By David Baxter
Today is a poignant day for me. Almost 2 years ago a colleague challenged me to write a thought leadership blog every week on Public-Private Partnerships (PPPs). I was skeptical at the prospect as I was not sure that I could achieve this objective. Notwithstanding, I set off down the path of personal exploration and discovery that has been rewarding as it has forced me to keep abreast of developments in the PPP world.
Surprisingly reaching this goal has been easier than I thought it would be, and also more difficult than I thought it would be. My biggest concern was what I should write about. Fortunately, my position as the Executive Director of the Institute for Public Private Partnerships (IP3) has given me ample opportunity to be exposed to the “World of PPPs” through consulting and capacity building activities that my colleagues and I are exposed to on a daily basis.
At IP3 we are privileged to meet and interact with PPP practitioners from around the world on a daily basis. We have met PPP practitioners from 175 countries over the years and what an enlightening experience this has been. I have also been fortunate to travel to Latin America, North America, Africa, Europe, and Asia, where I have been exposed to the common golden threads of PPP best practice, as well as the unique constraints of regions and countries.
Through this exposure, I feel that I have become a PPP scholar of the world. I have also learned a very practical lesson – the lesson of patient listening and learning. So many consultants often fall into a trap of being over enthusiastic about delivering remedies and solutions, without taking time to listen before leaping into imposing solutions on clients. I have been humbled by what I have learned.
No place has been too insignificant or too lowly to teach an “old dog new tricks.” I have collaborated with a large number of global institutions on improving PPP best practices. These include the World Bank, the Inter American Development Bank, the UNECE PPP Center of Excellence in Geneva, the ACEC-COPRI USAID PPP Working Group and the Istanbul PPP Center of Excellence, to name a few. The opportunity to learn PPP best practice through collaboration with PPP thought leaders in these lofty institutions has been enormous. However, I would also like to point out that collaboration opportunities with novice PPP practitioners in emerging economies and new PPP markets - who often struggle with limited institutional resources to implement PPPs - have often taught me incredible lessons in practical approaches to implementing PPPs. I have to point out that the enthusiasm of these practitioners is infectious. It continues to amaze me what so many of these PPP practitioners can achieve with so little support from their governments and the public agencies that they represent. So in this spirit of gratefulness I would like to thank those aspiring PPP practitioners from Myanmar, Rwanda, Uganda, Ghana, Bangladesh, and Mongolia to name a few, who have taught me that I have much more to learn about PPPs than I realized. How humbling and how rewarding!!
My colleagues have asked what are some of the highlights of the past two years that I would like to share. There are so many, but I will mention a few. Well, here we go:
- Many skeptics and naysayers have said that PPPs have had a good run, but are now becoming irrelevant. I strongly feel that they are wrong. The challenges that governments are facing to balance their budgets in the current global economic downturn has made them more reliant on private investor partners to support their national strategic goals of meeting the needs of their citizens. One does not have to look far to find examples of the need for partnerships between the public and private sectors where PPPs can play a significant role. A good example is the Saudi 2030 Vision, which envisages a greater role for PPPs.
- Many of my clients come from countries that have recently enacted PPP Laws through parliamentary acts to create stable PPP enabling environments. Countries where legislative actions have occurred include Ghana, Tanzania, Kenya, Uganda, and Dubai. These actions indicate that political leadership is increasingly realizing that if they are to attract investment in PPPs that they need an attractive investment environment that protects the rights of all parties.
- Many countries are now focused on improving their PPP practice and are forming centers of excellence that function as national and even regional capacity building institutions. An outstanding example of an institutional program is the UNECE PPP Center of Excellence program that is establishing satellite centers of excellence in participating countries that include the Philippines and the USA.
