Public-private partnerships: Promises, problems, prospects
A pillar of the Aquino government economic plan is PPP (referred to in other countries as P3 or P cubed). In a number of discussions with friends and colleagues from different circles (including members of our college student population and many in the skilled work force) on PPP, it is clear that most Filipinos have only a rudimentary understanding of PPP, that understanding being summed as follows: The government and the business community collaborate to build and/or provide needed public infrastructure and/or services.
Many remain inadequately informed about the nature, the definitions, and conditions of these proposed partnerships, and remain unclear about what such partnerships may involve. Many have heard the praises for PPP as our way ahead. Still others point to the hesitation that even national leaders (notably Secretary Mar Roxas) express of PPP. Others have heard of specific objections not so much to PPP as a concept as much as the way people seem to unthinkingly accept it as a panacea.
Given these, I thought it prudent to do some research into PPP and share the results in the hope that it will clear many issues regarding PPP, and get us to move faster in appropriately using it to get economic activities going in the direction we wish these activities to go.
In “googling” for material on PPP, I came across an article by Nilufa Akter Khanom in the International Review of Business Research Papers (Volume 6, Number 2 July 2010, pp.150-163) titled “Conceptual Issues in Defining Public Private Partnerships.” Among the many I found, this was the most concisely informative. What I read I tried to summarize below.
1. PPP has become widely accepted globally and is popular in public sector management where it is seen as serving several ends.
2. It came out of an earlier (1980s) movement known as the “New Public Management” (NPM), itself part of the bigger “reinventing government” movement which had its beginnings in the 1970s.
3. The “reinventing government” movement involved privatization, the use of market mechanisms, contestability in the delivery of public goods and services, deregulation and the reinvention of the role of government (this writer thinks there was the evolved perception that government, especially in the developing world, was not delivering the goods and services efficiently, if at all, either because of insufficient resources or the inability to function efficiently).
4. NPM shifted the focus from “public service” to “service delivery,” which meant public services need not be delivered by a government entity but whosoever could do it efficiently and effectively.
5. There is, however, a controversy over what PPP is, and what it involves.
6. It is seen by some as a tool of management and governance; by others as a financial arrangement; still others see it as a tool for the development process; while some skeptics see it as a “word game,” aimed at making privatization more palatable to those who fear “privatization” or “contractualization.”
7. As a tool for management and governance, the varied definitions contain three common features:
A. There is cooperation over a considerable period because of the nature of the projects that typically use PPP;
B. Risk-sharing and other forms of sharing (knowledge, skills, resources) figure prominently in the models; and
C. A product or service needed by citizens is jointly produced, and implicitly, all parties stand to gain from its sale or provision.
8. PPP is also often used as a tool for financial arrangements. Out of the continuing mutations within ever-changing contexts have come our “special purpose vehicles,” for example. Other tools that have evolved included:
A. BOT: Build-Operate-Transfer (the most common form these arrangements take);
B. BOOT: Build-Own-Operate-Transfer; and
C. BOO: Build-Own-Operate.
9. PPP is also seen by many as a tool for the development process.
Given the complexities and the immensity of the development challenge, PPP models as tools of development have four common characteristics that make them attractive.
A. They focus on the common objectives of the collaborators developed typically through communications, dialogue and negotiations—hence the perception that objectives are mutually acceptable and that promised rewards are deemed fair by everyone;
B. The agreement reached means there will be specific commitments from all parties involved;
C. The collaboration will involve the recognition not only of the strength each partner brings to the collaboration but the weaknesses as well. The collaboration must be designed to strengthen each partner’s weaknesses by the others; and
D. The variety of stakeholders involved—from business people to government bureaucrats to NGOs to communities, etc.—assures a built structure for checks and balances. (The last statement does not guarantee that the structure will work as desired. That will have to be properly planned.)
10. Lastly, there are many who see PPP as a “language game,” as re-labeling certain socially less palatable concepts to make them acceptable, even desirable.
The label PPP is seen as a deliberate attempt at obscuring the real nature of the intervention, which is privatizing or “contracting out” a government service and/or replacing a public organization.
So PPPs are not a one-size-fits-all tool that one can use on a variety of different projects. The choice of a PPP mode must take into account the nature of a project (whether it is the construction of a facility or the provision of a service, or both), the ultimate beneficiaries and/or users of the project (whether it is a toll road in a relatively prosperous area or a farm-to-market road in a poor area), and a number of other considerations.
From the descriptions available, it is clear that PPPs are mutable by nature and the forms they take will vary according to the nature of the project and the desire of the collaborators, mutually agreed upon.
It becomes clearer why the PPP, heralded by BSA III (P-Noy) as the tool that would spur the economy, has not worked the speedy wonders that many expected. Improperly conceived and faultily implemented, PPPs could result in monumental failures, wasting precious scarce resources and damaging public goodwill.
It will be good for the government and its PPP partners to approach it with cautious urgency, publishing the conditions for a chosen PPP and reporting its progress as the projects move along. This way, people are kept abreast that, indeed, things are moving in the right direction along the straight and narrow path as promised in 2010.
(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is chairman of MAP PPP committee and professor at the Asian Institute of Management. Feedback at [email protected]. For previous articles, visit <map.org.ph>.)
