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The Warsaw Voice » Business » June 3, 2014
Public-Private Partnership
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A Chance for Sustainable Development
June 3, 2014   
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Internationally, public-private partnership (PPP) are an effective and increasingly widely used method for providing public services. PPP makes it possible to improve the standard of such services to meet the public’s expectations. The main advantage of PPP is that it uses the skills and financial potential of private capital. Enlisting extra capital and delegating the risks inherent in business projects to private companies increases the effectiveness with which public tasks are carried out.

Many countries use this instrument, developing and implementing programs involving PPP in service sectors such as education, transport, healthcare, public utilities, security (armed forces) and culture. The European leaders in this area are Britain (mainly education and redevelopment), France (hospitals), Germany, the Netherlands (redevelopment), Spain and Ireland (road infrastructure).

In Poland, PPP regulations were introduced in 2005 and subsequently revised in 2009. The PPP market is developing much more slowly than in Western Europe. This is largely due to a lack of strategic documents and programs for applying PPP and of recommended standards and procedures.

Risk sharing between the PPP partners enables them to avoid over-stretching public budgets, even though the public partner has financial obligations toward the private partner. In a situation that requires the budget deficit to be reduced, this is an added argument in favor of striving to make PPP more widespread in Poland.

The needs in public services are huge in Poland while the financial capacity to provide these services is limited.

There is substantial consensus among experts and public authorities as to the urgent need to use PPP in carrying out public projects in Poland.

The Polish PPP market is only just emerging. Not one project was completed under the previous law on PPP, which was passed in 2005. A new law came into force in February 2009. Under the new regulations, there have been 288 calls for private partners and 63 contracts signed. The PPP contracts signed in 2009-2013 are estimated to be worth some zl.2.5 billion. Projects still under preparation (calls for partners, negotiations) account for a further zl.15 billion. That is not a lot, especially if you consider the needs as well as the vastly inadequate—compared with other countries—effectiveness of private partner selection procedures, where only about 25 percent of launched procedures end with the signing of a contract.

Another unique feature of the Polish PPP system is the low value of projects and the completely different sector structure. Sports and recreation projects dominate in Poland, whereas in Western Europe education and transport infrastructure projects lead the charge. This is closely related to the fact that, unlike in many other countries, the Polish PPP market is the domain of local government projects. So far no large national-level project has been completed.

Using PPP as an efficient and effective way of solving crisis problems—as shown by the experience of countries successfully using this form of providing public services—requires government political will turned into a series of regulatory and executive measures. In Poland, however, declarations are often not followed by actions to enable effective and quick implementation of PPP. The necessary procedures for a practical application of the partnership in socioeconomic policy have not been launched, and there is no strategy for promoting the system. No procedures have been formally put in place by the public authorities, nor are any best practice models being promoted.

What, then, should be done to promote the use of PPP in Poland? The most important and often voiced proposals in this area include:
1. Developing a government policy for applying PPP as a form of providing public services.

Elements of this thinking can be found in the National Urban Policy currently being developed by the Ministry of Infrastructure and Development. The ministry strongly recommends PPP as an instrument for use in redevelopment projects.

2. Developing a strategy for putting PPP into practice; developing and launching medium-term programs for disseminating knowledge and skills in applying PPP in Poland.

Despite a more active role of government bodies in the past year, these activities are still fragmented. There is no cooperation between different institutions.

3. Launching institutional solutions to reduce the level of risks involved in applying the PPP formula.

These should include a system of support from public funds to co-finance PPP preparation costs (for example, preferential loans).

A system of guarantees is also needed for loans taken out for the completion of PPP projects, in addition to an institution to evaluate the advantages of the PPP format compared with other forms of carrying out projects.

4. Ensuring a PPP-friendly legal environment and application procedures.

In response to proposals from PPP market participants, the Economy Ministry got clearance from the Finance Ministry to begin work on a far-reaching revision of regulations. This comes after many months of talks.

Work has yet to begin on standardizing pre-project analysis methods and application procedures.

Irena Herbst, Ph.D.
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