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Opinions of Wednesday, 5 July 2017

Columnist: Robert Osei-Kyei

One District One Factory: How feasible is it through the Public Private Partnership concept?

It is important to note that PPP is not just about getting investors to finance public projects It is important to note that PPP is not just about getting investors to finance public projects

During the electoral campaign, the then-presidential candidate for the New Patriotic Party (NPP) and now the President, Nana Addo Dankwa Akufo-Addo expressed strong commitment towards the industrialisation of the Ghanaian economy through the development of a factory in each of the 216 districts in Ghana, dubbed ‘One District One Factory’.

Although this idea received stiff criticisms from the then ruling government, many Ghanaians still believed in this initiative and therefore voted massively for the NPP.

However, one question that was often posed to this initiative was how the ‘One District One Factory’ (1D1F) initiative would be funded, considering the huge government budgetary constraint.

Importantly, the Public-Private Partnership (PPP) concept was the answer given, and this has been emphasised by the Minister for Trade and Industry, Hon. Alan Kyerematen on many platforms.

As a matter of fact, implementing the 1D1F using PPP is a laudable idea and a good innovative approach, but the question is; how far has the PPP concept developed in Ghana and, considering its current status, can the 1D1F be implemented successfully through PPP?

It is important to note that PPP is not just about getting investors to finance public projects as its being carried about currently; it entails proper management structures, well established institutional frameworks, and the coordination of users/ general public.

Notably, the PPP concept was actually initiated by the Kufuor administration in 2004, however, this policy failed to be operationalised. It was then revitalised in 2011 by the Atta Mill’s administration in which a national policy was introduced. Further, a PPP unit (i.e. Public Investment Division) was established under the Ministry of Finance and Economic Planning (MOFEP) to spearhead the implementation of the policy.

In March 2012, the World Bank agreed to support this procurement policy by providing funds for the feasibility studies of some selected projects. In addition, the World Bank was committed to the enactment of a PPP law.

Apparently, since 2011 when the PPP concept officially became operationalised, only one PPP project (the US$115m Sea Water Desalination Plant Project at Nungua) is in operation. There are many other projects which are currently at the preparation stage and are yet to go through the full procurement stage.

In fact, the current PPP environment in Ghana is very immature and weak. Ghana has a weak legal and regulatory framework for PPP arrangement which creates a big avenue for corruption in PPP arrangements.

Further, many public institutions, particularly the district and municipal assemblies, do not have sufficient skilled personnel to handle complex PPP arrangements and negotiations.

Also, the current political system in which every contract engaged in by an incumbent government is seen as ‘evil’ by opposition party demoralises investors’ confidence. The most critical challenge of all is the negative general public perception on private sector participation in public service delivery in Ghana.

These prevailing conditions constitute a serious threat to the successful implementation of the government’s 1D1F initiative through PPP. Indeed, the 1D1F is feasible within the current ecological conditions of the PPP concept on condition that policy makers look beyond the financing aspects and rather consider other critical institutional and management measures such as transparency and competition, accountability, proper project monitoring, affordability, proper risk allocation, external stakeholder management etc.

The current attempts by the NPP administration to implement the 1D1F initiative through PPP seem to overlook the aforementioned critical success impacting issues, and it is important that they critically look at them carefully.

The question is: Within which legal framework on PPP is this large scale 1D1F program being implemented, as the PPP bill has not yet been passed by Parliament?

The PPP law is supposed to form a solid foundation to ensure transparency and accountability for all PPP projects. With the absence of a PPP law, public officials are likely to engage in fraudulent practices as has been experienced in several cases worldwide and with our own example of the STX-Korea housing project deal initiated in 2009.

The PPP bill has already gone through a second reading by Parliament under the previous administration; therefore there should be some efforts by the current administration to speedily pass it into law so that all forms of PPP arrangements including the 1D1F initiative will go through it accordingly.

This will boost the general public’s confidence in PPP deals, and also ensure a more transparent approach in the implementation of the 1D1F policy using PPP.

Another major point is that the approach currently adopted by the government to implement the 1D1F initiative is the use of unsolicited PPP proposals. As a matter of fact, this approach poses a big threat to the future sustainability of the 1D1F initiative.

An unsolicited PPP proposal is where a private developer submits a project idea or business proposal to a public entity to develop a public facility without any prior explicit invitation. Subsequently, the proposal is directly negotiated with the private proponent without going through any competitive tendering process and, of course, always with favourable terms to the investor.

In fact, this approach of implementing PPPs has been internationally criticised for enabling corruption. Unsolicited proposals often offer poor value for money, they tend to favour few private individuals and have low social benefits.

In the U.K. this approach of implementing PPP is not accepted and it has also been condoned by the European Union as they put the government in a poor negotiating position.

Essentially, other governments including South Africa, Taiwan and the Philippines have adopted a more structured approach to handling unsolicited PPP proposals through the enactment of laws and legislations.

Ghana does not have any proper legislation regulating the management of unsolicited PPP proposals, and this exposes the 1D1F initiative (where unsolicited PPP approach is the major method adopted) to corrupt practices, misallocation of risks, and fuels the negative public perception on PPP deals.

Ideally, the government should ensure that Parliament passes the PPP bill, which clearly stipulates how unsolicited PPP proposals should be handled to ensure transparency, competition and accountability.

Otherwise, as it stands now, the future of many 1D1F projects through PPP are uncertain and have the tendency to fail due to bad negotiations, fraud and public agitations.

The best alternative approach, if the government feels that the PPP law may delay the implementation of the 1D1F initiative, is to conduct thorough feasibility studies and prioritize the 1D1F projects (this has to be done in cooperation with the PID/PPP unit) and, thereafter invite investors to bid under a competitive and transparent process for each project.

This will put the government in a good position to negotiate terms which are favourable to the general public.

In as much as Ghanaians need jobs and rapid development, it does not necessarily mean that things have to be done in any inappropriate manner.

We need to use the right approach to employ the PPP initiative to implement the 1D1F to make it sustainable and beneficial.