The PPP Facility of German Development Cooperation

In order to promote the role of the private sector in development cooperation, the German Government has introduced a facility for development partnerships with the private sector - the so-called PPP facility. This facility promotes project implementation in cooperation countries through partnerships of private businesses and sectoral agencies with proven development-policy and private-sector know-how - among them the German Investment and Development Company (DEG), Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH (German Technical Cooperation), Kreditanstalt für Wiederaufbau (KfW) (German Financial Cooperation), and the Foundation for Economic Development and Vocational Training (SEQUA).

The aim of PPP measures is to implement projects that make good development and business sense as a contribution to economic and social development in the partner countries. The public involvement aims to enhance the positive external effects that arise as a result of private business initiative. Through examples of successful partnerships, private firms and development-cooperation executing agencies demonstrate that the effectiveness and sustainability of PPP measures can exceed that of purely public measures. At the same time, firms should come to realize that extensive consideration of the social and ecological aspects of their activities also makes business sense, at least in the medium to long term, and should be an integral part of their business policy. Development partnerships with the private sector are to be an integral part of German development cooperation.

Quality Assurance

Four Criteria must be met, before a partnership can be started:

1. The project must be in line with the development-policy goals set by the German Federal Government.
2. The interests of both partners must be compatible.
3. The private partner must make a key contribution to the project, as a rule, 50% of the project costs.
4. The public partner (agency) provides only those services to a project that the partner firm would not itself in any case render.

PPP projects must be oriented to the basic principles of the German Federal Government's development policy: respect for human rights, participation of the population in political decision-making, the rule of law and guarantee of legal security, the introduction of a social market economy, and the development orientation of government action. This catalogue of criteria is supplemented by the following points, which ensure that the interests of all parties are represented in the planned project:

Compatibility with development-policy objectives

Projects must fundamentally correspond to the promotional focuses of the country concepts and the basic principles of the sectoral promotion policies (especially the multisectoral concept for the promotion of the private sector). Projects outside the list of priority countries or outside the sectoral priority areas of the BMZ country concepts in their respective current forms, may only be carried out in well-founded cases and after previous consent of BMZ Section 410. All projects must demonstrate clear development relevance and be environmentally and socially compatible. Cooperation with firms in the areas of tobacco and alcohol production and other sensitive areas is not possible in the framework of the PPP program.

Complementarity

The public and private contributions must so complement each other that both partners achieve their objectives at a lower cost, more effectively, and more quickly as a result of the cooperation. PPP measures must be concluded within a maximum of three years in order to be continued subsequently by the private partner alone. If the contract term is over one year, the public share must decline and in the third year may not exceed a maximum of 50% of the total sum of the first year.

Subsidiarity

A public PPP contribution shall be made only when the private partner would not undertake the PPP measure without the public partner and the PPP measure is not required by law. The private partner's PPP share includes only that part which would not have to be financed in any case in the framework of the original investment. Projects that are already being implemented cannot be subsequently co-financed as PPP measures.

Fair competition

The PPP measure shall not lead to the case that a private partner selected as the result of a non-transparent and incomprehensible process gains a competitive advantage over competitors from its own industry, with the result that competition is distorted or potentially threatened. Therefore, the organizations must be open to cooperation with all firms, with no barriers to access. The possibility of PPP cooperation and the individual PPP measures must be made public and brought to the attention of as many companies as possible. The process of selecting the private partner must be clearly understood. The choice of private firm must be carried out on the basis of uniform criteria. Enterprises are not entitled to PPP cooperation.

The contribution of the private sector

The private firm must provide a key financial and/or human resources contribution to the PPP measure. It must be ensured that the greatest possible contribution to the solution of problems in the partner country is made with the least possible public expense.
The organizations are required to evaluate the projects proposed by private partners, to promptly inform the private partner of its decision, and to clearly document the entire process. Furthermore, in the framework of their core competencies, the organizations actively develop projects that are not oriented to the corporate proposals, but to the development-policy priority areas of the BMZ.

Download of the full text of the Guidelines for Development Partnerships with the Private Sector (Public Private Partnerships - PPP) (english, pdf, 29kb, 8pp)

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