Introduction and Meaning of Public Private Partnership (PPPs)
The term Public Private Partnership (PPPs) can be defined as cooperation between the public and the private sector in which they jointly execute projects together with shared risks and responsibility. From another perspective, it can also be defined as the range of possible relationship among the public and private entities within the context of infrastructure and other services (ADB, 2013). Essentially, it becomes a necessity in the context of the incapacity of the government to adequately provide the essential services needed by the people, as well as the dissatisfaction with the traditional procurement method, which sees government as the sole actor in the provision of essential services. Recently, interest in PPPs is increasing as a result of the increase in the demand for the provision of infrastructure and other services with limited fund and higher efficiency (Herpen, 2002). However, in the past, the private sector has always been involved in the procurement of infrastructural services on a contractual level. However, PPPs enable the private sector to become a full fledge actor in the provision of essential infrastructure in the society.
PPPs can be utilized as an alternative means of providing essential infrastructural services by both stable and fragile states. But they are more essential for the provision of essential services in fragile states, which have a low level of infrastructural development, as well as weak political and economic institutions. Although PPPs have both advantages and disadvantages, their advantages position them as an alternative means of providing essential services in both stable and fragile states. For instance, in Canada, PPPs are used to construct a hospital project which cost up to 525 million dollars in a suburb of Toronto. Canada is a developed country which can effectively execute such project. However, in fragile states where there is vast deficit in the provision of infrastructures, PPPs signify an alternative to rectifying government’s incapability.
Challenges and solution of PPPs in fragile countries
The term fragile country is a concept that is used to describe low income countries in the developing world. Essentially such a country is characterized by weak political and economic structures which make its economy and people subjected to varying degrees of vulnerabilities. While many countries are making progress on the achievement of millennium development goals, fragile countries continue to lag behind in these areas (Wikipedia, 2015). Examples of these countries include, but are not limited to: Guinea, Liberia, Burundi, Comoros, and Haiti among others. According to a World Bank report in 2009, about 26% of the seven billion people in the world live in fragile states and they are surviving on less than $1.25 per day, coupled with high maternal deaths (World Bank, 2009). There are different factors that can be responsible for the fragility of a state. A common measure of state fragility is the World Bank’s country policy and institutional assessment index (World Bank, 2015). These indicators include property rights and rule-based governance, quality of budgetary and financial management, efficiency of revenue mobilization, quality of public administration, transparency, accountability, and corruption in the public sector. An examination of these indicators reveals that many countries in Africa and other developing countries are fragile in nature. Importantly, some fragile countries are characterized by a prolonged conflict period, but this does not imply that fragile countries and conflict affected arrears are the same, although they have certain similar characteristics. For instance, the Republic of Ukraine is a good example of a country with conflict affected areas; it’s almost two years of conflict is driving it to state of fragility. On the other hand, Democratic Republic of Congo and Somalia are prototypes of fragile states. In fragile states, state institutions are usually challenged by sub-state actors, which include tribal groups, insurgent and rebel groups; this makes it difficult for the government to provide security for its people. However, the provision of basic services is essential to reducing fragility in these countries. This is fraught with the following challenges, however;
Financial Constraints- in fragile or low income countries, the issue of finance is a fundamental problem encountered by the partnership between the public and the private sectors in the delivery of essential infrastructural facilities. The government is usually not strong economically to provide essential services which are sine-qua-non to the welfare of the people, and even when the private investors get involved in the provision of basic infrastructural services, sourcing for funds always make the initiation and delivery of such services at appropriate time to become a large problem. For instance, in Nigeria, a lot of government projects have been abandoned at the level of state government. This is caused by combination of lack of financial ability on the part of the government and the unwillingness of the private investors to invest in such projects, as a result of the perceived weaknesses of the government. The solution to these problems lies in three factors:
- Partnership with International Economic Institutions for foreign aids
- Bilateral agreements with affluent nations
- Assistance from regional financial institutions.
On the part of the private sector, the problem of financial constraint can be solved through any of the following: equity, interest on project bonds, pseudo-equity, and bonds raised from the capital markets. Here, several issues exist:
Limited Expertise - in the provision of infrastructural services, the use of experts is highly essential to guarantee the efficiency and durability of such services. But in fragile countries, expertise is always inadequate or unavailable to execute such capital projects. These constitute an immense impediment to the success of PPPs in such country as it will require recruitment of experts from outside the country, or use of inexperience people to deliver such services. Thus, services will be substandard. To solve this problem, government and the private sector can collaborate to train and develop individuals within the state, who can become experts in any of the areas where expertise are needed.
Lack of Information - in a fragile state, lack of effective communication among stake-holders, including the public sector, private sector and the host community is a considerable problem. This is usually occasioned by the weakness of state institutions and their awareness about the importance of efficient communication among the stake-holders as well as members of the public. Solving this problem requires a formal arrangement between the government and private sector, as well an effective means of communication among them.
Mismanagement of Project fund, implementation and execution - in fragile or low income countries, there is always the problem of mismanagement in financing, implementing and executing projects. This is complicated by the prevalence of high levels of corruption and inadequate experts that can efficiently manage projects. In addressing this problem, there should be strict regulations which will guide the execution of projects. In the case of mismanagement, the regulation should specify who is to bare accountability.
Power and Markets – fragile states are usually characterized by high levels of political instability and market fluctuations. This constitutes a great challenge for business collaboration between the private sector and the government. Since the market is not stable as a result of political instability, it can result in an immense financial loss for any private party that intend to invest in such economy. Tackling this problem will require that governments formulate policies that will ensure the continuity of the project started by a preceding regime and also to enact effective laws for proper regulation of the market.
