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Aligning the public-private knowledge asymmetry for successful partnerships

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The universal discourse around the issue of infrastructure deficit within Emerging Markets and Developing Economies (EMDE) has gained considerable traction, particularly over the last few decades. The ability to attract financial investments in developing economies, and particularly in Africa, has proved daunting mainly as a result of insufficient infrastructure. However, infrastructure in itself is an investment which has equally proved daunting for governments in such countries to undertake, given the sheer financial and technical requirements.[1]

Indeed, Africa’s absolute and relative lack of infrastructure points to the existence of untapped productive potential, which could be unlocked through scaling up investments in the sector.[2] According to a recent report issued by the World Bank[3], sub-Saharan Africa lags other developing regions in virtually all dimensions of infrastructure performance. Efforts to track and address some of the germane causes to the global infrastructure imbalance between developed and less-developed economies have resulted in some commendable reforms to institutional and legal Public-Private Partnership (PPP) frameworks across many EMDEs. And though advances in reforms during recent years are impressive, they have yet to commensurately translate to the desired private sector financial investment in infrastructure, owing partly to the weaknesses in the capacity and processes to deliver PPPs within these frameworks.

The concept of private participation in public sector infrastructure projects has been in existence for centuries. Research reveals that the Brooklyn Bridge in New York City was built with private sector capital as far back as 1883.[4] Since then, and especially from the 20th century, PPP, as a model for delivering and managing public infrastructure projects, has developed and refined in scope and practice. Much of government motivations for private sector participation – private sector finance and efficiency – have guided the use and preference for PPPs in both developed and emerging markets and have given rise to initiatives to stimulate private parties to invest their resources in public infrastructure. But in a growing number of cases, especially within developing economies, the optimism accompanying the choice of PPPs is often dashed either by the public sector’s inability to develop sufficient pipeline of bankable projects or by project failures due, substantially, to distorted understanding or application of PPP solutions.

PPP expertise is not readily available within the public sector, predominantly amongst developing countries.[5] This lack of adequate public sector capacity and experience has blighted many otherwise promising PPPs across EMDE. Furthermore, innumerable data indicate that inadequate capacity is the foremost intangible constraint to the public sector’s ability to respond to the demands of preparing and delivering successful PPP projects in emerging market economies. The private sector is almost always several notches ahead of the public sector when negotiating PPP arrangements and contracts[6], which often leads to the question of loss of value for money for the public sector.[7] As noted in The Farrell Review on Public Service,[8]  “the widening skills gap between the public and private sectors is as much about the quality and type of expertise than the quantity of staff”. To further underscore this point, the Review noted that, it is the people rather than the policies that make the biggest difference at a local level. Crudely put, good people can work round bad polices but good policies cannot work round bad people”[9]. The forgoing reasoning is extremely logical because PPPs, by their nature, require special skill sets that are distinct from the conventional skills usually available within public sector project teams. Governments seeking to realise their potentials to deliver economic growth through PPPs must therefore adopt a proactive and systematic approach to equipping relevant public officials.

A more subtle challenge with regards to delivering successful PPPs, however, lies within the theory of PPP in itself. For example, given the differing definitions and processes attributed to PPP by various institutions and resources, PPPs have come to invariably mean different things to different people. Consequently, governments sometimes embark on PPPs without due regard to jurisdictional nuances, leading to complications or associated project failures. The consequence of this misunderstanding of PPPs and misapplication of the PPP processes is often under emphasized when analysing the capacity gaps within PPP project teams. But it is conceivable that the asymmetries between private and public sector capacity, together with the distortions in understanding and applying the PPP solutions are risks which are almost impossible to hedge. This thought process considerably informed the development of the APMG-Certified Public-Private Partnership Professional (CP3P) Body of Knowledge (BoK), as the CP3P program aims to adequately equip PPP teams with the necessary understanding and create a consistency of terms, as well as a common PPP approach for PPP practitioners world-wide.

As PPP arrangements steadily gain momentum within African countries, and with governments in Africa, and other emerging market economy countries, increasingly adopting it as a model for the procurement of infrastructure facilities and related services, the CP3P provides an effective pathway to sustainable project success. The CP3P is even more relevant for countries contemplating PPPs or where PPPs are at the cradle stage. As aptly stated by the United Nations Economic Commission for Europe, (UNECE), “knowledge gap leads to the use of business proposals put forward by private companies that are ‘unsolicited’ by the public sector and which is not desirable as a method of (or reason for) launching a PPP[10]. Moreover, since it is the government, and not the private sector, that “fixes the parameters in which the partnership is formed[11], the government must take responsibility for equipping its PPP project teams with the capabilities to, at least, match those of the private sector partner. Simply put, equipping public sector project teams with the CP3P is tantamount to reassuring the potential private sector partner of the existence, within the public sector, of the specialist knowledge to assess and develop a business case for PPP projects; including the capability to structure, implement and manage PPP projects to successful completion.

Given the endorsement of the CP3P program by the World Bank and other multilateral partners, such reassurance is more certain to activate the attention and finance of the private sector to public infrastructure projects and services. The World Bank reports[12] that growth in the EMDEs is projected to reach 4.1 percent in 2017 and 4.5 percent in 2018, buoyed, amongst others, by infrastructure, stabilizing investment, and improving confidence. The CP3P provides a veritable springboard for actualizing the region’s projected economic growth, by retooling project teams and, in effect, boosting private sector confidence to undertake the necessary investments in infrastructure.

 

 

[1] In Nigeria, for instance, a ball-park estimation of the amount of investment required to expand energy generation capacity from 10 000 MW to 30 000 MW is between USD 25 and USD 30 billion. Anyanwu, J. C. (2009) ‘Public-private Partnerships in the Nigerian Energy Sector: Banks Roles and Lessons of Experience,’ in Tobin, J. B. and Parker, L. R. (eds) Joint Ventures, Mergers and Acquisitions, and Capital Flow. Nova Science Publishers, New York.

[3] World Bank. (2017, April). An analysis of issues shaping Africa’s economic future. Retrieved from http://documents.worldbank.org/curated/en/348741492463112162/pdf/114375-REVISED-4-18-PMWB-AfricasPulse-Sping2017-vol15-ENGLISH-FINAL-web.pdf.

[4] Earlier use of Concession in France in 1782 has been reported. See McCarthy, S. and Perry  J, (1989) BOT Contracts for Water Supply. London: World Water.

[5] See Herbert Robinson, Patricia Carrillo, Chimay J. Anumba, Manju Pate. (2010) Governance and Knowledge Management for Public-Private Partnerships. Wiley-Blackwell, U.K

[6] The Central Electric Authority (CEA) Report on India’s Dabhol Power Project stated in part that the “entire MOU was one-sided”. See Abhay Mehta (2000) Power Play: A Study of the Enron Project, p.28.

[7] One of the main reasons for cancelling the Dabhol Power Plant Project in Maharashtra, India was due to the overwhelming capacity of the private sector partner which resulted in the contract being greatly tilted in favour of the private sector partner.  

[9] The Farrell Review. 2014, p.149

[10] UNECE (2012) Introduction to Public-Private Partnerships: Can public-private partnerships improve infrastructure and deliver better public services, p.6. Retrieved from https://www.unece.org/fileadmin/DAM/ceci/images/ICoE/Introductionppp.pdf.

[11] Id. at p. 21

[12] World Bank. (2017, June). Global Economic Prospects: A Fragile Recovery. Retrieved from https://openknowledge.worldbank.org/bitstream/handle/10986/26800/9781464810244.pdf

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