Public Private Partnerships as a means of Developing Infrastructure

The PPP Model

The Public Private Partnerships or PPP are ventures where the government ties up with the private sector to execute projects for the public and the social sectors. For instance, it has become common in many developing countries for the government to collaborate with the private sector to undertake infrastructure and social services related projects. The reasons for the popularity of the PPP projects are that the burden of raising the resources falls equally between the government and the private sector.

In other words, for those developing countries where the governments are unable to raise resources because of lack of adequate finances, PPP projects are a boon as they can invite the private sector to share the burden of pooling the resources.

Further, the private sector is usually interested in the PPP projects as the risk of executing the project falls equally on the government and themselves which means that in case of non-performance and failure, they would not be held solely responsible. Of course, this can lead to other issues like blame games whenever something goes wrong but this is another matter altogether that would be discussed separately.

The Advantages of the PPP Model

The PPP projects have become a favorite means of getting social works executed especially those related to urbanization.

As the trend of more people living in the cities has increased over the past few decades and the world is increasingly urbanized, there needs to be provision for infrastructure projects and facilities to provide basic services to the denizens of the cities.

This means that public bodies like municipalities and city corporations have to undertake the mammoth task of executing projects in urban areas that stresses their finances. Moreover, they might lack the expertise needed to execute the projects. This is where the private sector with consortia of players drawn from domestic and international companies can play a catalyzing role in getting the work done.

For instance, it is common in many developing countries to have PPP projects because of the reasons discussed so far and the examples of the Delhi Metro, the Beijing Metro, and various highway-building projects attest to the success of the PPP model.

These projects secure funding from international agencies like the ADB (Asian Development Bank), World Bank and other governments because they are backed by the sovereign guarantees of the countries in which the projects are being executed.

The Disadvantages of the PPP Model

Apart from this, it is common for the PPP projects to involve multiple players because the expertise needed to execute the projects might not be available with a single player. Of course, as mentioned earlier, these aspects also result in delays and shoddy work because of the collusion of the governmental officials and the private players.

The private players are sometimes opportunistic and want to make quick and easy money as the government backs the projects. These disadvantages can be overcome by social audits of the projects wherein members from civil society, NGOs (Non Governmental Organizations) can monitor the projects, audit them for wastages, nature of work, and prevent possible corruption.

How the PPP Model squares up on Balance

Having said that, it must be remembered that the PPP model has worked in a majority of cases where political stability reigns as opposed to the projects in countries that are rocked by continuous instability. The reason for this is that many incoming governments often review the projects undertaken by the previous government and scrap some of them based on whims and fancies of the politicians. They also reprioritize the projects meaning that they do not extend full cooperation to the some of the projects. Therefore, a solution for this would be for the executing player to get all stakeholders on board in case of megaprojects so that any change in the political landscape does not affect them in a negative manner.

Finally, it is our opinion that the PPP model is the way forward for infrastructure projects in the Third World and any flaws in the design, execution, and operation of the projects can be rectified through consultation and arbitration.

❮❮   Previous Next   ❯❯

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to and the content page url.

International Business