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Advanced ToT Pro-poor Policy Formulation and Implementation at Country Level May 31st, 2016: Hanoi Vietnam

PUBLIC PRIVATE PARTNERSHIPS –For sustainable agricultural development

Session 1: Introduction & PPP Policy Environment

Session 1 Contents1. PPP concept, rationale and definitions (recap Sept

2015)

2. Common roles of public and private actors

3. PPP Policy & Legal Issues

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Public Private PartnershipsWhy the hype?? PPP buzz word??

1. Scale of investment means public sector cannot do it alone

2. High risk of doing business in agriculture can deter private sector participation

3. Partnerships can drive innovation, market access & inclusion of smallholders

PPPs help to resolve:Market &/or policy failure to deliver public good

Why partner? Rationale for Agri-PPPs

Agri-PPPs Objectives

Realize national sector and socio-economic development plans

• Generate rural employment and income

• Ensure food security

• Increase agricultural competitiveness

• Foster structural change

Agri-PPP themes FAO Study

1. Value chain development

2. Innovation & technology transfer

3. Business development/advisory services

4. Market infrastructure & logistics

Others

• Irrigation

• Food safety/biosecurity (SPS)

• Co-management of natural resources (fisheries, forestry)

Definitions

No single definition - broad

“Business and/or non-profit civil society organizations working in partnership with government agencies including official development institutions” (WEF, 2005)

1. Reciprocal obligations and mutual accountability

2. Voluntary or contractual relationships

3. Sharing of investment and reputational risks

4. Joint responsibility for design and execution

No single definition – public good“PPPs represent a framework that while engaging the private sector, acknowledge and structure the role for government in ensuring that social obligations are met and successful sector reforms and public sector investment achieved” (ADB PPP Handbook, p7)

1. Allocate tasks, obligations and risks in optimal way

2. Recognize unique advantages of each partner

3. Aim to minimize costs while improving performance

PPP or Public Private Collaboration? PPC: • Less formal (i.e. contractual)

and informal agreements

• Division of responsibility can vary

• Risk & decision-making may not be shared equally

Includes “softer” collaboration

• Multi-stakeholder collaborations • SMEs, farmer

cooperatives, community groups, NGOs

• Joint initiatives with government agencies • Co-management• Co-regulation

PPP involves…1. Formal agreement

2. Both parties contribute financial resources

3. Costs & revenues calculated

4. Social, economic and environmental benefits

5. Clearly defined roles & responsibilities

6. Joint accountability for deliverables

7. Sharing of risk and benefits

Anything else?

• Threshold levels for investment to qualify as PPP?

• Specific types of projects that qualify?• Infrastructure only?

FAO Study Agri-PPP Definition“Formalized partnerships between public institutions and private partners designed to address sustainable agricultural development objectives…

• where the public benefits anticipated from the partnership are clearly defined,

• investment contributions and risk are shared,

• active roles exist for all partners at various stages throughout the PPP project lifecycle”

Does the definition matter? Depends…

What types of partnerships require a more formal agreement and defined legal and policy framework for implementation to occur?

PPPs & Policy

The concept refers to formal collaborations between the public and the private sector where the public sector involvement is aimed at providing public goods and addressing development objectives.

When is this approach appropriate? ▫ When the public sector lacks the financial resources

or know-how to stimulate agribusiness development▫ Where there is high risk/low return for private

investment▫ High potential for positive socio-economic spillover

effects from investment benefitting the rural poor

2. Who are the Partners? (FAO, 2016)

Public• Central and

decentralized government

• State banks and rural finance corporations

• State-owned enterprises

• Research institutions, universities, marketing boards

• Donors

Private• Global and domestic food

companies

• Input supply and agro-processing companies

• Financial institutions

• SMEs and producer associations*

• Civil society (NGOs)

• 3rd party contractors

What do they do?Public• Define ‘public good’

• Design program objectives

• Conduct/commission feasibility studies

• Screen potential partners

• Monitor and evaluate implementation

• Create enabling environment

• Provide finance and technical assistance

What do they do?Private• Comply with programme

design• Lead implementation• Secure markets and financing • Introduce technology

innovations • Provide technical assistance• Deliver results

NGO/Intermediary • Ensure inclusion• Organize producers and

provide technical support

Producers• Dual role as

beneficiaries and/or private partners

3.Institutional Environment:PPP Policy and Legal Issues

Policy & Strategy Context (1)•Application of PPP concept to agriculture

new in many countries▫Reflected in recent policies and laws

•PPP as traditional mechanism for large-scale infrastructure projects

•Private sector engagement increasingly referenced in agricultural policies and strategies ▫PPP as one mechanism to encourage this

