Public-Private Partnership: Smart Cities Township Development
By Anusha Magendram Sustainable Development Technology Division, MIGHT
Throughout the world, cities are highly concerned that they need to modernize their infrastructure and cities’ systems to improve the living environment of people. Cities’ Township development embrace varieties approach especially in funding or financing the smart city developments.
Public-Private Partnerships (PPPs) aim at financing, designing, implemen�ng, and opera�ng public sector facili�es and services development. the public-private partnership offers an op�on that lies somewhere between public procurement and priva�za�on for governments to seek and expand ci�es’ infrastructure development. PPPs brings private sector competencies, efficiencies, and capital to improving public assets or services as the government faced deficiency of upfront cash. Private sectors agree to take on risk and management obliga�on in exchange for profits reimbursement. PPPs is an increasingly preferences choice by policymakers in execu�ng important public works projects, especially in facing shortage of government financial resources and to counter public inefficiency. PPPs enables governments that are already stretched for resources with the present economic climate, to u�lize
alterna�ve private sector sources of finance while concurrently gaining the benefits that the private sector can bring in terms of skills and management. PPPs is a very par�cular type of contract whereby the public partner (government en�ty) delegates some of its own responsibili�es to a private partner under a long-term contract that defines the rights and obliga�ons of each party during the term as well as the mechanisms for its financial re-equilibrium arising from unforeseen events or lack of compliance of the par�es. PPPs is an important instrument for financing and funding ci�es’ infrastructure development and therefore promo�ng economic growth. PPPs applied for various infrastructures development like roads, airports, ports, power, water, and solid waste treatment and typically involve investment and opera�on and maintenance. PPPs also used for social infrastructure like health and educa�on.
The challenge in financing the smart cities’ township development needs a creative thinking that varies from traditional models of infrastructure finance.
Good PPPS Implementa�on
One unique issue local authority face is that would-be sources of finance may fear that being an ‘early adopter’ in this technology can be a drawback, par�cularly as some areas of digital infrastructure remain untested, or tested only to a limited capacity. To encourage re�cent investors to commit to the project, local authori�es need to fully understand it themselves: its poten�al cashflows, the range of financing op�ons available to ensure its frui�on (both at local and interna�onal levels), and procurement methods. PPPs is con�nuously implemented in Malaysia ci�es’ infrastructure development and other infrastructure best prac�ces. Understanding the constraints for succeeding PPPs adop�on enquired relevant par�es, the Government neither the private sector to take the necessary effort in iden�fying constraints and ensure maximum benefit achieved from the PPPs. In par�cular, the findings show the shortage of government guidelines on PPPs procedures, thus a signal to the PPP regulatory body to concern about the immediate need to overcome the issue. This is because, PPPs implementa�on s�ll new in Malaysia, yet it is important to consider the requirement for transparent PPPs guidelines and procedures by the key players in the industry. Nevertheless, only a few guidelines on PPPs have been published in Malaysia. The Government needs to clearly state the objec�ves of promo�ng PPPs as a tool to deliver
ci�es services in Malaysia. PPPs provides clear objec�ves, methods, and the execu�on of the policies, while highligh�ng the progress achieved and addressing the future direc�on of the program. In the mean�me, con�nuous economic development also requires the public sector to enhance the prac�ce of PPPs in Malaysia to ensure and meet the needs of the public followed the standard to achieve best value to both sectors. Meanwhile, public sectors need protec�ons from the private partner. Private investors typically provide performance guarantees or parent guarantees that can be unlimited or limited. If private sectors do not deliver the product or service at the agreed level of quality or the �ming contracted or the building is not finished on �me or the water supply does not meet the specified safety levels, the public sector (government) pulls on such agreements. Propor�on of penal�es regarding the type of non-compliance is vital for the sustainability of the PPPs contract over the long term. Contracts should mainly rule by incen�ves rather than penal�es, giving both par�es every reason to fulfil their commitments for the whole term of the contract and without a government champion, PPPs hardly succeed. In any cases, they require a lot of nego�a�on and consensus building to develop a common understanding of the project at each phase among main stakeholders.
Malaysia Smart City Outlook 2021 - 2022 |
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