Over the past two years, Saudi Arabia has accelerated its efforts to build a public-private partnership (PPP) policy framework. That process has taken a significant step forward with the recent royal decree establishing the National Centre for Privatisation (NCP). This article sets out the approach taken in other jurisdictions to develop the policy framework of a PPP unit, as well as options available to the newly formed NCP.
The royal decree states that the aims of the NCP include:
- Developing polices, strategies, programmes, regulations, plans and tools;
- Proposing sectors to be privatised;
- Identifying standards and frameworks for privatisation;
- Developing the appropriate rules to facilitate the management of privatisation projects;
- Coordinating with the sectors to be privatised;
- Determining the best methods for privatisation;
- Developing appropriate governance plans and timelines;
- Reviewing the progress of plans to implement privatisation projects;
- Identifying the key performance indicators related to privatisation projects;
- Analysing the benefits and risks related to the implementation of privatisation projects.
The term privatisation is used in the royal decree broadly to include PPPs.
The by-laws set out in the royal decree have been crafted in high-level terms and provide the NCP with the latitude to develop a detailed PPP framework that matches and even exceeds some of the best frameworks developed by other PPP units around the world. The following are features of how some of those units operate.
In many countries, the national PPP unit oversees the strategic direction of PPP policy and provides advice to ministers. This is often extended to include producing policy documents and guidance notes, as well as collecting critical statistical data both domestically and internationally that can be used for the purpose of monitoring value for money. Combined with the support of the private sector to assist with a comprehensive programme of capacity building, a national PPP unit can play a significant role in shaping national PPP policy.
The sponsoring ministry is typically responsible for identifying its own infrastructure requirements. A business case is prepared providing all information needed to justify the particular project. This might include strategic, economic, financial and commercial cases. The PPP unit is then charged with assessing the business case and determining whether value for money will be achieved by adopting a PPP strategy rather than procuring the project along conventional lines.
The approval regime is sometimes dependent on the size and nature of the project. For very large schemes, some countries will stipulate that the Ministry of Finance must separately sign off on the project. In other countries, the PPP unit only has approval rights over a limited number of prescribed sectors.
Approvals are often required at different phases of the procurement process. This might involve an initial approval of the strategic plan, an intermediary approval of the detailed business case and a final approval of the negotiated deal immediately prior to signing project documentation.
As PPP units will be expected to have significant interaction with other government stakeholders, the jurisdiction of the PPP unit and that of other government stakeholders should be clearly delineated. In some cases, the PPP unit will assist ministries with identifying projects and preparing implementation plans. In other cases, the development of the business model and procurement of the developer will be the responsibility of the sponsoring ministry (save for approving the final risk allocation). Equally, project implementation, including contract management, will typically be the preserve of the sponsoring ministry. In some cases, the PPP unit will monitor implementation on a periodic basis to determine whether value for money is being achieved in line with the original business case.
Even though many countries will have a national PPP unit, PPP schemes are often procured at the local or municipal level. Where there is a large municipal infrastructure programme, there will often be a municipal PPP unit covering all municipalities in the country. In such cases, there needs to be a clear demarcation between the jurisdiction of the national PPP unit and the municipal PPP unit. The point is well illustrated in Saudi Arabia, where the Ministry of Municipal & Rural Affairs is responsible for some 269 separate municipalities with potentially overlapping jurisdictions in the healthcare, energy and environmental sectors.
Because the royal decree establishing the NCP is drafted in broad terms, the new PPP regime seems wide enough to address the issues discussed above through the issuance of implementation by-laws. The key starting point will be the policy framework. A framework that facilitates a coordinated approach between the NCP, the Council of Economic & Development Affairs, the Ministry of Economy & Planning, the Ministry of Finance and the sponsoring ministry will be important to the success of the framework.
Leroy Levy is a partner at international law firm King & Spalding