- many countries are now creating national PPP Units – often located in their Ministries of Finance or their National Treasuries. These important institutions are fulfilling an important role in ensuring that a national PPP practice is enforced that meets the requirements of PPP laws and which ensures that only bankable, viable, and feasible projects are considered for inclusion in national PPP pipelines. These institutions have created an environment of PPP practices that has tempered the tendency by national leaders to promote PPP vanity projects that have no merit and are unaffordable. The South African PPP Unit is one that has been recognized by its African neighbors as an exemplary institution that should be imitated. Hopefully the USA will consider establishing a National PPP Unit and explore ways to unify its fragmented PPP practice through a collaborative national practice leader.
- Over the last 20 years many countries have invested resources in training a cadre of public officials who are being tasked with building their skills to be able to implement successful PPPs. IP3 has been instrumental in training over 33,000 PPP practitioners from all over the world over the last 22 years and we hope to continue being part of this initiative for at least another 22 years.
- PPP practitioners are increasingly being innovative in developing PPP alternative funding methods. There is a plethora of PPP delivery methods that include BOTs, BOOs, and DBFMOs to name a few. This is encouraging, as every PPP project has its unique characteristics and financing needs that should not be constrained by unimaginative PPP models.
- As both the public and private sectors collaboratively engage in more PPPs, PPPs have become more mainstream. As a result, practitioners from both the public and private sectors have learned the value of true partnerships through common practice that they have experienced.
So much has happened in the PPP world that is encouraging. I would however be remiss to point out some areas that still need attentions. They include the following:
- Ironically, many countries that have implemented PPP laws do not have the institutional capacity to implement their own laws. This has led to inertia in many countries, which are unable to approve projects as they are unable to ensure that proposed PPP projects are legally compliant.
- Unfortunately, some countries are still facing situations where they are subject to interference from politicians for nefarious reasons. Hopefully, interference can be mitigated overtime by PPP laws and by programs that educate politicians to understand that PPPs cannot be political actions that are leveraged for party political gain.
- Many countries that wish to implement PPPs are facing budget constraints and an impatience to launch PPP projects. It is critical that they avoid the temptation to underfund project planning, financial analysis, and due diligence actions. If PPP projects are to be successful, it is critical that every effort is made to ensure that projects exhibit Value for Money (Vfm), have proven revenue feasibility, and are bankable. If this process is not appropriately implemented, it is likely that projects will fail in novice countries and sully the reputation of PPPs.
- For any country to develop a viable and sustainable PPP practice it is critical that PPP training is unequivocally supported. In the current global economic downturn it is important that every effort is made to enhance and maintain institutional capacity to deliver PPPs now and in the future. It would behoove countries to ensure that they are ready to embrace PPPs when the global downturn passes. It would be tragic for national leaders to neglect their PPP institutions only to find themselves unable to compete for investment in an increasingly competitive PPP world.
- It is important that aid agencies worldwide avoid calling partnerships between the public and private sectors PPPs if they do not include binding contracts. A partnership between the public and private sector is not necessarily a PPP. It is a partnership, which in many situations are philanthropic and do not require long-term financial commitment and sharing of risk which form the fundamental basis of PPPs.
- It is a pet peeve of mine when PPPs are equated with privatization. If you privatize social services or infrastructure, you take the public sector out of the equation and there is simply no longer a PPP.
It is difficult to share all the lessons that I have learned over the last two years. The lessons that I have learned – of which only a few are listed above – continue to convince me that there are many more to learn and share within the community of PPP practitioners.
In order to learn more through listening, I will be making a series of road trips to many countries in the next 12 months. In September, October, and November I will be visiting Ghana, Nigeria, South Africa, Tanzania, and Kenya to lead forum discussions on PPPs. These forum discussions will give IP3 alumni and PPP practitioners in the host countries the chance to share lessons learned and best practices. I know I will learn more at these events. Should you be close by please join us.
IP3 is also expanding its footprint in Europe and the Middle East in the next few months. Keep tuned. The search for PPP knowledge continues. Please check back in another two years or sooner when I have written another 100 thought leadership blogs to see what else I have learned.