally bars government from bidding in tenders because it raises conflict of interest issue. A statutory agency is a procuring entity and thus can’t turn around and compete with persons or companies for its own tenders. Arguably, government is duty-bound to maintain the circulation of money in the economy. So, the government has the duty to engage the taxpayers (individuals and companies) to be part and parcel of the services it owes to them. This is why, under conventional procurement model, the platform for bidding is granted to the private sector. As for PPP, government is a partner in investment projects and can receive value for money unlike under conventional procurement framework. A public-private partnership can be described as a cooperation between the public and the private sector, in which the government and the private sector carry out a project together on the basis of agreed tasks and risks, each party retaining its identity and responsibilities. According to the new PPP law (law nº 14/2016 of 02/05/2016 governing Public Private Partnerships), it hasn’t come to supplant the conventional procurement model but to fill the gap that hasn’t been envisaged by conventional procurement model. Neither has the PPP law come to render procurement model redundant or inapplicable. Both PPP law and procurement law will co-exist to bolster investment at large. In other words, the two laws are not mutually exclusive, but have one common denominator: investment. For example, major public infrastructural projects have always been undertaken by the private sector through procurement model. The major difference between conventional procurement model and PPPs is the fact that the private sector can be regarded as a fully-fledged sector. In particular, the PPP law applies to potential sectors in line with infrastructure and services, namely “transportation, including roads, railways, airports, bridges, tunnels, waterways and inland ports; energy including water energy, gas energy, solar energy, wind energy, geothermal energy, biogas energy and peat; social affairs, including those related to education, culture, health, sports and leisure; tourism, including tourism related to history, hotels, parks and tourist attractions; natural resources and environment, including those related to forestry, oil and oil products, minerals, water sanitation and waste disposal; telecommunication and information technology; and any other sectors as may be determined by relevant authorities”. Contrarily, PPP law is non-applicable to contracts normally governed by a conventional procurement model. Similarly, PPP law is non-applicable to the privatization or divestiture of enterprises, assets and any infrastructure facility owned by the government. The preceding legal framework is the main ingredient the new PPP law and is likely to contribute to the investment terrain in Rwanda. Furthermore, the new PPP law has introduced a new institutional framework which will ensure the enforcement and compliance of this law in a broad sense. The institutional framework comprises: Steering Committee, Contracting Authority, and Rwanda Development Board (RDB). It’s important to note that RDB obviously has the upper hand in PPP projects precisely because investment matters are within its primary purview. Besides, under this new law, RDB wields powers to disqualify a partner from a PPP project if, of course, it’s behaved in a manner that’s inconsistent with the law. The interest in PPPs is growing, notably due to the growth in the demand for quality infrastructure and some services, as noted above, limited public funds to meet current and future needs and acceptance for the private sector in the provisions of infrastructure and essential services. It can be empathized that the principle behind PPP is that, although the public sector may need to be responsible for the delivery of a particular service, it doesn’t have to be responsible for actually providing that service or for undertaking the investment themselves. This way, all actors in PPP arrangements can concentrate on doing what they do best. As noted elsewhere, the most important advantage of a PPP is the creation of value for money. This means delivering a project with the same quality as under conventional procurement for less money, or delivering a project with a superior quality for the same amount of money. Of course, PPP has more advantages, such as shared risk, long-term nature of contracts, performance measurement and incentives, competition, cost efficiency and so forth. PPPs have been practiced in many countries across the globe. In fact, Rwanda has somewhat been lagging, not in practice but in legal regime. PPP is a contemporary investment terrain that every country desires. Rwanda’s step to create a PPP legal framework crystallizes its importance to the State. The writer an International Law Expert.

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Law on PPPs will enhance investment