The Asian Development Bank estimates that the global demand for infrastructure funding is $3 trillion annually, with 11% sourced via public-private partnerships. According to the World Bank, PPP projects are “… for services traditionally provided by the public sector; combine investment and service provision; see significant risks being borne by the private sector; and also see a major role for the public sector in either purchasing services or bearing substantial risks under the project.”
In the aftermath of the global credit crisis, governments everywhere are looking to pump prime their economies and to reduce budget deficits with PPPs. However, many developing and transition countries may not be ready and attractive candidates for private sector investment because they lack the enabling environment, robust framework, and public service capacity for PPP preparation.
Ideology plays a big role in making the case. Professor Ian Macdonald of York University is philosophical, asking: “Are PPPs ‘old wine in new bottles’? How public, how private, and how much partnership? How and why are public and private sector management models converging? How entrepreneurial should government become? What are the prerequisites for effective PPP projects? Who is accountable?”
A recent survey by the Canadian Council for Public-Private Partnerships reports that:
• 70% of Canadians are open to PPPs to deliver public infrastructure and services;
• National support grew from 60% in 2004;
• Support in Ontario jumped from 64% in 2010 to 77% in 2011; and
• Transit (73%), water and sewage treatment (67%), and schools (66%) had the greatest increase in year-over-year support.
The Inter-American Development Bank PPP Americas Conference in Cartagena, Colombia in February profiled PPPs as a tool for economic growth in Latin America and the Caribbean. PPPs are gaining traction for new private investment in health, education, and green projects and in poorer countries and sub-national governments. Brazil, Chile, Colombia, Mexico, and Peru lead in creating PPP laws, units, and platforms to connect SMEs to project opportunities.
But the development community is grappling with fundamental policy issues – role of government, legal framework, case-by-case review, capacity building, evidence of impact, replication. The challenge is to position PPPs as one option among many and to answer where, when, and why to use them. Countries that jump to PPPs without understanding the problems risk costly governance and management choices.
Ideological variations make it difficult to evaluate PPP effectiveness. The theory aims for the best of both worlds – the public good and efficient service delivery. But the practice embraces market dogma that may simply substitute private for public monopolies. As in Mark 8:36, public leaders are left wondering: What does it profit a man to gain the whole world but lose his soul?
John Wilkins was a Commonwealth diplomat and a career public servant in Canada. He is Executive in Residence: Public Management with the Schulich School of Business at York University (firstname.lastname@example.org or email@example.com).