AlV: The potential of PPP.

(From The Slovak Spectator)

Continued from pg 7

TSS: There are voices calling for a new wave of cooperation between governments and the global financial services sector if they want to create alternative sources of capital. What forms should such cooperation take?

AlV: Alternative sources of capital are in fact different types of public-private partnership [PPP] projects, which represent different interconnections of private and public resources. The main difference is that it is not a classical loan or bond but we rather talk about different long-term relation, for example concessions for running the highway operation, construction of highways, waterworks or other forms.

For example, the pension fund management companies in fact have resources and perhaps it would be desirable if these resources were working. If the government was reasonable, it would enter a dialogue with these companies not by forcing them but rather inviting them to cooperate on a reasonable and commercially defensible basis with the option that the money would be used for unambiguously long-term projects. We are not talking about any short term projects here, but considering the fact that there is a long-term saving in question, which are investments into infrastructure or modernisation for example. These are options which have not been widely used in Slovakia so far, which is a pity. Slovakia does not have much experience with PPP projects. There isn't a single finished PPP project or one in a reasonable phase for that matter. But it does not mean that we have to be afraid to go into such projects. That said, one also must add that even based on foreign experiences PPP projects are a huge source of corruption abroad. It is the greatest negative of this form. Sometimes the private firms channel away money from the state. However it is the state's fault that it is unable to guard these projects.

TSS: Could we look at the PPP projects as a form of outsourcing?

AlV: Yes, we could say that. However, when we talk about PPP projects the variations are quite huge and if we take two projects, we are unlikely to find two identical projects. The advantage for the state, which in some ways too has limited capacities, is in the fact that it can access these capacities through PPP. The state does not have construction capacities; it has certain companies which manage highways, but these also have limited capacities. So all in all, for the state it is advantageous that these firms or the private partners in PPP projects are often firms which have international experiences with the given project, when for example it comes to toll collection, highway construction or the operation of highways. These are all large firms with huge teams of people and developed systems, software, know-how etc. In many cases it means that the state, by using this form, gives up part of the profit, but then it can gain a well functioning project. Then of course the success depends on how the projects are tuned.