Report: Challenges, Importance and Risks of PPP
Public Private Partnerships are often seen as a viable option for ruling
bodies to amplify their productions prowess and strengthen
infrastructure, formulate new cost saving mechanism, expansion of
service providing ambit and to have two different spectrum of market to
come together and elaborate open a contention that can bring about a
productive change for either side, made possible because of converging
goals for both, the public and the private sector. It is important to
understand how both these elements of a societal modal play their
significant roles in boosting the economy.
Albeit like many almost all things present in our world, physical or
metaphysical, PPPs come with some very evident challenges, risks and
also features a great deal of promise when it comes to development of a
third world nation. The goal of a PPP or P3 is very simple and succinct, to
provide a service to the local public or populace in a more competitive
and cost effective manner. The description is rather simple but the inner
dynamics of how a PPP operates or functions is not as simple, rather it is
a bit more complex side of the equation.
Challenges:
Due to having such an unnatural hybridization of both the economic
ends, PPP’s have a lot more new challenges that may or may not be
conventional. As PPP’s are more inclined to ushering growth and
building and strengthening infrastructure on a faster pace due to
combined access of both public and private firms and/or multinational
organizations to provide a service to locality. The first challenge that a
PPP faces is an internal one, with two different sets of governing bodies
which take roots from two very divergent and distinctive systems, it is
difficult to keep track of the flow of command. Having two different
streams of command hierarchy is one of the most fundamental aspect
that brings down a PPP. This is due to so many factors and/or
stakeholders being in play. When the number of manipulators increase it
is arduous to keep track of the initial goal and it sooner or later becomes
a game of personal incentives and bias - which heavily effects, either the
service quality or the cost of that service; in either case defeating the
purpose of the hybrid body. Thus it makes it more of a bureaucratic
issue where the hierarchy is at the play. Hence the most often
encountered challenge in PPP’s is the chain of command; who gets to
play who; what amount of power lies with which sector. A tip on either
side, be it public (read: Government) or the private sector, both can
have gruesome consequences for the other. Hence, a neutrality is to be
observed in the entire framework.
Another challenge that most PPP’s face is to continue providing with the
service they have started, as soon as the private sector gets involved in
the grand design of things, key players are changed. Key players become
cost-effective and a more capital oriented thought pattern towards the
service that is being provided which means poor people have to take the
short end of the stick, as they do not substantiate to the maximized
return of the investment made by the private sector. This creates serious
issues of prejudice and partial treatment of people who are better off.
Fair treatment is to be observed. Another major challenge that is up on
the road for a PPP.
At times, going for least investment and maximum return ideology,
products and services are compromised on some end, resulting a poor
performance and an inherent implosion of the original notion. Thus, it is
important for a PPP to maintain and align its interest between the
private and public sector as to not have a backlash on the service or
product that is being offered or created.
One more challenge that is of utmost importance within context of
Pakistan is the exploitation and loopholes present in the legislature with
regards to a PPP. Due to its ambiguous nature, a PPP is quite prone to
being taken advantage of in numerous ways, supplementing it with a
system that is infested with corruption, power exploitation and exercise
of unlawful means, the scenarios become all the more convoluted due
to various sectors being intermingled and present in one body. Thus, a
strict legal system policy is required in this domain to regulate the
working body of a private public partnership.
Importance:
A Private Public Partnership has a number of reasons as to why it is
important in our era, even more so in a developing state that needs to
restructure its infrastructure at a faster pace than normal. As private
sector mostly has the expertise need and the investment reserves that
can hire people that are exceptional at the task at hand, it gives a PPP a
lot more opportunities to complete the project faster and more
competitively when compared to a project being handled solely by a
public or a private sector alone. While on the other hand the public
sector provides with the necessary public data and the grand scale that
particular, expertise can show its potential to. It will be cumbersome for
either of the one sector to handle the entirety of the task thus takes
them more time. Due to this hybrid model, a lot of time can be saved
and projects end up more competent and finished without delay, Which
is very much need in a country like Pakistan, where a large amount of
projects are never completed and the ones that are taken to the end,
either are severely lacking in the service they are supposed to provide or
are inherently not functional enough to deal with a big mass.
A major advantage of using a PPP system is its ability to give chance to
new and unexplored ways of progressing things mainly due to the
financing approaches that are made feasible because of two entities
working collaboratively. This gives a breeding ground for more
revolutionary projects which at times focus on the innovative aspect of it,
something that new developing states like ours need to work on badly as
the market trends are always shifting and looking for something new,
additionally catering to the demands that the masses half for new
services. This also highlights a PPP’s importance to create an importunity
for a market gap.
In a Private Public Partnership system, the return of investment or ROI is
more coherently dealt. In fact, in projects related to PPP’s the ROI is
usually greater than the normal projects. This is due to the scale
expansion and highly specific individuals working on things they excel at
comes into play. When the quality of service being provided is good and
it is also in a bearable cost margin, it is bound to be a success among
locals and hence be a lot more sustainable and long lasting when
compared to projects that are normally put out - indirectly creating
greater depths for revenues that can be generated out of it.
Due to proper risk management, cost appraisals and funding from
private sectors, it becomes evident that ridiculous government projects
will not be entertained that are based on false promises. Hence acting as
a checking parameter that does not let falsehoods to flourish.
RISKS:
There are a lot of risks involved when it comes to the formation of a
Private Public Partnership, and that is due to its very complex mixture of
two distinct identities it persists upon.
Major risks involve the control factor and the struggle for it between
both sectors. Private sectors will only do work for what they are being
paid to do so. Any further assistance would either be costly or not
offered to occasionally. This creates a very steep unbalance in the power
that is present on both sides. The control here strictly lies with the
private sector at it is manipulating the terms as public sector
(government) is dependent on them to complete the project. While also
being held responsible for the project and continued up to the mark
quality of the services, hence creating a long lasting responsibility solely
on the government and it will be either criticized or be held responsible
by the common people. Creating an inward flux for the government
from which it can not get out without taking considerable damage on its
credibility and competence.
As private sector has more individuals who are more experienced and
competent, its very likely that they are the ones manipulating or
dictating the terms when it comes to handling the data regarding a
particular project, which provides them with leverage on public sector that is the government.
Public Private Partnerships are difficult to form because there is
considerable amount of lack in the legal regulations that are present for
them. As PPP projects are mostly long lasting, it is almost impractical to
prepare for all the contingencies that can become relevant in the future,
and as PPP is mostly contract based, it puts either side on a considerable
amount of a risky ground where the contract policy might get exploited
in either the private sector’s favor or the public sector’s.
In conclusion, PPP is imminent when it comes to the current times of
economic struggle, but like any other, it has its fair share of
shortcomings that need to be addressed, for it to function in a
productive manner that is beneficial to the all the relevant bodies
involved - a challenging task but not an impossible one. To do so
Pakistan itself needs to reaffirm its positions and the things at stake and
restructure its policies regarding Private Public Partnerships, to stand a
chance in the global economics.
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Ppplrc, . 2019. Public Private Partnership Legal Resource Center. [Online]. [22
April 2019]. Available from:
/public-private-partnership/overview/ppp-objectives
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Izzud din. (2009). DAWNCOM. Retrieved 22 April, 2019, from
http://www.dawn.com/news/966126
Ppplrc, . 2019. Public Private Partnership Legal Resource Center. [Online]. [22
April 2019]. Available from: /public-private-partnership/key-issues-ppps-poor