Language: English

Original: English

/ AFRICAN DEVELOPMENT BANK

Grant Proposal for Financing under the MENA TRANSITIONAL FUND: Operationalizing Public Private Partnership in Tunisia

COUNTRY: Tunisia

Questions on this document are to be addressed to / K. Mhirsi, Team Leader, Chief Invesment Officer, OPSM
V. Castel, Team Leader, Principal Economist ORNA
M Mandaba, Senior Invesment Officer, OPSM
K. Abderrahim, Economist, ORNA
K.. Ammar, Economist, OSGE
T. Anvaripour, Manager, OPSM.2
J. Kolster, Director ORNA

PROJECT DOCUMENT

MENA TRANSITION FUND

Operationalizing Public Private Partnership in Tunisia

1. Introduction

1.1 Background Information

Tunisia lags behind in the use of public-private partnerships (PPPs) to implement public policies. Effective & efficient PPPs are uncommon (airport, power plant, with several attempts in the late 2000s - desalination plant, sewage treatment plants), and are mostly designed as concessions. Hence, almost all essential public services are still delivered by the state or public enterprises. The reasons for the relatively low use of PPPs under the former regime are diverse and include: the existence of efficient public operators; the willingness of the former regime to maintain a tight control over public services regulation and delivery; a relatively narrow legal environment and a lack of transparency and good governance at the state and government.

After the revolution the new Tunisian authorities expressed their willingness to promote the use of such partnerships, with the aim, among others, to lighten the state investment burden, to improve public and private governance, to improve the quality of service delivery, to improve infrastructure maintenance and to increase foreign direct investment. In this context a new law has been prepared during the course of the year 2012. The revised law on Public-Private Partnerships is expected to be adopted by mid-2013 (and modifying the Decree n° 2008-2965 dated 8 September 2008, relating to the creation of Unit for the monitoring of concessions and all types of PPPs). The law should provide a legal framework for Public-Private Partnerships (PPPs) and should enable the Government to better leverage the private sector financing and development of economic and social infrastructure projects. In parallel to the finalization and adoption of the new PPP law, Tunisia critically needs to embark on operationalizing this reform in a context where PPPs knowledge is relatively limited nationally. The establishment of a specific unit – which will be a foundation for good governance and expertise in this specific field - is critical. Indeed, the increasing willingness (and pressure) of the private sector to engage on this front in Tunisia could potentially cause distortions and represents a risk if not managed properly.

1.2 Project Objectives

The objective of the project is to support the Government in operationalizing the new PPP law and implementation decrees, expected to have been adopted by April 2013, in a manner which will promote transparency, efficiency and effectiveness of public spending, and help the government of Tunisia in meeting its public policy objectives (economic transformation, job creation, nature of services and sectors covered, balanced development in the country, attracting Foreign Direct Investments, nature of the partnerships established). The proposed project should enable the rapid implementation of a number of PPP transactions so as to deliver tangible results and achieve quick wins (learning by doing and reassuring investors foreign and local). The project will ensure that PPPs are undertaken for reasons of value for money and are based on the appropriate skills, structures and tools. The project will build on experiences and best practices throughout the world.

1.3 Regional Department responsible for preparing the Request

The department responsible for the preparation of this project is the Regional Department for North Africa A (ORNA) of the AfDB.

1.4 Justification for the use of resources:

The Interim Government has adopted an economic and social development agenda based on the implementation of far-reaching policy reforms to meet the aspirations of the revolution as well as sector policies centered on major infrastructure projects and the implementation of reforms to transform Tunisia's development model. This plan · the Jasmine Plan - has been articulated along a three-pronged approach: (i) Post-revolution crisis management and political reform, (ii) carrying out the transition towards democracy, and (iii) setting forth the conditions for sustained social and economic development in the medium term.More specifically under pillar (iii) the Plan indicates that in addition to the short term economic and social emergency measures initiated by the Government (job-support programs, enhanced financial support for social and regional development, assistance to those enterprises that were adversely affected by social disturbances, as well as various fiscal incentives aimed at reactivating the economy), the interim Government isconducting a complete overhaul of the regulatory frameworks pertaining to microfinance, private equity, Public Private Partnership (‘PPP’), and SMEs in support of the in view of their immediate impact on job creation and on bolstering innovation, R&D and investment in human capital. For the latter these will include the development of a technological infrastructure and encouraging the creation of a knowledge-based economy. The GoT’s Plan makes in this regard reference to a National Initiative for Industrial and Technological Development in cooperation with the private sector setting forth 80 measures and actions aimed at bolstering the technological content of the Tunisian economy (highlighting the urgent need for a revised PPP law).