Challenges and solutions of PPPs in conflict affected areas
In countries that just emerged from violent conflicts, there is usually a severe lack infrastructure. Consequently, this may render a few fragile while others may have to start rebuilding infrastructures in order to stabilize social welfares and public services. If infrastructural welfare improvements are not quickly met, the countries may slide back into war (PPIAF, 2011).
However, as promising as PPPs are to the rebuilding of infrastructure of war-affected areas, there are also significant obstacles that need to be overcome. These challenges can make PPPs susceptible to failure in executing accurately as agreed or breach of contract:
The Emergence of Governance and Responsibility: in private public partnerships, the traditional hierarchy responds to collaborative engagement. This breeds collective coordination and shared activities, capacities and partnership of organizations. Here, the controlling decision is never in the office or hierarchy of the public sector but lies with who can effectively coordinate diverse of actors for the proper execution of project. This means that hierarchical management hold little or no ground in the decision-making of PPPs but supervision and ability to foster collaboration among personnel. However, new development will project a shift in management and organizational accountability which might raise ethical or legal questions. Moreover, this may impede the rapid development of infrastructure of a war-affected area because of operational discord among the contractual actors of the two sectors. The suggested solution to this shift in governance and responsibility is that both bodies should come up with a more flexible plan that will cater for issues like this. This means that, before the contract, it should be stated that every right can be exceptionally violated for the progress of the initiative and for timely delivery of service. A change in either constitutional right should be welcome without depute or discord.
Management and Accountability Discord: in terms of decision-making and accountability, value is given to the decision of the supervisors who can effectively coordinate rather than the skills of the hierarchical body of public sector managers. This poses a threat to the political right reserved by the public sector on the hiring and firing of employees. However, it becomes a challenge for the smooth running of project because the private supervisors have no right over whether to reduce workforce due to too many personnel or increase in the work force in order to meet with the contractual time. In a country which infrastructures have been affected greatly, there is a good reason for the partnership of both the private and public sectors in order to be able to reinstall the social goods, services and other necessities. But when managerial instability occurs in the execution of project in PPPs, there may rise the tendency that the time given for the rehabilitation of infrastructures will not be met. This may further cause a war-affected area to fall back to war or be completely reduced to a fragile economic state. In a situation like this, to avoid greater challenge that might impede the urgent delivery of infrastructural services needed by the affected areas, if for the sake of the contractual project alone, there should be a body of appointees set up for each infrastructural project. This body will comprise the actors from both parties and should be constitutionally endorsed to coordinate, control, employ expertise, etc. workers will be accountable to them and they will be directly accountable to the board of partnership.
Failed Expectation and Cost under-overruns: PPPs planning may fail, leading to a failure in the execution of a project. Failed expectation and cost under-overruns cannot be avoided in a situation where there is disagreement on leadership and decision making. The cost of a project of PPPs can be under-estimated; running a project below the exact cost which may cause failure in the long run or procure debt for the private sectors. On the other hand, the project can be overestimated, costing less than agreed or claimed by PPPs. This can lead to unmet expectations, bad execution and inaccurate costs, which are capable of destroying the initiative and affect the contractual partnership between the government and the private sector. As a matter of fact, this challenge is capable of debunking the importance of effective and transparent management of contract in PPPs. To avoid this, the World Bank should extend a helping hand in the rehabilitation of social amenities in order to get the affected areas back to shape politically...
Conflict in Motives and Interests: there is always a difference(s) in the motive or objective behind PPPs initiatives. These differences are mostly far beyond the agreed or contractual consensus. For example, where the government of a war-affected area decides to partner with private sectors in order to generate human or other enabling resources for the primary aim of providing social amenities for its citizen. On a different end of purpose, the private sector would consent to this contract strictly for business in order to profit. This conflict between the appearance and reality of cooperation is a great challenge in PPPs in war-affected areas; different approaches to critical infrastructure rehabilitation and this can lead to discord between private and public sectors. “Government appeals to moral, patriotism, or civic responsibility quickly lose their lustre when they begin to eat into the firms’ bottom line. Business may publicly promote their commitment to infrastructural security, but behind close door, there is an upper limit to firms’ expenses” (Nathan and Austen, 2012). The two parties consider the construction of infrastructures alone, although possible problems that might arise, before, during and after the project.
In final analysis, both the private and public bodies should endeavour to be dynamic in a few of their constitutional rights as this will enable a perfect coordination of the workforce and allow a smooth and effective partnership. Furthermore, the World Bank and other development institutions should come to the aid of war-affected areas and fragile countries by assisting their governments financially in the provision of infrastructure. Hence, this will prevent the private sector from bearing too much burden in terms of costs, extorting the populace who are just recovering from losses caused by war and placing the public sector on impossible terms and condition.
Adiat A Abiodun holds Bachelors and Masters degrees from Obafemi Awolowo University,Ile-Ife,NIgeria
African Development Bank,(2013), Public Private Partnership Handbook. Accessed at www.adb.org (27/03/2015).
Herpen, V (2002). Public Private Partnerships: Advantages and Disadvantages Examined. accessed at www.aetransport.org (28/03/2015).
Wikipedia (2015). Fragile State. accessed at www.wikipedia.org/fragilestate (28/03/2015).
World Bank (2009). 'Poverty Analysis'. Accessed at http://web.worldbank.org (28/03/2015).
World Bank (2015). ' Country Policy and Institutional Assessment Index'. Accessed at http://data.worldbank.org/indicator (28/03/2015).
PPIAF,(2011). “Public-Private Partnerships as a Model for Post-Conflict Reconstruction”, Post-Conflict Countries Series. Accessed at http://www.ppiaf.org/sites/ppaif.org/files. (28/03/2015).
Nathan E. and Austen D. (2012). Homeland Security Affairs, “Public-Private Partnerships and Challenges”. Accessed at http://www.hsaj.org/articles/233 (28/03/2015).
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