Albania has one of the largest infrastructure gaps in the Western Balkan region. Yet, high public debt and limited project management capacity in the public sector have created a need for looking beyond traditional means to provide society with infrastructure. In the last two decades, successive Albanian governments have increasingly resorted to PPPs as the most feasible way to build roads, energy infrastructure, hospitals and schools among other infrastructure.
PPPs offer many benefits, including crowding-in private sector finance and expertise, while allocating risks to the party best equipped to handle them. Currently, Albania boasts a portfolio of over 200 PPPs, 186 in energy with the rest in transport, health, environment and agriculture. This portfolio represents investments that exceed 30 percent of GDP half of which is actually foreign direct investment in the energy sector.
In a context of constrained fiscal space and a rule that caps the stock of PPP fiscal commitments at 5 percent of the general government revenues, PPPs represent many benefits including the allocation of risk to the party best equipped to handle it. However, the growing PPP portfolio in Albania has given rise to the issue of the potential fiscal risks from PPP contracts. It is therefore vital that Albania continue to bolster its PPP management framework. The objective of a strong monitoring and disclosure framework for PPPs is, precisely, to address fiscal risks and ensure value-for-money.
We want to meet several objectives:
- Better management of fiscal risks – a centralized framework gives a bird’s-eye view to monitor aggregate PPP budget commitments and contingent liabilities across government contracting authorities, ensuring that new PPPs remain consistent with overall fiscal sustainability.
- Timely intervention in underperforming projects – a standardized monitoring framework ensures that contracting authorities systematically review the performance of their PPPs and that they intervene quickly in case of underperformance.
- Learning from successes and failures – monitoring enables parties to learn what works and what doesn’t across the government portfolio, strengthening the quality of future PPP designs.
- Increasing government accountability and value-for-money – government becomes more accountable to ensure that PPPs meet value-for-money targets.
- Strengthening market confidence – transparency allows markets to more accurately assess the fiscal sustainability of the government’s PPP portfolio, strengthening investor confidence.
In 2019, recognizing the importance of PPP monitoring, the government of Albania, with technical assistance from the World Bank’s Macroeconomics, Trade & Investment and the Infrastructure Finance, PPPs & Guarantees practices, has therefore designed a new comprehensive PPP monitoring framework.
Beginning with the 2019 budget execution instruction, contracting authorities across government are required to submit to the Ministry of Finance and Economy regular and systematic information on the current and expected future performance of their PPPs. PPP risk analysis follows the framework set out by the World Bank-IMF PPP Fiscal Risk Assessment Model (PFRAM). The Ministry of Finance and Economy will use these regular submissions to publish a detailed annual report on the performance of Albania’s PPPs. This report will outline not only the general performance of the portfolio, but also do deep-dives on the performance of the most strategic infrastructure projects, including their efficacy at service delivery—as well as any potential risks.
As is evidenced by the table below, the frequency, institutional arrangements, capacity, and protocols needed to implement such a framework vary from country to country, reflecting the local legislative, political, and institutional context. Nonetheless, all approaches reflect the fundamental insight that a formal monitoring framework is an important step towards managing fiscal risks from PPPs and ensuring that projects deliver value-for-money for the public.