Policy & Strategy Context (2)Types of documents referencing agri-PPPs

• National agricultural strategies• Long-term vision documents

▫ Kenya Vision 2030, Pakistan 2030

• National development plans ▫ Philippines Medium Term Development Plan 2011-16

• R&D/S&T Innovation policies▫ Thailand PPPs – National Science , Technology and Innovation Policy

• Industrial policy▫ Uganda & Nepal PPPs to support agro-industrial growth

• Global Partnership Platforms ▫ WEF “New Vision for Agriculture ”, G8 “New alliance for food security”

Legal and Regulatory Framework (1)• Many PPP Laws focus exclusively on large-scale infrastructure

▫ Chile, Colombia, Guatemala

• 2nd generation PPP Laws expand scope to include broader sectors (education, health, agri-infrastructure)▫ Kyrgyzstan Law on PPP 2012▫ Kenya national PPP Bill 2012

• National PPP Policies – provide guidelines for PPP formulation in all sectors▫ Ghana PPP Policy 2011▫ Pakistan PPP Policy 2010▫ Uganda PPP Policy 2010▫ Tanzania PPP Policy 2009

Legal and Regulatory Framework (2)• Other related non-specific PPP legislation with implications for

agri-PPPs:

▫ Public procurement & outsourcing ▫ Decentralizing authority to local government▫ Contract law (contract farming)▫ Land rights and land tenure ▫ Intellectual property law (S&T PPPs)▫ Food safety laws▫ Business/corporations law and investment laws – who can partner?▫ Tax/subsidies/budget law – incentives and concessions▫ Risk mitigation and arbitration laws

• Aim should be to reduce bureaucracy, increase transparency and streamline procedures to encourage private sector participation

Relevance to Pro-Poor Policy Wshop• At national and decentralized level:

▫What policies and strategies are needed to support PPP design, implementation and monitoring

▫What institutions and public sector skills are required to move from policy/theory towards implementation?

• At project level:▫What risk management mechanisms can be built into

the design of PPP projects to protect smallholders?▫What demands should be made on the private

partner to ensure inclusion?▫What role can local government play?

Session 2:Operationalizing Agri-PPPs

Institutional Set-up Options

PPP Institutional ArrangementsCountry Examples of PPP institutional modelsChile and Thailand

Contracting authority (i.e. public authority – national or local authority, or government body that signs contracts)

Pakistan Contracting authority + PPP unit at the provincial level

Kenya Contracting authority + single lead PPP agency + PPP committee

Ghana Contracting authority + cluster of PPP agencies + PPP committee

Peru Contracting authority + single lead PPP agency (existing, expanded mandate) + approving body

Philippines Contracting authority+ single lead PPP agency + cluster of central and local review and approving bodies

Uganda Contracting authority + single lead PPP agency + Cabinet/Ministry of Finance approval

PPP Institutional Options• Select option in line with national PPP Policy/Law

• Can be centralized or decentralized or combination of both▫ Pakistan – MoF, decentralized PPP unit in province

• Linked to sector policy objectives:▫ Thailand contracting authority under MoST▫ Chile under Ministry of Economy

• PPP Agency/Unit as “one-stop-shop”/centre of excellence▫ Policies, skills and know-how to foster PPPs▫ Provides support, advice and oversight to contracting authorities

• Shared responsibilities among ministries & agencies▫ Indonesia Minister for Economic Affairs, State Minister for National

Development Planning, Minister of Agriculture

PPP Programmes – Latin AmericaCountry PPP Programme Programme location

Colombia World Bank supported Agribusiness PPP Programme

Ministry of Agriculture and Rural Development

Ecuador EmprendEcuador – competitiveness of SMEs

Coordinating Ministry for Production, Employment and Competitiveness

PRONERI – Inclusive rural business programme

Ministry of Agriculture, Livestock, Aquaculture and Fisheries

Fondepyme – SME promotion

Ministry of Industry and Productivity

Peru PROSAAMER – rural market support services programme

Agrorural

FondoEmpleo – employment and income generation

Ministry of Labour and Employment Promotion

PPP Programmes – Latin America• Programmes package existing agribusiness public support

services, incentives and instruments

• Channel services towards farmer organizations and small and medium firms • Public services for extension and research• Innovation & training funds• Leverage private sector financial contributions & know-how –

matching grants

• Objectives:• Increase competitiveness of SMEs• Inclusive rural business programmes

