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The Warsaw Voice » Business » June 29, 2015
Business & Economy
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Growing Interest in PPP
June 29, 2015   
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A growing number of public institutions and private investors are eager to undertake projects together in the form of public-private partnerships (PPPs).

According to the latest report by the PPP Center Foundation, Six Years of PPP in Poland, the northern Pomorskie province leads the way in this area, but there are also regions, among them ŁódĽ province, that have not carried out a single PPP project in the last few years. Meanwhile, this is the last call for local government authorities to gain some experience in this area before EU funds stop flowing to Poland. After 2020, PPP will be one of the basic forms of financing infrastructure projects in this country.

In Poland, a growing number of major projects are slowly but steadily being undertaken in the form of public-private partnerships. Examples include an incinerator in Poznań and a courthouse in Nowy S±cz. Data collected by the PPP Center Foundation shows that nearly 95 PPP projects have been completed in Poland since the law governing PPP took effect in 2005. These projects were in areas such as waste management, energy, road infrastructure, and sports and recreation.

Poland is among countries near the bottom of the list in Europe in terms of the number and value of PPP projects. However, the completion rate for planned PPP projects undertaken in Poland is gradually improving. It went up from 26 percent in 2010 to 34 percent four years later.

The Public-Private Partnership Center Foundation is an independent nongovernmental, nonprofit organization established in 2008 that aims to meet important needs of the public through the use of available and effective tools such as public-private partnerships.

Bartosz Mysiorski, vice president of the PPP Center Foundation, says, “For the PPP market to be mature, the completion rate should be at least 50 percent. This can be achieved, on the one hand, by educating market players on how such projects should be carried out and by building awareness of the benefits of PPP. On the other hand, certain legislative changes are needed, especially when it comes to adding precision to what expenses related to the private partner’s remuneration can qualify as property expenses, and what expenses should be classified as current expenses. The lack of clarity in this area leads to a situation in which local governments that must comply with debt limits decide against going ahead with PPP.”

According to Mysiorski, the law on PPP needs to be amended if Poland is to catch up with other European countries that are successfully carrying out infrastructure projects in the form of public-private partnerships. According to the European PPP Market Update report, last year 82 PPP projects, each of which was worth more than 10 million euros, were completed. Their total value exceeded 18.7 billion euros. In Poland, only two such projects were reported. Britain, Germany, France and Greece overwhelmingly led the charge in terms of the number of projects carried out in 2014, and in terms of value, Turkey and Belgium led the way, alongside Britain. In Poland, more than half of all PPP projects are small initiatives not exceeding 5 million euros. According to the report by the PPP Center Foundation, projects in the waste management sector and the ICT sector had the highest average value, zl.229 million and zl.143 million respectively. The average value of all 90 PPP contracts signed from 2009 to 2014 approached zl.30 million.

Regional disparities

Małopolskie and Mazowieckie provinces were responsible for the largest number of calls for PPP projects in Poland from 2009 to 2014, at 58 and 47 respectively, according to the PPP Center Foundation. Pomorskie, ¦l±skie and Wielkopolskie were the most effective provinces in terms of PPP, with completion rates of 48, 45 and 43 percent respectively. Particularly active in this area were provinces and townships with considerable investment needs and staff trained to handle this type of project.

While most calls for PPP projects have involved sports and recreation so far (only about 10 percent of the calls actually ended with finding a private partner), since 2012 the percentage of projects focusing on energy efficiency has been on the rise. In subsequent years, it is possible to expect more projects in sectors such as construction, including public and residential buildings, transport infrastructure and healthcare.

Irena Herbst, President of the PPP Center Foundation

Benefits for the public sector from PPP:
The public partner gains access to private funds and know-how. Given the huge demand for infrastructure combined with the limited availability of public funds, this makes it possible to accelerate the development of infrastructure and the availability of public services.

With an appropriate level of risk sharing, PPP projects make it possible to avoid incurring public debt and running up a deficit.

PPP projects are carried out faster and more efficiently than those undertaken in the traditional way. It has been proven that PPP projects more often than not run to schedule and budget.

Benefits for the private sector from PPP:
Stable, long-term contract with a reliable public partner—an important consideration especially at a time of economic slowdown.

Flexibility in terms of the detailed specifications of the final product or service. It is the private partner himself who decides what kind of brick or light fixture they want to use in the construction project. The private partner is responsible primarily for the end result as defined in the contract.

The possibility of generating additional revenue from third parties—“reaping the rewards” (for example, renting out usable space when managing a building).
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