CAN PPPS CONTRIBUTE TO SUSTAINABLE SOCIO-ECONOMIC DEVELOPMENT IN TURKEY?
I have been asked to participate in a discussion on the 5th of November, during the plenary session, at the Istanbul PPP Summit on the impacts that Public-Private Partnerships (PPPs) have on sustainable socio-economic development.
The socio-economic outcomes of PPPs have become a focus of the development community and have become an increasingly important agenda. One is inclined to assume that the focus on the building of national strategic infrastructure and the implementation of social services through PPPs projects has a goal - whether it is stated or not - of developing sustainable projects that will enhance the socio-economic welfare of the communities where they are being built. However, this is not an assumption that is automatically made by skeptics of PPPs.
Whether this implied goal is met or not, sustainable economic outcomes are critical to PPPs, as these often long term projects require economic success so that the goals of the public sector and the economic goals (financial profit) of the private sector are realized.
These aspirations can be observed in the varied approaches to and descriptions of PPPs.
The World Bank and its partners generally define a PPP as a long-term contract (which can be in excess of 30 years for large projects) between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance, with an eventual goal of the ownership of the asset returning to the public sector at the end of the contract.
In this description the agreement is a binding financial contract and is performance related (with financial implications for both the private and public sector partners).
On the other end of the PPP spectrum of definitions, USAID’s Public Private Alliance Program, for example, expands the definition further include partnerhips with the private sector to jointly design, fund, and implement alliances aimed at improving social and economic conditions. USAID’s approach includes the objectives of mobilizing ideas, efforts, and the resources of the public and private sector in collaboration with civil society to stimulate economic growth, develop business and workforces, address health and environment issues, and expand access to education and technology.
This description expands PPPs to include collaboration with civil society partners and introduces an element of corporate philanthropy and corporate social responsibility not typically included in PPPs as generally practiced globally.
Both approaches’ goals have merit, but differences in semantics and philosophical approaches cause confusion, which often results in naive societal expectations that are often unachievable.
It must be remembered at all times that private sector participation in public sector driven projects is ultimately driven by profit. On the other hand, projects that have socio-economic development potential often have agendas that are set by stakeholders that are often not driven by profit motives. This requires an approach that manages the expectations of the public and private sectors (and its partners) and civil society stakeholders regarding profit, corporate largess, and social responsibility if sustainable PPPs projects are to be developed.
We have to ask ourselves - Can we develop PPPs, which have favorable business terms (e.g. binding contracts, irrevocable long term agreements, positive outcomes, and space for profit) and yet also address civil societies expectations regarding sustainable socio-economic development (e.g. expanded social contracts, CSR, and environmental protection)?
I believe we can, if national PPP strategies include the following objectives:
- Carefully selecting of projects through rigorous due diligence processes that confirm feasibility and economic viability and which will pay for themselves
- Avoiding prestige projects that do not meet national socio-economic development goals
- Implementing PPP best practices to selected projects that will ensure that expected goals and outcomes are met during the operations and maintenance stages so as to ensure that the projects do not divert valuable financial resources away from critical social and economic programs that are not viable PPP projects
- Educating politicians and members of civil society on the appropriate economic roles and objectives of partners (the public and private sector) and societal expectations of stakeholders (NGOs and civil society organizations)
- Clearly analyzing projects to ensure that there is a defendable case for Value for Money (VFM) for proposed projects
- Ensuring that environmental and social safeguards are embedded in PPP goals, designs and specifications
- Enforcing tendering practices that are transparent and competitive so that corrupt practices are avoided that place stress on socio-economic development
- Encouraging the creation of an enabling environment by government that encourages the private sector to step up and contribute to the socio-economic development of a country
- Specifying contractual terms that require international PPP private sector partners to foster capacity building programs for domestic employees - especially on long term projects, thereby creating local jobs that positively contribute to the local economy
- Establishing clear criteria for government support of categories of social service delivery PPP projects that may require financial subsidies (e.g. healthcare, schools, prisons, etc.)
- Creating an positive environment of PPP policies (e.g. compensation for relocation for large projects, environmental protection, job creation, etc.) that encourage civil society support of PPPs
In Turkey there are numerous examples of PPP projects (with the goal of being sustainable) that are being planned because they will contribute to the to socio economic development goals of the government as a whole. These include transportation, power, and healthcare projects, which, if successful and economically feasible, should beyond doubt provide socio-economic outcomes that will contribute to sustainable development. These considerations listed above need to be built into the new Turkish PPP Law that is being considered at the end of this year.
There is no doubt that sustainable socio-economic development can be fostered by PPPs. There is one caveat however – PPP projects have to be successful as success will deliver on incentives to use PPPs to fill the infrastructure and service finance gaps that Turkey is facing. The added benefit of this approach is that if PPP goals are met, national funds can be freed up for projects that do not lend themselves to PPPs thereby introducing a multiplier effect that can boost socio-economic development.
See the original article: Can PPPs Contribute to Sustainable Socio-economic Development in Turkey?