PPPs for More Effective and Innovative Service Delivery

Karen PersadBy Karen Persad
CAPAM Knowledge Exchange Advisor

 
The aid community and government actors globally have been supporting and promoting entrepreneurship through small/micro and medium enterprises, in addition to more active private sector involvement, as core integral activities to growth and productivity in development at different levels. The private sector offers an alternative source of financial resources, opening capital and expertise expected to catalyse and sustain innovation, increase employment and drive multiplier effects impacting economic development and democratic governance in both industrialised and developing countries. A further impetus that shines the spotlight on the private sector as collaborator is framed in the Sustainable Development Goals (SDGs), particularly SDG 17: Partnerships for the Goals. One of the SDG 17 targets[1] is Multi-stakeholder Partnerships, denoting that sustainable development can be reached through public, public-private and civil society partnerships that “mobilize and share knowledge, expertise, technology and financial resources…” That said, many countries of the Commonwealth are pivoting towards public-private partnerships (PPPs) as the model that can expand their markets in the partnership space, while overcoming economic and institutional limitations that slow down, or worse, impede effective risk management and reforms.
 
“PPPs hold the promise of increasing the supply of infrastructure without overburdening a country’s public finances. An infusion of private capital and management can ease fiscal constraints and boost efficiency …” IMF, Finance & Development, December 2004
 
An overview of the literature suggests that PPPs in governance and the public service are akin to contractual arrangements between the public sector and a private sector entity for the private delivery of public services or other basic services. Issues with the public provision of goods and services centre on high and/or rising costs (soaring electricity bills in the Caribbean), weaker timely performance (response rate to Lesotho’s women and girls in crisis), and lower innovation[2] in response to addressing development challenges (Botswana, Malawi and Namibia). Alternative service delivery then consists of blending in the private sector at a ratio that is complementary to the public sector through its relative agility, resilience to risks, ability to control costs, ability to borrow more cheaply, innovativeness and other factors.
 
No doubt, the public sector still holds comparative advantage over the private sector in designing social covenants in the interest of achieving broad social welfare benefits for all. While optimisation of public welfare (efficient and low-cost provision of quality services to the general public) is the domain of the public sector, the private sector is driven by corporate values and economic incentives. Though dichotomous and perhaps at odds, both roles can improve service quality and service delivery. This co-dependent relationship follows every PPP and must be reconciled against the backdrop of sector capacities and needs, cost recovery, environmental conditions, sustainable development imperatives, and enforcement frameworks (policies, incentives and regulations, inter alia).
 
“We pursue PPPs because we accept that the private sector will take the investment and operating risks that are involved in delivering world-class infrastructure to citizens, while at the same time free up limited public resources that governments can employ elsewhere to improve social services.” - Managing Director of the Development Bank of Jamaica Milverton Reynolds. 
 
With the increasing social power of citizens and more slowly, citizen engagement in shaping public policy, public and private sectors are inevitably working together in arrangements and frameworks that can achieve greater macroeconomic, social, environmental, scientific and industrial outcomes. In the Commonwealth Caribbean and Small Island Developing States (SIDS), providing disaster-resilient, accessible and reliable infrastructure is essential and PPP projects are on the rise in responding to this “infrastructure gap”. In the South African context, a partnership with a non-governmental organisation (NGO) enables more girls to access education instead of having to travel to collect water. Roundabout Water Solutions is an NGO that collaborates with the South African Department of Water Affairs[3] to raise donor funds to supply rural communities with clean drinking water via a sustainable pumping system – PlayPump – powered by the play of children.
 
The convergence of the public and private sectors is not occurring only on account of the pronouncements of multilateral actors and international financial change agents like the International Monetary Fund (IMF). The sustainable development agenda demands integrated development, calling for sustainable engagement and coordination among economic and social players. In South Africa, there is now a dedicated Treasury Unit to vet the quality, affordability, and expected fiscal cost of proposed PPPs. Development finance institutions have come together to further tackle institutional weaknesses in the region via the Public Private Partnership Support Facility[4], a collaboration between the Caribbean Development Bank, the World Bank, the Inter-American Development Bank, the Public Private Infrastructure Advisory Facility and the Multilateral Investment Fund. Countries can now better “develop and implement sound policies and transactions, and receive training to increase technical capacity among governments”, which may translate to fewer cost overruns, fewer delays and more equitable risk transfers. Countries with stronger public sector institutions encounter fewer challenges and enable a bolder foray into investments. In Canada and emergent India, global PPP deal flows and transactions have been maintained at high levels on average, while the UK and Australia, considerably high in general, still saw a 50 percent decrease in the average number of PPP transactions from 2011 to 2014[5]. This demonstrates the criticality of planning and carrying out feasibility studies, competitive procurement processes, and monitoring compliance to agreements, among others.
  
