Governance

UNDP Definition of Governance:

"The exercise of political, economic and administrative authority in the management of a country's affairs at all levels. Governance comprises the complex mechanisms, processes, and institutions through which citizens and groups articulate their interests, mediate their differences, and exercise their legal rights and obligations."

"Good governance is among other things participatory, transparent and accountable. It is also effective and equitable and it promotes the rule of law. Good governance assures that political, social and economic priorities are based on broad consensus in society and that the voices of the poorest and the most vulnerable are heard in decision-making over the allocation of development resources."

Impact of Country/Municipality Governance on the Formation of Public-Private Partnerships

Generally, the more honest, democratic and dynamic the governance system, the more successful a partnership with the private sector. Key factors include:

1. Integrity (i.e. level of corruption)
2. Organisational structure (i.e. non-hierarchical vs. hierarchical, democratic vs. authoritarian)
3. Leadership
4. Management Systems: (relationship management is essential for successful implementation)
5. Ownership.

Governance Policies that Support PPPs

• Early consultation and involvement of both parties
• Voluntary participation. No imposition by public authorities
• Legal and cultural enforceability of all agreements
• Identification and selection of an intermediary to broker public-private partnerships.

Governance Policies that Impede PPPs

• Too short a time horizon for establishing and implementing partnership
• Power differential in representatives (i.e., Executives at different levels)
• Inflexibility in changing strategies and tactics
• Slow or uneven progress in market reforms may impede the involvement and commitment of the private sector
• Slow progress in decentralization of government reforms may impede the authority of local governments, limit their autonomy, and reduce their capacity to access financial resources. This can be a critical stumbling block because many (if not most) PPPs occur at a local level and inevitably require the involvement of local government.
• Legal authority and the financial capacity of municipalities to attract private investment may well be the biggest barrier to progress outside of capital cities. Many countries restrict the legal authority of municipalities to raise money directly. Even where they can, their financial strength is such that many private investors will only come into projects backed by guarantees from the national government. Finally, where large capital investments are needed, amalgamating a number of smaller towns into one service area makes sense from a financial point of view, but can raise virtually insurmountable political issues.
• Poor communication. Many different parties drawn from the state, the private sector or civil society can serve as users, providers and regulators of infrastructure service. If the communication between them does not occur, the project is likely either to fail or fall well short of its potential. The national sewerage concession in Malaysia (the Indah Water Konsortium), for example, has faced serious difficulties as a result of inadequate dialog with users. In Argentina, privatisation of the Buenos Aires water system requires re-negotiation to correct inadequate opportunities for dialog between the regulator and the provider on the most efficient way to meet applicable standards.

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