Day one assignment is for me to come up with an infrastructure project finance model of my interest and render legal advice to all the parties involved.
I have chosen Construction of the Uganda Cargo Airport under a Public Private Partnership arrangement because Govt doesn’t have the $ 400bn and a Private Equity Firm, Arya Capital is willing to sink in $280bn.
The most significant infrastructure assets are related to freight transport terminals, particularly ports and rail, a reason why they are dominantly owned or operated by large private interests, which makes public involvement problematic. There is thus a conventional approach to PPP which is gradually been supplemented by an emerging framework where private entities are taking a higher level of responsibility, so the term private – public partnerships appears increasingly more appropriate.
However, like most initiatives where governments are involved, there are unintended consequences, implying a difference between the expected and the real outcomes. The two most prominent unintended consequences of a PPP involve undermining innovation and risk:
Innovations. Since a PPP results in less competition as the private company is securing an intrinsic monopoly, there are limited incentives to innovate, particularly for the purpose of reducing operating costs.
Innovations, such as new management methods and new infrastructures, may also be impaired by regulations and conditions related to the contract.
Therefore, as long as the contract remain effective, inertia (status quo) will endure, which means that long term contracts can become factors delaying innovation. It can also be expected that investment capital commonly the outcome of the accumulation of profits would come from the public sector. Since governments often put maximum profits clauses in contracts (windfall profits), there are limited incentives to use innovations to increase productivity and profits above the arbitrary threshold.
Risk. Strategies involved in the exploration of new market opportunities, such as new services for customers, are common business practices and always involve a level of risk.
While a PPP may reduce several risk factors because of the implicit public support, both from a financial and regulatory perspective (the government retains its potential to tax and coerce to achieve its goals), the abatement of risks also has unintended consequences. The goal becomes compliance to government policies at the expense of focusing on new opportunities and mitigating the associated risk. Thus, the rewards of risk taking are essentially removed. This can be seen as a reverse form of moral hazard where a government guarantee undermines the risk taking behavior of private enterprises.
To reduce these limitations and bring clarity and certainty to the PPP legal and regulatory framework, Uganda Parliament will have to fast track the enactment of the PPP Bill
Day Two: I have already dived into the action. Life without intellectual discourse is not worthy of a man. Tomorrow, it’s live, it’s hot, it’s informative here at UP with a panel involving some of the most brilliant international law experts in the world. We investigate what South Africa’s obligations under the Rome Statute are and whether the failure to arrest #Bashir constituted a breach. We also tackle the AU and whether member States owe each other any obligation to protect a sitting president from arrest. It’s beyond the rhetoric. It’s beyond the news byte. Finally, I am at a University