In this context a new law has been prepared during the course of the year 2012 with the support of the donor community and more specifically the EU. The revised law on Public-Private Partnerships is expected to be adopted by mid-2013 (and modifying the Decree n° 2008-2965 dated 8 September 2008, relating to the creation of Unit for the monitoring of concessions and all types of PPPs). The law should provide a legal framework for Public-Private Partnerships (PPPs) and should enable the Government to better leverage the private sector financing and development of economic and social infrastructure projects.

The proposed project will contribute to the implementation of the above mentioned economic and social development agenda by supporting the implementation of the PPP reform in Tunisia and helping (i) strengthening governance in the delivery of public services and the design of PPP contract, (ii) increasing public investment efficiency, and (iii) stimulating job creation and economic sophistication.In addition, the proposed projectencourages South-South knowledge exchange, namely by way of twinning arrangements, staff exchange and case studies involving countries having faced similar challenges (Egypt, India, Senegal, Mauritius).

  1. Project Description

2.1Description of activities for which resources are requested

The development and implementation of well-structured and balanced PPP implies 1) identifying the key challenges in the current situation, 2) training and sensitizing Government officials on PPP principles, 3) implementing a systematic and transparent selection and approval process, 4) applying rigorous and standardized quantitative and qualitative methods in order to 5) achieve bankable, balanced and sustainable models.

The proposed project (operationalization of the PPP law) addresses the above mentioned challenges through an integrated approach which will look at 1) the definition of the policy and institutional framework, 2) the establishment of a PPP Unit, 3) the development of in-house capacity, 4) the identification and preparation of PPP pilot projects, 5) the implementation of a consultation and communication strategy and 6) program management.

The proposed project will be structured in two phases. The first phase, subject of the present application, will span over a period of about two years. The subsequent phase will depend on the success of the first phase and will primarily focus on the identification and preparation of additional pilot projects.

The proposed project will use two sources of financing: The Middle Income Country Technical Assistance Fund (MIC TAF) hosted by the AfDB and the MENA Transition Fund (MENA TF).

The MIC TAF resources will be Government executed. These resources will be used to directly support GoT’s capacity in taking the lead for the implementation of components 1-A, 2-A, 3-A and 5-A. The services of a firm will be acquired competitively in this regard.

The MENA TF resources will be both Government and OECD executed. These resources will be used to: i) directly support GoT’s capacity in taking the lead for the implementation of components 4 and 6. The services of a firm will be acquired competitively in this regard;ii) implement the activities planned for components 1-B, 2-B, 3-B and 5-B which will be executedby the OECD. For these components the OCED will mobilized its expertise to advise the GoT and strengthened the work carried by the Tunisian authorities and the firm recruited using MIC TAF resources.

Component 1: PPP policy and institutional framework

This component will be designed to develop fundamental aspects of Tunisia’s PPP policy and institutional frameworkand will be jointly executed by the GoT (using MIC TAF resources) and the OECD (using MENA-TF resources).

Component 1-A: Activities executed by the GoT (MIC TAF)

The GoT executed activities, funded the MIC TAF, consist in supporting the Tunisian authorities develop a PPP policy and institutional framework. An advisory firm will be competitively selected to undertake this task.

The Overall PPP framework must ensure policy coherence. Consequently the clarity and presence of key institutional roles and responsibilities will enable the implementation of concrete PPPs within a regulatory environment that is responsive and clear. Best practices from various countries’ experiences indicate that in order to secure value for money from PPPs, a number of central ministries and authorities must have clear policies, roles and responsibilities regarding PPPs. Key institutions include the Ministry of Finance, the Chief Executive, the Supreme Audit Institution, the relevant procuring authorities, the PPP Unit, the relevant economic and social regulators. Of importance is also the interaction and interface between the State and civil society (private sector, consumers associations and labor unions).

The effort will focus on:

  • The state level (interface with sector ministries, cross-cutting ministries, the ministry of finance and regulatory agencies)
  • The local level (region and municipalities): identification of need and communication with central authorities
  • The broader policy framework: Beyond the PPP Law itself, the implementation of Tunisia’s PPP policy framework will rely on the coherence of the PPP Law with broader investment regulations, as well as with other relevant legal and regulatory provisions (such as laws governing concessions, specific economic sectors, procurement and competition). Competent public bodies should assess this broader policy framework.
  • Regulations that may follow on the PPP Law will also be an integral part of the PPP policy and institutional framework.

