PPPs as an option for development

Wednesday, 13 May 2020 00:00 -     - {{hitsCtrl.values.hits}}

The Government is currently looking at ways infrastructure development can continue without relying on public finance. As many already know the Government simply does not have the fiscal space to proceed with large-scale development programs and with an already-high debt situation, which has been made worse by COVID-19, it is clear alternatives must be considered. One option is Public-Private Partnerships (PPPs). 

Obviously there are obstacles to this, especially since the Government has demonised PPPs numerous times in the past as selling of state assets and conflated it with privatisation. However, infrastructure development is necessary for growth and if utilised properly it can be beneficial to the public and resolve many transparency issues usually connected to many large scale projects in Sri Lanka. 

It would also enable to the Government to be proactive in deciding what development projects to focus on based on the most returns to the public and the worries of unsavoury unsolicited proposals would also be addressed to some extent.     

In theory, PPPs make great sense. Today, PPPs are considered “creative alliances” formed between a Government entity and private developers to achieve a common purpose. But what Government ministers must remember is that this partnership is a process not a product. Successful navigation through the process results in net benefits for all parties and without buy-in from the public a successful PPP is impossible. 

The vision for the program should be the result of a consensus-building process that identifies the opportunities, objectives and ultimate goals for the community. The local government must consider and establish its long-range public interest goals and resolve any conflicts that it might have for the specific project in question. It is essential that the overall development strategy is described both verbally and graphically to ensure that both the public and private partner understand the program.

It is also important to manage expectations. During this stage of the process, establish a schedule that clarifies the expectations of the public decision-makers. It is a good idea to craft a public awareness program to inform stakeholders of the goals of the development strategy and the specific projects that are identified. Bridging the trust deficit is the biggest challenge of all as many do not distinguish between PPPs and privatisation. 

Tabling agreements in Parliament, getting independent valuations and dealing with credible companies will be essential steps to ensuring that PPPs are done in the best interests of the country. Unfortunately, without clearly identifying what investment is needed, the projects and what returns it will bring the Government runs the danger of increasing debt and allowing loopholes for corruption. 

As Sri Lanka considers the bleak prospects for growth this year it must also remember that there are underlying reasons as to why the country has performed badly in Foreign Direct Investment (FDI). Reforms to improve FDI are hard and there is ever-growing competition for the few fresh opportunities created by COVID-19. 

These are all excellent reasons for the Government to consider PPPs, even if they will not be called so. Already this week President Gotabaya Rajapaksa has chaired a meeting with relevant State departments to see how they can streamline project oriented development programs but going down the road of more debt is an unsustainable one.