New formal framework to help develop infrastructure within PNG

In brief

More public infrastructure and services may be provided in Papua New Guinea through public private partnership arrangements following the long-awaited commencement of the Public Private Partnership Act 2014. Partners Sarah Kuman and Nick Ng examine the key areas businesses should be aware of.

How does it affect you?

The PNG Government has passed the Public Private Partnership Act 2014 (the PPP Act) to establish a formal framework within which private industry may partner with the Government to develop much-needed infrastructure within PNG.

The Act's commencement paves the way for the establishment of the PPP Centre, a statutory agency that will be established to implement the PPP Act and monitor its use, along with arrangements under the PNG Government's National Public Private Partnership Policy.

It is anticipated that these developments will eventually result in a number of infrastructure projects being offered by the PNG Government to private investors to undertake.

General PPP law

The PPP Act applies to 'Relevant Public Bodies', which are defined to mean:

• the Independent State of Papua New Guinea;
• local or provincial governments; or
• a statutory body established by an Act which is not a Provincial or Local-level Government entity or an entity in relation to which the State controls the composition of the board, controls more than 50 per cent of the voting power in the company or holds more than 50 per cent of the issued share capital in the company.

The PPP Act sets out the structure in which a Relevant Public Body may undertake PPP arrangements.

PPP arrangements are defined by the Act to mean an arrangement with a person other than a Relevant Public Body, in the Act referred to as a 'partner', for the performance of functions specified in the arrangements which, among other things, may relate to:

• the design and construction of infrastructure, together with the operation of services relating to it and the provision of finance if required for design, construction and operation; or
• the provision of services, including maintenance relating to infrastructure for five years or more and the provision of finance, if required, for services.

Notable exclusions to PPP arrangements include mining projects, or gas projects or petroleum projects, and all associated development agreements or projects undertaken as part of the Government's tax credit scheme.

Infrastructure procurement projects involving a Relevant Public Body, the value of which exceed the 'referral threshold' will not automatically qualify as 'public private partnership arrangements' under the PPP Act. However, in all such cases, the Relevant Public Body  must conduct an initial assessment of the proposed transaction and submit its assessment to the PPP Centre within 30 days of having made it, to determine whether a project can be undertaken as a PPP arrangement. This assessment is a complex and multi-faceted one, and line agencies will no doubt draw upon the material developed by Infrastructure Australia and a number of Australian State governments in weighing the 'hard' and 'soft' factors that impact on the applicability of the PPP model.

The 'referral threshold' will be set in regulations to the PPP Act when those regulations are passed. However, there is a general indication that the referral threshold value of a project will be K50 million.¹

Entities established under the PPP Act

Key to the PPP structure is the establishment under the PPP Act of:

• the PPP Centre;
• the PPP Steering Group; and
• the PPP Forum.

The PPP Centre will be set up as a 'specialist' adviser to the National Executive Council and is directly accessible by line agencies. While the PPP Centre will assess PPP arrangements, it is not set up to be a decision-making body. Instead, it will coordinate and implement decisions of the PPP Steering Group and the NEC.

In the 2018 national budget presentation,² it was mentioned that some of activities envisaged in 2018 include:

• developing a roadmap that will assist the Government to identify and implement a pipeline of projects under PPP arrangements;
• ensuring that relevant projects are selected, developed, delivered and managed in a structured, transparent and efficient manner; and
• facilitate the procurement for all PPP projects.

The PPP Act does not contain much functional or operational detail and it is anticipated that this will be covered in regulations, to be issued sometime in the future.

Next steps

We will monitor the status of the commencement of the regulations issued under the PPP Act, as well as the progress of the establishment of the PPP Centre and keep our clients informed.