The PPP Policy will cover, inter alia, the decision making process. Investment projects should be prioritized at the political level. The decision to pursue a PPP should be integrated in general infrastructure investment policy so that it is clear which investment method is likely to yield most value for money and that there is a transfer of risks to those that manage them best. The Ministry of Finance should play a key role as a PPP gatekeeper ensuring the project represents value for money, is affordable and that the overall investment envelope is sustainable.

This component could be reinforcedby diagnostic missions composed of experts and peers from other developing countries recognized for having successfully implemented and operationalized PPP units. Such countries could include India, Senegal and South Africa.

Component 1-B: Activities executed by the OECD (MENA TF)

The activities executed by the GoT will be reinforced by drawing inputs and lessons learned from OECD countries where PPP Framework Reviews and/or investment policy reviews were recently undertaken and recommendations on PPP public governance gathered.

The OECD executed activities, funded by the MENA TF, will include:

  • The production of an analytic report on the PPP legal framework in Tunisia and the identification of a number of reforms aiming at achieving greater policy coherence in the administration. The report will examine theconformity of the legislative framework (including procurement law, competition law, regulations per infrastructure sub-sector, international investment commitments etc.) and the proposed PPP law. Based on similar exercises undertaken in many developing and emerging economies via the OECD Investment Policy Reviews, this effort will be undertaken with the active participation of local stakeholders. The iterative review process will include a questionnaire shared across relevant government agencies as well as the private sector, together with joint scoping and fact-finding meetings. This will encourage greater consultation and coherence for PPPs across all relevant stakeholders.
  • Preparation of the above report will include several missions (for the purposes of scoping, fact-finding, and sharing and discussing results), as well as an all-stakeholder workshop where recommendations of the report are synthesized and presented for feedback. The aim of the workshop will be for stakeholders to discuss and agree on priorities, timeline and responsibilities for implementation of main recommendations (with lead agencies etc.)
  • The production and high level dissemination of analytic report contrasting the current institutional set up in Tunisia to current best practice in OECD countries. It will make specific recommendations as to how to reform and enhance capacity in order to secure a smooth pipeline and value for money. The report will discuss the multiplicity of functions and structures that need to be in place for PPPs to work.
  • Preparation of the above report will include several missions (for scoping and analytical work), as well as one follow-up training workshop for the high-level launch of the report (including a side workshop for high-level officials, focused on recommendations and their implementation).

Component 2: Establishing the PPP Unit

Building on the PPP Policy and institutional framework, the second component will help Tunisian authorities establish the PPP Unit and design its operating model.This component will be jointly executed by the GoT (using MIC TAF resources) and the OECD (using MENA TF resources).

Component 2-A: Activities executed by the GoT (MIC TAF)

The GoT executed activities, funded the MIC TAF will consist in establishing the PPP Unit for which advisory services will be acquired competitively to assist the Tunisian authorities.

In particular, such advisory work shall:

  • Propose an organization and management structure for the PPP Unit, staffing requirements, skills requirements and job descriptions. The PPP skill mix at the PPP Unit being a key success factor. This can notably draw on best-practices identified in PPP Units across developing and OECD countries (for instance as analyzed in depth by the OECD Directorate for Public Governance and Territorial Development).
  • Assist the Ministry in the recruitment of staff for the PPP Unit;
  • Advise the Tunisian authorities on the most efficient relationship between the PPP Unit, Line Ministries, local authorities and civil society;
  • Prepare the documents necessary to guide the implementation of the PPP Unit, including PPP toolkit, draft procedures and operating manuals. This will cover the identification of : eligibility and selection criteria; preparation procedures; contractual and financial structuring principles; procurement rules and processes;
  • Develop an indicative budget for the PPP Unit, and recommendations on how this budget is to be funded;
  • Develop pro forma initial Standard PPP Bidding Documents;
  • Assist the Ministry in defining information system requirements for the purpose of establishing the PPP Unit. Indeed, the design of the toolkit and operating manuals will include knowledge documents, guidelines, methodologies but also an information technology (IT) component which will comprise software, intelligent databases and data-room applications in order to efficiently prepare projects but also manage transactions in the long term and collect data to measure key performance indicators and keep an institutional memory and build on lessons learnt on each transaction.

Component 2B: Activities executed by the OECD (MENA TF)

The activities executed by the GoT will be reinforced by drawing inputs and lessons learned from OECD countries and will comprise the development of a report analyzing the current budgetary framework with regards to appropriation process for capital investment. Based on the best practices in OECD countries with regards to budgeting and appropriating for PPPs and capital investment, the report will suggest suitable institutional and procedural changes. The report will also touch on key issues such as how to assess affordability, transparency and good accounting practices. Preparation of the report will involve several missions for the purpose of scoping and analytical work.