In the Australian Infrastructure Audit[6], it is projected that investment in infrastructure through the private sector will surge, maintaining the country as a mature PPP market. In emergent economies like Latin America, India and South East Asia, PPPs are featuring more highly in procurement arrangements to attract foreign investments while they remain under the radar of private sector investors, evidenced by high volumes of greenfield projects. Canada has overshadowed the United Kingdom where the latter’s private finance initiative (PFI, now renamed PF2) has been on the decline with under three projects in the pipeline, displacing the UK as a leading PPP region, at the time of reporting.
 
In spite of social interest gains (successful PPP boot camps in the Caribbean Commonwealth[7] and positive education and health implications for South African children, among others) these partnerships face challenges – weak legal frameworks witnessing bribery and corruption, and absence of a PPP strategy; weak or no economic, financial or macro-risk analyses; and processes around negotiations for infrastructure projects can cause major delays if governments are unable to manage complex transactions. The African Development Bank Group declares that PPPs are popular in the realm of physical infrastructure (power, transport, telecommunications, water and sanitation) but admits to a core impediment: the continent’s business environment. This includes an inadequate legal and regulatory framework for PPPs; nearly absent technical skills to manage PPP programmes and projects; unfavourable investor perception of country risk; Africa’s less prominent role in global trade and investment; small market size; limited infrastructure; and limited financial markets. However, the case of Uganda illustrates that certain countries are making strides to better operationalise PPPs through its Public Private Partnerships Act, 2015[8]. Going further in the Commonwealth Pacific, Papua New Guinea established a PPP Act in 2014 and a PPP Centre to assist government in developing, tendering and implementing PPPs. The Asian Development Bank contributed policy guidance and legislation drafting as a subset of national reforms to increase private investment in the delivery of infrastructure services[9].
 
Looking beyond sectoral and socio-economic considerations, the relevant public and private sector stakeholders attending the High-Level Forum on Aid Effectiveness in Busan in 2011 crafted broad-scoping principles for cooperation[10], some of which are analysed below in connection with PPPs at the national level. These principles demonstrate how indivisible and intertwined public sector/state-level action and international commitments have become in all Commonwealth countries.
 
Principle 1 - Inclusive dialogue for building a policy environment conducive to sustainable development that includes government consultations with the domestic and foreign private sectors in order to create an enabling environment for development.
 
Sectors in Uganda that have been supported by a PPP concessions model include energy, transport, business infrastructure, health, education and tourism. Uganda strengthens its PPP policy environment through implementation of legislation supporting sustainable development policies like the Public Enterprises Reform and Divestiture (PERD) Act[11]. Acknowledging the known challenges faced by Caribbean governments, the Commonwealth Secretariat’s Commonwealth Public-Private Partnership Network (C3PN) was created to encourage cross-collaboration among institutions, South-South learning, dialogue and peer reviews.

Another entity[12] is the Partners’ Forum, a Trinidad and Tobago group established in 2011. The aim of the Forum is to act as both a catalyst and a mechanism for multi-sector action to promote health and reduce chronic non-communicable diseases (NCDs) in Trinidad and Tobago. The partners (comprised of public, private, NGOs, civil society organisations as well as academic, regional and international bodies) build and develop a cross-sector approach to reduce non-communicable diseases. Project Laser Beam[13] is a global and local PPP launched in 2009 aiming to reach 500,000 malnourished children and to create a scalable, replicable and sustainable model to significantly reduce child under-nutrition. The Project plans and implements PPPs in Bangladesh and Indonesia on nutrition-related themes. Founding partners, UN World Food Program, Unilever, Mondalez International Foundation, Dutch Life Sciences Group, the Global Alliance for Improved Nutrition and the Clinton Global Initiative, collaborate with the Ministry of Primary and Mass Education in the school-feeding programmes and the Ministry of Industries of the Government of Bangladesh. Public agencies in Indonesia also cooperated through nutrition programmes, facilitated by the Ministry of People Welfare, Ministry of Health, Ministry of Education, Ministry of Development Planning, Ministry of Agriculture and local governments.
 
Principle 2 - Collective action through more permanent interactive platforms for dialogue both at the country and global levels to enable sustainable and competitive private sector development and the involvement of the private sector in finding solutions to development challenges.
 
In Commonwealth Europe, the Scottish Futures Trust[14] is a medium fully focused on dialogue with a commitment “to saving taxpayers’ money and works with the public sector to deliver the best possible value when money is invested in infrastructure…”
 
The Niger Delta Partnership Initiative (NDPI) is a partnership established in 2010 by Chevron Corporation through the creation of a strategic foundation in the USA (NDPI Foundation) and an implementation foundation in Nigeria (PIND Foundation). The aim of NDPI is to establish innovative multi-stakeholder partnerships that empower communities to achieve a peaceful and enabling environment for equitable economic growth in the Niger Delta. NDPI provides access to finance, dialogue between public and private sectors and civil society, and acts as an information hub.
 
