B. Training for PPP Development, Implementation and Management

Michael Funcke-Bartz
CDG
Germany

Background

Carl Duisberg Gesellschaft e.V. (CDG) is an international non-profit training organisation that cooperates with an international network of training institutions to provide practical experience and international exchange programmes for professionals and business leaders around the world. CDG is committed to the search for innovative and forward-looking technologies, systems and strategies, which will help to achieve sustainable development.

Most of CDG's training efforts in the international development cooperation arena are sponsored by the German Federal Ministry for Economic Cooperation and Development and the Governments of the federal states. Other important commissioning bodies for CDG are the Federal Ministry for Education, Science, Research and Technology, and the Ministry for Foreign Affairs. On the international level, CDG receives support from the European Union, UNIDO and the World Bank. CDG's head office is located in Cologne/Germany, but the organisation maintains a nationwide network of branch offices and a growing number of regional coordinators overseas in Harare/Zimbabwe, Lima/Peru, and Manila/Philippines for ASEAN countries.

Because of CDG's close relationships with the private as well as the public sector, PPPs have become increasingly important in CDG's training activities. In the field of infrastructure in urban agglomerations, special emphasis is placed on private sector participation. Even though German companies from the sanitation sector play an important role as cooperative partners and for in-house training, CDG is open to collaborating with other international companies as well.

The CDG-PPPUE Partnership for Training

Since local governments are cannot cope single-handedly with the ever-increasing demand for adequate infrastructure services for their citizens, new approaches are urgently required. Public-private partnerships between local governments and private infrastructure companies are one of the most promising forms. Through PPPs the advantages of the private sector - innovation, access to finance, knowledge of technologies, managerial efficiency and entrepreneurial spirit - are combined with the social responsibility, environmental awareness and local knowledge of the public sector.

This explains why CDG and UNDP's PPPUE decided to cooperate and take advantage of their complementary strengths. UNDP brings to the table extensive operational experience in developing countries derived from its network of over 130 Country Offices, its long term involvement in sustainable development work, particularly with regard to environmental initiatives, and its experience in piloting public-private partnerships. CDG's comparative strengths derive from years of experience with capacity building in the international industrial, environmental and development arenas, as well as in its track record working with the private sector in developing countries. The idea is to use several platforms at different levels in order to build national and regional capacity for PPP development in support of the country activities of the PPPUE and similar initiatives, and to promote the idea of PPP as a tool for improving urban infrastructure services.

The main cooperation project targets decision-makers at the municipal level (mayors, executives) and private enterprises that are responsible for the planning, implementation and operation of urban infrastructure. The objective is to make these key personnel aware of the advantages and disadvantages of private sector participation and enable them to opt for the PPP modality best suited for their context - taking into account criteria for economic efficiency, environmental soundness and socially-balanced development.

The joint project with PPPUE started in 1998 in the Andean Region with a workshop in Lima, Peru that focused on the role of PPPs in managing urban infrastructure. Similar regional activities are planned for the SADC Region (2000), followed by the ASEAN Region (2001).

In each of these three regions, CDG implements a three-step approach designed to introduce PPP concepts and set the stage for the first pilot projects:

Phase I
An Introductory Workshop is held to examine the pros and cons of different PPP options through presentations and discussions of practical PPP experiences within the region. This analysis helps to determine which PPP modalities are best suited for the respective countries and which obstacles might exist within the given legal frameworks. Enterprises and local governments that show real interest in these activities might pass onto Phase II.

Phase II
A South-South Exchange Programme creates an opportunity for learning from PPP examples from around the region. The goal is to ensure that these experiences help to orient national policy vis-à-vis private sector participation in infrastructure development, and to identify bottlenecks that occur while implementing PPPs.

Phase III
Transfer Workshops focus on evaluating experiences gained in the South-South exchanges with implementing an appropriate strategy for the participants' own company which might lead to initial pilot projects.

In addition to these regional Programmes, CDG and UNDP are also working together on other supporting activities. In addition to the Bonn Conference on Public-Private Partnerships for Urban Environmental Services in 1999, the CDG/UNDP partnership will focus on business opportunities for private sector participation in the management of urban infrastructure at an exhibit during the World Exhibition EXPO 2000 at Hanover in October 2000. In order to translate the experience gained on the regional level into practical work at the country level, CDG is also developing specific national training projects, one of which focuses on the Peruvian sanitation sector.

