A Recommended Assessment Method During The Preparatory Stage

Author : Harun al-Rasyid Lubis, Nik Nasir Majid

Public Private Partnership (PPP) is known as a cooperative venture between public and private sectors, built on the expertise of each partner that best meets clearly defined public services through appropriate allocation of resources, risks and rewards. Many ASEAN countries are now adopting this approach as it helps to accelerate infrastructure development while at the time minimizes its fiscal impact. However, recent developments in the financial market and the trend towards global convergence in accounting standard are having major impact on PPP implementation. The argument that PPP can address budgetary constraint is now being challenged as Government is expected to commit resources either directly or on contingent basis to ensure project is financially viable. Hence, PPP has to be rationalized on the basis of value for money (VfM). For VfM to be realized project has to begin on a right footing and this requires robust assessment framework. This paper is approaching the issue by proposing a framework of comparing the cost of PPP project against what it would cost the Government if it is implemented through conventional approach. In this manner it can be ascertained that the option chosen fulfils the three VfM criteria of economy, efficiency and effectiveness. For ASEAN countries, there are challenges in adopting this approach and these include institutional capability and other enablers such as information availability. These challenges are not insurmountable. Using the proposed assessment framework as a guide to chart program of work for capability enhancement, ASEAN countries will be in the position to reap the full value of PPP program.

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