As well, the United Kingdom has a well-recognised platform, the PPP Forum, which is geared towards infrastructure and procurement functions. In Canada, the Canadian Council for Public Private Partnerships promotes “smart, innovative and modern approaches to infrastructure development and service delivery through public-private partnerships with all levels of government.”[15] The Malaysian Government has institutionalised the platform model with a web-based official portal[16], the Public Private Partnership Unit, under the Prime Minister’s Department.
 
Principle 3 - Transparency of public-private cooperation, including business, governments and international organisations.
 
The Southern Agriculture Growth Corridor of Tanzania (SAGCOT) is a public-private platform that aims to coordinate government, donor, and corporate investments and interventions. Core areas of work include agribusiness value-chains and supporting infrastructure with the goal to remove bottlenecks and improve the overall agriculture system. Its intent is to kick-start environmentally sustainable and socially beneficial commercial agricultural development. It is a long-term platform with targets for 2030.
 
The Internet, e-government and data-driven approaches are enabling new ways of thinking about openness, awareness and expectations. Transparency features increasingly in the public governance agenda in light of demands for greater openness between executive government and citizens. Pursuant to a more deliberative democracy, transparency gets questioned as more views (and actors) and perspectives are brought into the processes of public policy decision-making. The modus is slowly but surely shifting towards governing with citizens, away from governing for them. Other drivers of change are accelerating a departure from government ownership of service delivery towards that of a government service facilitator, broker, and commissioner, which entail greater disclosure than before.
 
The World Bank reported that disclosure practice has progressed in jurisdictions like British Columbia[17] (procurement-related), New South Wales, and Victoria, which are more experienced with the PPP model and disclosure. More rapid progress towards a policy of disclosure specific to PPPs has been found in Colombia, India, and Peru. A vehicle for ensuring and enforcing transparency and proactive disclosure of information for all involved in PPPs brings into focus Freedom of Information (FOI) Acts. Seven jurisdictions reviewed by the World Bank[18] have provisions mandating proactive disclosure. It was found that in India, the FOI Act recommends but does not mandate proactive disclosure. In Kenya, the legislative framework is weaker as it does not have a FOI Act in place; the Philippines and South Africa have not advanced this type of legislation to date.
 
Cooperation is not as much enforced in the traditional way as it is now being carried out with an emphasis on mutual benefit and trust. A PPP Unit resides in both the Ministry of Health and Social Services[19] as well as the Ministry of Finance in Namibia. A PPP policy for Namibia was approved by Cabinet in 2012[20] and PPP legislation is still in progress with legal drafting and submission to the Attorney General’s Office. Internal processes are also underway for setting up of a PPP Committee and for PPP applications evaluation.
 
Principle 4 - Accountability for results focuses on options for monitoring, reporting, and evaluating development results, measuring the sustainable impact of public-private cooperation for development, and sharing the lessons learned. The literature reveals that accountability is nowadays significantly tied to activities and notions of assessment, blame, redress, explaining and changing behaviour after failure, as well as transparency, control, responsiveness and improving performance through investigating and scrutinising (Hodge, 2008). Internet and data-driven governments must now grapple with the convergence of these issues. Helen Margetts (2006) has discussed this development and this has further pushed the movement on watching governments (OMB Watch, Democracy Watch and other watchdogs).
 
Defining values and principles for good governance is indispensable as it supports consensus building on accountability and consequently, public trust. Zambia’s Musika is not only an accountability governance framework but it also adds credibility, attracts funding, and communicates its partnership approach to clients. The process entailed outlining relationships between the different actors to establish an ownership structure of the organisation as well as a schema for different levels of staff to illustrate credibility and auditability for funding requirements set out by the Department for International Development (DfID) and the Swiss International Development Agency (SIDA).
 
For the non-profit organisation in Zambia, Musika, the value of a governance structure proved invaluable. It helped Musika explain to clients its services, accountability policies, support and facilitation of partnerships, and how partners could benefit from working with Musika.
 
Finally, to operationalise the concepts and principles linked to PPPs, particularly that of accountability, a results-based management strategy with mechanisms for monitoring and evaluation of a PPP should be developed. It can concentrate on a ministry’s strategy and/or departmental PPP platform, if any exists, and on any and all partnerships established, brokered or supported, in the first instance. This can enable a reporting dimension that links back to the overall contribution of the PPP to national priorities and related development goals. An extensive process for setting up systems to collect accurate data for analysis is required for strong monitoring of the PPP initiatives and arrangements. If PPPs are pursued and additional implementing partners are introduced, it is essential that a monitoring and evaluation system is designed, tailored, implemented, and sustained to evolve with the partnerships over time.
 