• Governance of programmes still requires central approval, yet approval granted in bulk in accordance with programme conditions, not individual PPP projects

PPP Development & Delivery Procedures

Management tools in Agri-PPP agreementsFormal PPP

agreements• Contracts & MoUs• What type of contracts?

• Fixed design, well-defined procedures & criteria

• Demanding bidding and vetting process

• Feasibility analysis (economic, enviro., VCA)

• Business plans• Contract farming• M&E systems

Proposed Design & Implementation Process - Vietnam

Project Proposal •Who? Public authority & investors (unsolicited?)•Appraisal board in MARD

Project Listing •Who? PPP management unit MARD

Feasibility study •Public authority/investors•Appraisal board in MARD

Investor selection •Bid evaluation•Public authorities negotiate and sign, appraisal board approve

Investment certificate •Ministry of Planning and Investment (Central)•Provincial People’s committee (Local)

Outstanding Questions• Does the process fit with the scale of investment?• Has the public good element been defined and

targets quantified?• Value for money assessment included in bidding

process?• M&E framework established that works for both

partners? Corrective action possible?• Pro-poor/smallholder inclusion criteria? E.g.

Indonesia oil palm regulations, contract farming for large-scale investments

• Dispute resolution mechanisms?

Legal forms of Partnership Agreements

Partnership Agreements•Degree of formality: MOUs, formal contracts,

equity arrangements, new companies▫Ad-hoc/donor supported - MOUs▫National PPP Programmes – formal contracts▫PPP companies – China, Pakistan, Philippines▫MI PPPs – typical PPP contract forms – BTO,

BOO, Management contracts

•Trend towards standardized agreements▫Pros - easier to monitor, reduces ambiguity▫Cons – reduces flexibility

Partnership Agreements•Degree of formality linked to soliciting

process▫Solicited according to public priorities – formal

contracts▫Unsolicited – submitted by private partner, ad-

hoc arrangements more likely (MoUs)

•Single versus multiple bilateral contracts with parties

•Aim to distribute risk fairly

PPP Financial Instruments• Matching grants

• Investment guarantee funds▫ Cover against force majeure and failure of public sector to fulfill

obligations

• Project Development facilities▫ Fund costs of proposal development such as feasibility studies

• Viability Gap Funding/VG Schemes▫ Finance investment gaps in PPPs that are economically justified, yet

fall short of financial viability

• Catalytic Funds▫ Provide stimulus funding to private companies & CBOs participating

in agribusiness PPPs

Session 3:Group WorkReadiness of national legal and policy framework

for Agri-PPPs

Session 4:Policy recommendations

& skills required

Important questions• What needs to be done to improve the existing

frameworks?

• How can we ensure agri-PPPs are designed in a way that is inclusive of smallholders and have an impact on the rural poor?

• What further skills are needed by the public sector to support implementation?▫E.g. do skills exist for conducting or interpreting

feasibility studies?▫Designing M&E frameworks suitable measuring joint

outcomes for public and private sector?

Where to next??

Sept 2015Intro to PPPs for risk management

May 2016Consolidating knowledge & analytical skills for policy

????Further analysis?Time for action??

Thank you for your attention!

Marlo.rankin@fao.org

Important Agri-PPP ResourcesFAO 2016 study on Agri-PPPs: An International Reviewhttp://www.fao.org/documents/card/en/c/20e3ff08-df6f-4e48-abd3-037eccdde9df/

Other useful recent resources:PBL, 2015 Public-Private-Partnerships in Development Cooperation – potential and pitfalls for inclusive green growthhttp://www.pbl.nl/sites/default/files/cms/publicaties/PBL_2015-public-private-partnerships-in-development-cooperation-1810.pdf

IFAD, 2016 How to do Public-Private-Producer-Partnerships in Agricultural Value Chains https://www.ifad.org/documents/10180/998af683-200b-4f34-a5cd-fd7ffb999133