1. 
Remaining public investment needs in the face of declining aid flows: what scope for public-private partnerships in BiH? Serban Ghinescu, EBRD 4 March 2003 1

2. PPPs: where can be used, public sector versus PPPs
BiH:
foreign aid is declining, budgets are facing hard constraints
infrastructure is outdated, dilapidating rapidly, inadequate to support economic growth and to serve the citizens
PPPs:
Arrangements between governments and private sector entities to provide public infrastructure and services. Sharing of investment, risk, responsibility and return
Areas:
Power, Roads, Water, Waste Disposal, District Heating, Rail, Urban Transport, Hospitals, Education, Facilities Management, Prisons

3. Advantages and Disadvantages of PPPs to the Public Sector
Significant transfer of risk in:
Construction completion
Design standards
Integration of construction and operation
Responsibility for day-to-day management
Raising and repayment of finance
DISADVANTAGES OF PPPs
Long term contract possibly inflexible
Can be complicated to implement
Require institutional change
Can require changes in law

4. Risks to be retained by the public sector
Political risks: war and political violence, nationalisation and expropriation, change in law, change in tax
Sector specific: usage or volume risk, ongoing need for a facility, off-take from a power station if there is no market
Public sector duties: discipline in a prison, standards of education, universal service obligation in telecommunications

5. Generic constraints Affordability constraints
Inadequacy of legislative and legal framework
Lack of tendering and contracting capacity
Public sector experience and willingness of private investors
Affordability constraints
Counter-party credit risk

6. Challenges for the public sector
Build cross party consensus
PPP’s typically will last for the life of several governments
Become a manager of contracts
Public sector is no longer a procurer of assets but a buyer of services
Allow innovation
Private sector finance is generally more expensive than public sector finance. Value to the public sector accrues from reductions in whole life costs which outweigh incremental financing costs

7. Challenges for the public sector contd.
Provide a stable environment
The private sector needs to be confident of the public sector’s long term commitment
Plan thoroughly
Set clear and realistic goals before starting the process of developing a PPP
Build local capacity
Need to work with international partners and achieve technology transfer

8. Challenges for the public sector contd.
Build implementation capacity
Consider a dedicated task force
Address cross sectoral issues consistently
Get good advice

9. Challenges for the private sector
Build long term relationships with public sector clients
Offer competitive prices and value for money
Foster a long term investment culture

10. The way forward
PPP’s can offer viable and cost effective alternative to the public sector model
PPP’s are not a “cure-all”
A successful PPP programme can bring resources, innovation and commercial enthusiasm to the development of infrastructure