Strengthening Management Capacities of Peruvian Water Utilities

As dictated by Peruvian Law, local governments must ensure that supplies of drinking water and waste water treatment are handled by independent enterprises (Empresas Prestadoras de Servicios - EPS). The weakness of the great majority of these enterprises is closely linked with the problem that their decision makers and personnel are not sufficiently prepared to manage these EPS's in an economically efficient way without forfeiting their environmental and social responsibilities. Additionally, their limited financial resources prevent them from carrying out much-needed investments.

There is now a favourable climate to tackle these problems, however, and the Peruvian government is considering various types of private sector participation that could contribute to the financial stability of the water utilities.

There is still a lot of work needed to create the right enabling conditions for PPPs. Many Peruvian local governments and infrastructure enterprises, for instance, confuse private sector participation with full-scale privatisation, in which assets are transferred from state or municipal ownership to private hands. In fact, this is only one of multiple forms that private sector participation can take. Furthermore, for most relevant international enterprises only booming economies present attractive investment opportunities. This bias makes it difficult for countries like Peru to attract foreign investment.

Peru's efforts have been supported by German Development Cooperation. In addition to the technical and financial cooperation of GTZ and KfW, CDG has developed an advanced professional training project under the name of "Strengthening the Management Capacities of Peruvian Water Utilities," which will support managerial competence training in twenty-six EPS's during the next three years.

The twenty-six Peruvian water supply utilities are located to the north and east of Lima, the capital city. The training project will be undertaken in two phases: In Phase I, key persons from thirteen medium-sized utilities are trained to become "change agents" to coordinate the development process of their enterprises, and to act as "multipliers" who are able to assume consultancy and training responsibilities in their own or in partner enterprises.

In addition, South-South exchange programmes in the Andean region offer representatives from the first group an opportunity to learn from regional experiences. Another suite of training programmes also takes place in Germany, where a year-long course focusing on management skills is offered to young Peruvian professionals to provide them with hands-on opportunities to learn more about the management of German enterprises in the sanitation sector. Strategy meetings with representatives from public and private sanitation organisations in the water and sanitation sector, international development cooperation organisations and Peru's central government also provide a forum for political dialogue. All these activities are practice-oriented and designed to strengthen cooperation between national and international companies in the sanitation sector.

Phase II of the Programme focuses on training and consulting for management level personnel of thirteen other smaller water supply utilities. The "multipliers" who have been trained in the previous phase will aid in the training of these personnel. In order to assure the sustainability of the training effort, CDG will promote PPPs involving local private companies from the German and Peruvian sanitation sectors. Through a number of co-operative efforts with GTZ and KfW, Peruvian utilities have already started to link their activities to the German sanitation sector. At the moment there is a relatively large number of utilities in Germany that are ready to invest and to offer their know-how of global investments, the majority of which are still public or mixed-capital enterprises. As far as their international experience is concerned, they are still in the initial stages. They are therefore ready to participate in small and medium-scale projects, in order to prepare themselves for larger investments and undertakings. CDG is linking these interests to activities in the Peruvian business sector through training, international dialogue and in-house training, and soon an Internet-based communication and information platform will be available to support these activities.

Points for further discussion

• Small and medium-sized utilities are not very attractive for the few global players in the infrastructure sector, but they do offer business opportunities for small and medium-sized private companies.
• In terms of North-South cooperation between public and private partners, both sides need time to prepare for PPP projects. Training and exchanges of personnel can contribute to learning more about the partners and to developing appropriate forms of cooperation.
• A lingering problem for establishing the basis for sound investments is the question of how to collect and disseminate more detailed information about the quality of infrastructure and services for assisting small and medium- sized companies in making investment decisions. While many companies would be interested in PPP projects, they do not have a clear idea about their possible partner enterprises. Facilities that give financial support for analysing the volume of necessary investments and management deficits would be helpful in reducing the risks for private investment.
• Utilities from developing countries that are interested in PPP projects have problems finding neutral consulting services, which would preferably come from experts in their region. These services would help them select among different technical solutions and PPP options; help them design and prepare projects; to make calls for tenders and evaluate offers; and to negotiate contracts.

In some cases, it is necessary to adapt the legal framework on the national level to the needs of PPP projects. In such cases, political dialogue and regional exchanges can open doors to fruitful discussions on private sector participation.

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