Public Private Partnerships – Experience From The Field

Governments across the world especially in the Middle East are facing a dual challenge of meeting the increasing demands of public service and to maintain the quality of these services. In order to overcome these barriers, governments are denouncing traditional methods to accomplish the task and embracing new techniques and methods. One such method is to develop public-private partnerships (PPP) to deliver more efficient and effective services.

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However, just like all other methods, this is not a magic solution. It can work wonders for the governments if applied appropriately. But if it is abused, it can aggravate the existing problems and create new ones for the governments. The Middle East or MENA region is especially struggling with problems related to public services and therefore, it is pertinent to discuss how public-private partnerships help these governments to improve the quality of public service while meeting the increasing demands of the masses.

Middle East is planning to spend $1.5 trillion dollars on infrastructure alone over next 5 – 10 years. This simply means that the concerned government agencies should also have the necessary capabilities to deliver these services. It is also a fact that they cannot take on such a huge challenge alone and this is where private organisations can come to their rescue.

Historically, they have relied on public organisations to deliver the public services due to the nature of these services. However, countries like Saudi Arabia and UAE are adopting PPPs especially in their energy sector and very soon other sectors will follow suit as well. Similarly, there has been more contributing of the private sector in the transportation, telecom, water, health and education sectors in recent years.

Middle Eastern governments are following other countries especially in Europe and leveraging private sector to deliver assets and services in different ways. In recent years, governments have also experimented with privatising various public service departments and totally relinquish their control on such services. However, this has worked well only with handful of sectors while others are facing the same problem. As a result, governments have realised that they need to maintain the role in public service delivery by creating more public private partnerships.

In the context of above discussion, the following illustration shows how PPPs offer the best balance of asset ownership and risk for the government.

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Now the question arises why government adopt PPPs to deliver public service? They adopt PPPs for many reasons most important of which are economic, technical, fiscal, political and social reasons. For instance, PPPs usually result in fast and quality delivery of services. This results in quick economic growth and deepening of the markets. Similarly, PPPs raise the living standard of the people by delivering quality services while meeting all the community needs, having deep impacts on social behaviour of the people.

In contrast to complete privatisation of the public service departments or traditional procurement methods, PPPs enhance the efficiency while sharing equal amount of risk. The biggest advantage of relying on PPPs is that governments can select from several forms of PPPs schemes and cost recovery methods. The following illustration gives a brief introduction of all these schemes and methods.

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Last but not the least; governments need to develop an effective institutional set up along the administrative, legal, economic and regulatory environment before adopting PPPs. Similarly, they have to mitigate and manage different types of risks that PPPs entail. Governments also need to consider four general factors that are integrated business case, accurate long term planning, optimised risk allocation and transparency to successfully adopt PPPs and maximise their benefits.

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