Environmental Engineering Reference
In-Depth Information
1.3.6 Disadvantages of PPPs
PPP-specific regulations do not exist in many countries. A long negotiation phase
and increasing costs are often connected with PPPs.
142
This creates uncertainties in
relation to the regulatory framework and, due to the lengthy contract period, it can
be subject to law changes enacted by a newly elected government.
143
The drive for economic efficiency may affect the quality and performance of the
project, and weaken democracy in the region, because all decisions concerning the
service are made in the private company
s headquarters, far away from the affected
region.
144
In terms of project finance, the private sector has higher borrowing costs
than the government.
145
It therefore comes down to a comparison between the
efficiency of the private sector operating a PPP and the higher cost of borrowing
money.
146
Corruption may also occur at almost every stage of a PPP: from the
consultation phase, to the tender phase, to the execution phase.
147
Moreover,
corruption may lead to public skepticism and subsequently to doubts as to the
integrity of the whole PPP process.
148
Although off-balance sheet treatment is convenient for the local state because it
means that the long-term PPP project does not appear in its budget,
149
this may lead
to the government purposely choosing a PPP to avoid any appearance of costs
within its annual budget.
150
As this only works if the state has no costs at all, off-
balance sheet treatments are not advisable, since the private sector cannot guarantee
the success of the project.
151
The host state should be aware that a PPP will limit the
state
'
s future budget flexibility.
152
'
142
Ahadzi and Bowles (
2004
), 967 (971); cf. Davies and Eustice (
2011
), 30; cf. Roquette/Butcher
in Roquette and Otto (
2005
), F. Public-Private Partnership III para 24.
143
Straßburg (
1996
), 29 (38-39).
144
Pfaffhausen (
2008
), 95 (97 and 101); Importance to maintain the level of service, in: Davies
and Eustice (
2011
), 25.
145
Jonas and Paulsen (
2007
), 13 (21); Roquette/Butcher in Roquette and Otto (
2005
), F. Public-
Private Partnership III para 21; Corbacho and Schwartz (
2008
), 85 (88); Yescombe (
2007
), 18.
146
Irwin (
2008
), 105 (107).
147
Christiansen (
2008
), 143 (151); OECD (
2008
), 124.
148
Christiansen (
2008
), 143 (151).
149
Corbacho and Schwartz (
2008
), 85 (85); Davies and Eustice (
2011
), 26; cf. Hemming (
2008
),
235 (235); Schoeltzke and Claus (
2007
), 133 (134).
150
Corbacho and Schwartz (
2008
), 85 (89).
151
Possible state liabilities, in: Corbacho and Schwartz (
2008
), 85 (89); Possible state guarantees,
in: Hemming (
2006
), 9; Hemming (
2008
), 235 (239); Kumaraswamy and Zhang (
2001
), 195 (200).
152
Irwin (
2008
), 105 (106).