In closing, the added value co-created by a principled and purposeful public service in collaboration with private enterprise is not only inevitable but is moving apace to align with Agenda 2030. Collective action will not only synergise but accelerate innovation in today’s increasingly digitising world economy. Statements from Financial Times chief economic commentator, Martin Wolf, back in 2003 resonate about the contribution of industrial policy to innovation: “Growth and output per head determines living standards. Innovation determines the growth of output per head. But what determines innovation?” “Yes, innovation depends on bold entrepreneurship. But the entity that takes the boldest risks and achieves the biggest breakthroughs is not the private sector; it is the much-maligned state” quoting Mariana Mazzucato’s “The Entrepreneurial State”. All Commonwealth countries, some of which are cited above, are acknowledging that “the failure to recognise the role of the government in driving innovation may well be the greatest threat to rising prosperity.”[21] To avoid extreme interpretations, readers should not be myopic to view the public service by itself as the panacea of innovation and prosperity. Rather, the balancer lies in coming to terms collectively with the distinct limitations faced by non-US and non-European social democracies or simply, geographic and historical contexts not covered in the analysis of Mazzucato, among others. Can governments and the public service effectively create innovation, identifying specific innovation outcomes and implementing them independently, or are governments better at implementing interventions that create spillovers that then shape a conducive environment for innovation? Choosing a direction for innovation (aside from the military and security sub-sectors) as well as being the visionary of disruptive innovation can be two mutually reinforcing roles that policy makers, technology research and development literature will have to explore in more depth.
[1] Source: UNDP website: http://www.undp.org/content/undp/en/home/sustainable-development-goals/goal-17-partnerships-for-the-goals/targets/
[2]  Source: Global Innovation Index (2016): http://www.wipo.int/pressroom/en/articles/2016/article_0008.html
[3] Source: http://www.playpumps.co.za/
[4] Source: Regional Public Private Partnership Support Facility: http://www.caribank.org/programmes/ppp
[5] Source: https://assets.kpmg.com/content/dam/kpmg/pdf/2015/06/public-private-partnerships-june-2015.pdf
[6] Source: Infrastructure Australia, Australian Infrastructure Audit: Our Infrastructure Challenges (April 2015); World Economic Forum. The Global Competitiveness Report 2014-15 (September 2014).
[7] Source: http://www.worldbank.org/en/news/feature/2016/04/07/three-trends-on-public-private-partnerships-in-the-caribbean
[8] Source: http://ppp.worldbank.org/public-private-partnership/sites/ppp.worldbank.org/files/ppp_testdumb/documents/uganda_the_public_private_partnership_act_2015.pdf
[9] Source: https://www.adb.org/news/adb-welcomes-new-public-private-partnership-act-png
[10] “Expanding and Enhancing Public and Private Co-operation for Broad-based, Inclusive and Sustainable Growth,” a joint statement for endorsement by representatives from the public and private sectors at the 4th High Level Forum on Aid Effectiveness, 11 November 2011, http://www.oecd.org/dataoecd/25/36/49211825.pdf.
[11] Source: Ministry of Finance, Planning and Economic Development: A Pipeline for Public-Private Partnership Projects in Uganda. http://www.perds.go.ug/ppp/index.php/publications/book/2?page=1
[12] Source: https://sustainabledevelopment.un.org/content/documents/1687PLATFORMS%20for%20partnerships.pdf
[13] Source: http://www.un.org/en/zerohunger/pdfs/Project%20Laser%20Beam%20-%20Final%20Report.pdf
[14] Source: http://www.scottishfuturestrust.org.uk/
[15] Source: The Canadian Council for Public Private Partnerships: http://www.pppcouncil.ca/web/About_Us/web/About_Us/About_Us.aspx?hkey=98be3d80-2b17-4dab-800c-63bcffe76aa7#sthash.o8TMjrYY.dpuf
[16] Source: http://www.ukas.gov.my/web/guest/objektif
[17] Source: http://www.partnershipsbc.ca/files/documents/pbc-disclosure-guidance-19jan10-update_000.pdf
[18] Source: http://pubdocs.worldbank.org/en/773541448296707678/Disclosure-in-PPPs-Framework.pdf
[19] Source: http://www.mhss.gov.na/files/downloads/c68_PPPF_A5_Booklet_Correction_REPRO2.pdf
[20] Source: www.mof.gov.na
[21] Source: https://marianamazzucato.com/wp-content/uploads/2013/08/ft-wolf-review.pdf