PPP risk provisions drafted

Risk- and return-sharing provisions will be included in an amended draft bill of the Private Investment in State Undertakings Act, aiming to ease investor concerns over joint investments under the Public Private Partnership (PPP).

Risk evaluation for PPP projects is difficult and inaccurate, making it possible for state agencies to either overstate or understate risks, said Ekniti Nitithanprapas, director-general of the State Enterprise Policy Office (Sepo). This imprecision discourages investors, especially foreigners, from making a joint investment with the government.

Under t he Private Investment in State Undertakings Act 2013, either the private or the public sector must take all risks associated with PPP projects, as the act does not state risk- and return-sharing principles.

The Purple and Blue Line electric railways are good examples, Mr Ekniti said. The Purple Line is a gross-cost contract requiring the government to shoulder risks if ridership is lower than expected, while the Blue Line is a net-cost contract, requiring the private sector to take such risks.

“The real PPP is sharing risk and return,” Mr Ekniti said.

The concept of sharing risk and return has been adopted for PPP projects in several countries, including Britain, Australia and New Zealand.

Without a clear statement of the concept of sharing risk and return, state officials are in a difficult position, Mr Ekniti said.

He said risk and return sharing will also improve the transparency of joint investment between the private and public sectors, as sharing risk and return eliminates worries as to whether the contract benefits the private sector.

Although the Private Investment in State Undertakings Act 2013 has been enforced in recent years, the law stipulates PPP process details rather than joint investment processes, Mr Ekniti said.

Sepo can shorten the PPP vetting process to nine months from 20 by integrating collaboration among related state agencies, he said.

With state budget constraints, accelerating joint investment under PPP projects is crucial to achieve the 12th Economic and Social Development Plan, which requires PPP worth 47 billion baht each year.

The new draft with the risk- and return-sharing provisions will seek Finance Minister Apisak Tantivorawong’s approval this month and go before the cabinet by July.