|
Country Example |
India |
Philippines |
Chile |
Croatia |
South Africa |
|
Roles |
|||||
|
Unit for PPP monitoring designated in each contracting authority |
Yes |
Yes |
Yes |
Yes |
Yes |
|
Central PPP monitoring unit for the Government designated |
Yes |
Yes |
Yes |
Yes |
Yes |
|
Location of the central PPP monitoring unit |
National Planning Commission |
National Economic and Development Authority |
Ministry of Public Works |
Agency for Investments and Competitiveness |
National Treasury |
|
Is the staff of the central PPP monitoring unit solely dedicated to monitoring? |
Yes |
Monitoring + implementation |
Yes |
Yes |
Monitoring + implementation |
|
Speciation of qualifications needed by staff needed in central PPP monitoring unit |
Yes |
Yes |
Yes |
Yes |
Yes |
|
Responsibilities |
|||||
|
Frequency of reporting from PPP to contracting authority |
Monthly |
Monthly |
Ongoing |
Ongoing |
Ongoing |
|
Template for reporting of PPPs to contracting authority specified in national guideline |
Yes |
Yes |
Yes |
Yes |
Yes |
|
Frequency of reporting from contracting authority to central PPP monitoring unit |
Quarterly |
Quarterly |
N/A |
N/A |
Ongoing |
|
Template for reporting of contracting authority to central PPP monitoring unit specified in national guideline |
Yes |
Yes |
Yes |
N/A |
Yes |
|
Frequency of consolidated reporting by the central PPP monitoring unit |
Quarterly |
Yearly |
Quarterly |
N/A |
Yearly |
|
Disclosure of the consolidated PPP monitoring report |
No disclosure |
Disclosure |
Disclosure |
N/A |
Disclosure |
|
Frequency of disclosure of fiscal risks statement, including on PPPs, by the Ministry responsible for Finance |
N/A |
N/A |
N/A |
N/A |
Yearly |
|
Content of consolidated PPP monitoring report |
|||||
|
Summary of signed PPP portfolio: no of contracts and value by sector and project status |
Yes |
Yes |
Yes |
N/A |
Yes |
|
Baseline projection of PPP investment and budget commitments for already signed projects by year |
Yes |
Yes |
Yes |
N/A |
Yes |
|
If baseline projections are presented, is a project-by-project breakdown available? |
Yes |
Yes |
Yes |
N/A |
In contracting authority |
|
Section highlighting operation statistics in key sectors (traffic on toll roads, customer satisfaction etc.) |
Yes |
Unclear information |
Yes |
N/A |
In contracting authority |
|
Discussion of key performance outliers in the signed PPP portfolio (highlighting successes and setbacks) |
Yes |
Yes |
Yes |
N/A |
In contracting authority |
|
Analysis of fiscal risks for key at-risk PPP projects of the Government |
No |
No |
No |
N/A |
Yes |
|
Section describing plans for future PPPs to be signed |
Yes |
Yes |
Yes |
N/A |
In contracting authority |
|
Useful links |
|||||
|
Link to website |
|||||
Source: Technical Assistance Recommendations on PPP Monitoring Framework for the Government of Albania.
Where does the government of Albania go from here? Its PPP monitoring and disclosure framework will gradually improve over the coming years, as technical staff gain more hands-on experience in monitoring PPPs, monitoring procedures are further anchored in the regular operations of government, and the framework is further fine-tuned to reflect lessons learned. The evolution of this process towards more transparency and accountability will include continuing to advise the government on the next phase of disclosure, which would include a platform widely available to the public.
Do you have experience to share about PPP disclosure frameworks or want additional information? Feel free to reach out in the comments section.
Technical assistance has been financed through a SAFE Trust Fund supported by the EU and the Swiss Confederation.
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Great achievements for Albania as outlined above, but at what expense? As a procurement specialist and professional civil engineer, the right skilled and professional human resource in negotiating value for money PPP contracts and implementation are key aspects. The monitoring and evaluation activities are symptoms but not route causes for failed or exorbitantly implemented project at the expense of Albanian citizens. Even monitoring framework alone will need qualified personnel to implement.
It would be prudent to build local capacity in PPP and procurement fields for enhanced negotiation and taking ownership of the projects processes; in monitoring and evaluation skills; operations (projects) management skills as these may be the reasons Albanians are not involved fully in the projects.
Undoubtedly, the enabling environment for the effective implementation of PPPs has a lot of components of which monitoring and evaluation is just one part.
The government has made an important step in recognizing the need for such a function in a centralized place such as the Ministry of Finance and Economy and that’s a good start. This blog is the highlight of just part of the story. For sure, improvements will have to be made even in the implementation of this PPP Monitoring Framework and there are other efforts to improve not just monitoring but also project preparation and making sure that PPPs are designed sustainably to ensure value-for-money and service delivery.
As you mentioned, capacity building at all levels needs to be worked on. Just as an example, as part of this technical assistance the WB trained not only the central unit in charge of monitoring PPPs within the MoFE but more importantly the contracting authorities and technical people that sit closest to the project to make sure their inputs are relevant and of good quality.
We can also confidently say, that the government is very conscious of the capacity that still remains to be built at all stages of PPPs (prioritization and pipeline development, project preparation and structuring, and contract management).
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