By Anaís Alcántara and Enrique de Marchena
Since February 20, 2020, the Dominican Republic has a new regulatory framework that incorporates the figure of Public-Private Partnerships (PPPs) as a cooperation mechanism between the State and the private sector to promote quality public service infrastructures. It is law 47-20 of APP.
Article 1 embodies the purpose of this law, namely, “to establish a regulatory framework that regulates the initiation, selection, award, contracting, execution, monitoring and extinction of public-private partnerships”. Two types of PPPs are distinguished: public initiative and private initiative, depending on who takes the initiative.
This type of association aims to overcome the usual budgetary constraints that overwhelm the State, guarantee the flow of investment, and thereby achieve a sustained and progressive development of the national economy, which in turn translates into an increase in social wellbeing.
PPPs are aimed at developing infrastructure projects without compromising the State’s borrowing capacity, so it is common for the private sector to benefit from multilateral bank financing through the Project Finance structure. While not all infrastructure investments are financed that way, it is quite widely used as it relies primarily on project cash flow for payment of the initial investment and project expenses.
One of the main features of Project Finance is that it usually involves the creation of a “Special Purpose Vehicle”, so that the debt generated by the project is structured as a debt pertaining to the project itself. Regardless of the accounting mechanism used to compute the debt in the financial statistics of the State, the liabilities of the projects must be transparent.
In his article entitled “About public trust bills and the reform of Law 47-20 on Public-Private Partnerships” (El Nuevo Diario: 24-06-2022), among other things, Dr. Carlos Sully Bonnelly maintains that “… public-private partnership trusts… must be subject to the Law on Public Procurement, free access to public information, accountability, and their registration in national accounts will depend on the international standards adopted “for the Public Sector”. Recommendations to take into account to strengthen both investment mechanisms.
In order not to discredit such forward-thinking initiatives, it is of the utmost importance to observe the principles of transparency, publicity and accountability, because they generate confidence in civil society for these investment instruments, which require transparency to maintain their credibility, and prevent the formulas provided for PPPs and Public Trusts from being perceived as means to transfer public resources to the private sector. Successful experiences in other countries prove that this is false.
Although we recognize that similar experiences in the country, prior to the approval of the law that regulates this development formula, did not yield the desired fruit, this is an important challenge for Luis Abinader’s government, which must ensure that any initiatives undertaken with this type of alliance help generate credibility for this mechanism.
Source:
Hoy
