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The Warsaw Voice » Business » April 2, 2008
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Public-Private Partnerships
April 2, 2008   
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In Europe in the last 10 years countries have needed to build new infrastructure on the one hand but, on the other, public resources have been limited. This has resulted in the expansion of public-private partnerships (PPPs) in areas that were previously the exclusive domain of the public sector.

Public-private partnerships are a way to achieve a balance between infrastructure development and investment needs and limited public funding because of state deficits and public debt.

The European Union has directly supported infrastructure development by promoting public-private partnerships and details these in many documents such as the Green Paper, Resource Book and Guidelines for Successful Public-Private Partnerships. Public-private partnerships have proved themselves to be the ideal tool via which private partners can finance, create, manage, maintain and utilize infrastructure and public services. The new European Union member countries are left in no doubt that this is the road to follow to meet their development needs.

It must be emphasized that the success of public-private partnerships results not only from better resource management but also from the fact that they positively impact the management of public services. They introduce competition and productivity criteria, previously met solely in the private sector.

The injection of private capital has revolutionized public services administration and this in turn has resulted in a marked improvement in people's opinion of the efficiency and quality of public services. At the same time the use of public services resources is more efficient because of the need to control and account for the spending of European Union funds.

A good public-private partnership depends on balanced risk sharing, a sufficiently long contract and clear business plan. Thus it is not about passing the most risk onto someone else but optimization of risk, or giving it to the party best prepared to take it on and at the least cost. The decision as to who takes on the highest risk should also take into account financial structure and debts. A suitable accounting method that fulfills the requirements of the European Union's SEC 95 guidelines will make possible public infrastructure financing without affecting administration funds.

In Poland people talked about public-private partnerships before May 2004, when the country joined the European Union. Nevertheless, Poland to this day has still not been able to create suitable laws and financial regulations that would facilitate the operation of such partnerships.

A bill passed in 2005 was of little use for many reasons but mainly because it mandated rigorous initial analyses, which resulted in many failed attempts at partnerships because it proved impossible to fulfill the basic conditions.

Poland needs laws that promote public-private partnerships if it does not want to waste the opportunity to improve its infrastructure and public services, which is the current situation. The issue at stake is Polish law, but there are many examples of effective laws in other countries that Poland can use to help it decide which direction to take.

Up until now Poland has used the public-private partnership model of English-speaking countries, which undoubtedly is the precursor for the European Union model, but other variants exist. Over the years the latter have given better results and are, moreover, more compatible with laws in continental Europe and are thus better suited to Poland. The roots of Polish law-Roman law, the Napoleonic Code and European Union norms-are similar to laws in Spain, Portugal and France. These countries have recently developed partnerships of a very high standard based on bilateral trust between public and private sectors. This they achieved by appropriate sharing of risk and responsibility and ensuring that both sides have a clear understanding of their individual goals.

A suitable form of public-private partnership is an essential requirement for the development of infrastructure and public services. Poland should thus not lose the opportunity to create conditions to facilitate the development of such partnerships.

Jaime Fuster Rufilanchas
Partner and Director of the Garrigues office in Poland
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