1. Comments on Public Private Partnerships
Balázs Romhányi
Hungarian Ministry of Finance

2. Important points in the paper
The PPP-idea is theoretically meaningful
But in practice full of traps
Field of government activity matters
Budget rules and procedures matter
What is important in the paper?
the PPP-idea is theoretically meaningful
private sector efficiency
whole of life perspective
value added can override higher financing costs on the private side
but practically full of traps
market imperfections (e.g. shallow supply side)
incomplete contracts because of
great uncertainty
difficulties in measuring and demarcation of risks and responsibilities
high stake
very long term
field of government activity matters
infrastructure is better than pure public goods
budget procedures matter
both value for money and affordability has to be tested
introducing budget rules and procedures is a logical answer
but might invite opportunism compromising either VfM or affordability

3. Can we agree on accounting rules?
Main accounting options:
Pure cash flow accounting
Cost of investment up front and service distributed
Full present value up front
Accounting rules have to depend on the role of the deficit indicator
The role is not to measure something but to give politicians the right incentives to run sound fiscal policy
Answers
NO, because the economies are different
YES, because politicians are all alike
Further options: ..

4. Can PPPs be used as a legitimate commitment device?
Politicians prefer new projects
Social spending is rigid downwards
Politicians only react if there is no room left
Answers
Yes it can because otherwise high VfM will be crowded out by social spending
No because two harms don’t make good and it invites lobby groups
Only if:
Full transparency
Stable social preferences (25 years!) …

5. Can affordability be analyzed without the revenue effects?
Why do we analyze projects by assuming exogenous growth if the very aim of the projects is to help growth?
Answers
YES, because we only compare PPP with pure government investments
NO, but it has to, because
Too much uncertainty
Invites opportunism
NO and NET present value should be calculated
Further options: …

6. THANK YOU