Sub-Theme 1 | Legal Framework and Institutional Foundation
The PPP Act
The Act on Private Participation in Infrastructure (hereinafter referred to as either the PPP Act or the law) identifies the types of infrastructure facilities that are subject to PPP procurements. It also lists, in connection with the PPP project proposal and implementation, such ‘related acts’ as the Toll Road Act, the Railroad Construction Act, the Telecommunication Business Act, the Housing Act, the Act on National Defense, the National Land Planning and Utilization Act, etc.
The scope of PPP projects has been gradually expanded, with continuous revisions and amendments of the act since its inception of 1994. The Ministry of Strategy and Finance (MOSF)
is the enforcement agency, being responsible for PPP policy formulation, project appraisal and budget allocation. It actively promoted PPPs, devising risk sharing methods in such a way that favored the private sector – e.g. MRGs (minimum revenue guarantees), buyout rights, credit guarantee funds, land acquisition supports, tax exemptions, and termination payments.
The law mandates the Minister of MOSF to establish the PPP Review Committee
(hereinafter being referred to as simply the Committee). It is composed of the Minister of MOSF (as chairperson), vice ministers of relevant line ministries, and eight or fewer members from the private sector with knowledge and experiences in private investment. Its primary responsibilities include: reviewing matters concerning, and making recommendations as to, major PPP policies, modification of the basic plans, designation of solicited PPP projects, approval of PPP projects, selection of concessionaire, and development of procedures for PPP implementation etc.
PPP is a Special Act, meaning that it can override other laws and regulations, when and if necessary. The provision of a “waiver” clause is particularly helpful when large-scale PPP projects are undertaken. The Act stipulates that, if the competent authority issues the public notice of a detailed engineering and design plan, permits and authorizations as prescribed in the laws are considered “granted.” This way the Act overrides other conflicting laws and regulations.
The Act is supported by the Enforcement Decree
, which specifies policy supports, methods and processes of procurement, and the roles of the participants, both public and private. It also lists eligible infrastructure projects in great detail.
The PPP Basic Plan
The Plan outlines the government’s policy directions, government supports, and the procurement procedures. It contains matters related to the scope of investment, method and requirements of each PPP project, the management and operation of private investment projects, government supports on PPP projects, and other matters pertaining to PPP, including the aggregate ceiling of PPP projects, modification of the aggregate ceiling, and agreement to increases in the limit amounts, etc. It also describes processes for both solicited and unsolicited proposals
The Private Infrastructure Investment Management Center (aka PIMAC)
PIMAC’s functions are manyfold; to help MOSF formulating the PPP Basic Plan, to support procuring authorities in PPP-driven procurement, to promote investment into PPP projects, and to develop and operate capacity building programs for public sector practitioners, both domestic and overseas.
It also helps governments with technical aspects of the PPP procurement, involving project feasibility assessment, value-for-money (VfM) tests, request for proposal (RFP) preparation, tender evaluations, standard concession agreements, designation of the concessionaires, proposal evaluations, refinancing methods and process, and negotiation with potential concessionaires on behalf of the competing authority. Matters pertaining to these subjects are all contained in the Implementation Guidelines as set forth by PIMAC. The guidelines are continuously updated to meet the changes with regard to relevant laws and regulations, and also to reflect changes in market conditions.
[Figure 1-1. PIMAC Organization Chart]
Main functions of PIMAC include:
- Execution of a Preliminary Feasibility Study
- Execution of the Reassessment Study of Feasibility (for large-scale publicly-financed projects)
- Production of various reports and policy recommendations on improving public ○investment system in South Korea
- Supports the government in developing policies and plans on Public-Private Partnership (PPP) and in implementing PPP projects
- Conducts Value for Money Tests and lends assistance in the designation of a concessionaire
- Manages capacity building of public officials and provides managerial services for PPP database
"Public Investment Evaluation Division"
carries out execution and management of publicly financed infrastructure projects. Preliminary Feasibility Studies and Reassessment Studies of Feasibility are implemented at the planning stage of a project to examine the proposed project’s objectives, economic feasibility, policy appropriateness.
"Public-Private Partnership (PPP) Division"
provides administrative and technical support in the process of PPP project preparation and implementation. The division develops guidelines for PPP procurement, conducts pre-feasibility study and value-for-money tests, assists in RFP formulation, tendering negotiation, and refinancing.
"Policy and Research Division"
is where policy research is conducted independently of actual project implementation to give feedback to and assist the government in deciding its medium to long term policy orientation. The role of the division also includes evaluation of projects implemented by public institutions and executing feasibility assessments for tax expenditures. The division is also responsible for database management, capacity building and training, and international cooperation.
(Source: PIMAC Web page)