Until 2008, public–private partnerships (PPPs) in Papua New Guinea were implemented on an ad hoc basis without a formal PPP enabling framework in place. In 2008, the Government of Papua New Guinea endorsed the National PPP Policy which provided the principles and the policy framework for PPPs in Papua New Guinea. The National PPP Policy defines PPPs and provides the scope, objective, and principles of the policy. It outlines the institutional framework for governance and accountability in delivering PPPs. It also details the various stages and the process for a PPP project, including development, procurement, implementation and contract management, and termination.
Until 2008, public–private partnerships (PPPs) in Papua New Guinea were implemented on an ad hoc basis without a formal PPP-enabling framework in place. In 2008, the Government of Papua New Guinea endorsed the National PPP Policy which provided the principles and the policy framework for PPPs in the country. The National PPP Policy defines PPPs and provides the scope, objective, and principles of the policy. It outlines the institutional framework for governance and accountability in delivering PPPs. It also details the various stages and the process for a PPP project, including development, procurement, implementation and contract management, and termination.
Based on the National PPP Policy, the National Executive Council approved the Public–Private Partnership Act (PPP Act) in 2014 to provide the legal basis for identifying, preparing, procuring, implementing, and managing PPP projects in Papua New Guinea. The PPP Act provides for the procurement and delivery of infrastructure facilities and services through PPP arrangements, and gives power to certain public bodies to enter into such arrangements.
The PPP Act was passed by the Parliament of Papua New Guinea in September 2014 and gazetted in January 2018. However, the government has not implemented the PPP Act yet, as there are amendments to further strengthen it. These amendments are yet to be circulated for comments and inputs from the public.
The PPP Act provides for the establishment of the PPP Centre, a statutory agency to be established to implement the PPP Act and monitor its enforcement. The PPP Centre would be set up as a “specialist” adviser to the National Executive Council and would be directly accessible by line agencies.
The PPP Centre would determine whether a PPP is the most appropriate mode of developing a project, using methods such as value-for-money assessments based on whole-of-lifecycle costs and public sector comparator benchmarking analysis. The PPP Centre would support line agencies (at the national, provincial, and district levels) through various stages of project preparation and procurement. It is envisaged that projects submitted to the PPP Centre will be pre-approved by the National Executive Council (the cabinet) through inclusion in the proposed National PPP Infrastructure Pipeline (an allocation in the national budget) or by cabinet decision. A PPP Steering Group would serve as the supervisory committee of the PPP Centre. The PPP Centre would not be set up as a decision-making body. Instead, it would coordinate and implement the decisions made by the PPP Steering Group and the National Executive Council (NEC).
The PPP Act excludes mining, gas, and petroleum projects, and all associated development agreements or projects undertaken as part of the government’s tax credit scheme. Infrastructure procurement projects involving a Relevant Public Body,
wherein the value of which exceeds the referral threshold, would automatically qualify for PPP arrangements under the PPP Act. The referral threshold value would be set in the PPP Act regulations. However, there is a general indication that the referral threshold value of a project will be K50 million.
Though the PPP Act and the PPP Regulations are yet to be implemented, in sectors which are already regulated by independent or universal regulators such as the Independent Consumer and Competition Commission (ICCC), including telecommunications, water and power, the PPP agreements must also be in compliance with the ICCC regulations.
There have been various PPP projects developed in Papua New Guinea. The first two PPP projects had reached financial closure long before the introduction of Papua New Guinea’s PPP policy and the recent commencement of Papua New Guinea’s PPP Act. These are the Port Moresby Diesel-Fired Plant in 1996 and the Papua New Guinea (PNG) Water Limited potable water treatment plant in 1997. In 2011, Papua New Guinea’s ICCC awarded a build–own–operate contract and a value-added services license for 15 years to Bemobile Limited, a PNG limited-liability company, to strengthen the country’s backbone infrastructure for telecommunications and to reduce its reliance on the legacy infrastructure of Telikom PNG (the state-owned telecom service provider).
There are also several proposed PPP projects, including the PPL–Ramu II Hydroelectric Power Plant project, the Lae port expansion project, and the Port Moresby (Jacksons) International Airport development, which are at various stages of preparation. In late 2017, a PPP contract was signed for Lae port expansion project. In November 2019, the Port Moresby Power Station was commissioned.
Some of the major challenges associated with PPPs in Papua New Guinea are as follows:
- The PPP-enabling framework in Papua New Guinea needs to be further developed and streamlined. The PPP Act needs to be amended and further strengthened to include provisions for PPP types, timelines for and approvals to be sought through the PPP process, government support to PPPs, dispute resolution mechanism, PPP contract termination provisions, lender security rights and mechanisms, and other relevant provisions.
- The PPP Act needs to be supported by detailed regulations, standard operating procedures, and manuals to provide the relevant tools, frameworks, and guidance for identification, preparation, procurement, and management of PPP projects.
- Presently, there is no operational institution tasked with managing the PPP project development process. Therefore, the PPP Centre needs to be operationalized to fulfill its various functions as stipulated under the PPP Act. Also, the PPP Act has assigned substantial responsibility related to project preparation and procurement to the PPP Centre. The project preparation and procurement responsibilities of the Relevant Public Body need to be comprehensively defined and the functions of the PPP Centre need to be further streamlined.
- Presently, there is no database for PPP projects that have been procured, and commercially and financially closed. Similarly, there is no pipeline of PPP projects at various stages of preparation, structuring, or procurement. Hence, a national database for PPP projects and a PPP project pipeline should be prepared and updated annually or semiannually.
- The institutional capacity to develop, procure, and implement PPPs for the various Relevant Public Bodies in Papua New Guinea is limited. Also, the ability of the Government of Papua New Guinea to fund new infrastructure is limited, resulting into heavy reliance on assistance from the international development banks. As a result, very few PPPs have been developed in the country to date. Thus, there is a need for building institutional capacity to identify, prepare, structure, procure, and manage PPPs that are at par with international standards.
- The funding sources for project preparation and development, which could be tapped by the Relevant Public Bodies, are not clearly defined; and such funding is availed on an ad hoc basis. Hence, there is a need to clearly define the funding sources available for the relevant public bodies and the eligibility criteria for availing such funding.
- There is also a need to develop enabling institutions to support PPPs such as credit rating agencies for rating PPPs, development finance institutions to provide long-term financing to PPPs, and capital market and derivative market institutions and instruments to help PPPs raise funds from retail and international investors.
- Other challenges include the lack of provision for dispute resolution mechanisms, such as an independent tribunal for settling PPP disputes. Community opposition to PPPs is another key challenge. This reflects a lack of consultation with affected communities, as well as issues on potential exploitation of communities when local governments partner with private companies that dominate key sectors of the local economy in rural and isolated regions. These need to be adequately addressed through appropriate mechanisms and processes.
