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Is PPP an effective tool for implementing energy related projects? The case of Bosnia and Herzegovina

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Trying to find your way through public-private partnership (PPP) legislation in Bosnia and Herzegovina (BiH) may seem like navigating a maze. With 12 different laws at multiple levels of government, all quite similar yet none the same, the situation often seems confusing. One cannot help but wonder whether PPP is an efficient tool for implementing already complex energy projects.

Thanks to the complex constitutional structure of BiH – with state level authorities, three administrative units (Federation of BiH (FBiH), Republika Srpska (RS) and Brčko District (BD)) and a further 10 cantons in FBiH, each with its own legislative competences – PPP is today regulated by 12 different laws, accompanied by a swathe of secondary legislation. These laws can be effectively divided into two sets – one unhelpful as it relies on public procurement legislation, and the other envisaging viable contractual and institutional PPP, reflecting the principles and structures tested across Europe and further afield.

 

Although the PPP structure still poses significant unknowns to the public authorities, the interest in these structures is evident. There are many activities undertaken by the NGO sector, international players and finance institutions to promote PPP as a tool for improving infrastructure projects, with a focus on energy projects whose popularity is on the rise. Many of these activities are directed towards educating the potential public partners on how to use PPP for developing public interest projects while simultaneously incentivising the private sector.

 

Due to the low level of awareness and complex legislative environment, only two projects on the market can be categorized as PPP projects so far. One is related to the provision of medical services, while the second concerns hospital infrastructure development. As for the energy sector, there are three projects related to the construction of district heating systems. Experience in all three projects shows there are effectively three sets of potential obstacles – institutional barriers on the part of the public partner, unharmonized cross-area legislation, and different expectations on risk distribution between the partners.

 

When it comes to institutional matters, the local authorities are usually very open and ready to pursue the project at its initial stage, but this motivation tends to wane once they realize the work and effort necessary to finalize the process. This is primarily caused by the lack of understanding and experience of public bodies and a complex and bureaucratic decision-making process. However, this barrier can be easily removed by improving the relevant bylaws and introducing more intensive education programmes, a number of which have already been initiated by several stakeholders.

 

Read the full article here.