P3s: What Does It Mean To The Poor-A Quick Glimpse- Tips and Thoughts

Now the buzzword in the blogosphere for Public-Private Partnerships (PPP), P3s have re-emerged as a result of the global economic crisis and as one of the fiscal reforms adopted by certain Governments throughout the globe, primarily to expand needed infrastructures and generate revenues for priority expenditures, among other objectives.

I came to know P3s when I used to head an office on an ad-hoc basis which serves as a technical staff to the Chairman of a cabinet-level policy making body overseeing privatization related matters.  It was during this time when the non-performing assets under the first wave of privatization have been bailed out and almost been disposed of.   The Government, in consultation with multilateral agencies, was exploring other possible options on how to attract foreign investors to manage and operate its existing public utilities which were in dire need of fresh funds to expand and enhance its operations. Additionally, these corporations posed as major factors for the persistently large budget deficit purportedly due to mismanagement and bad policies, which turned out to be a major problem not only to the Government but to the entire economy as well.

P3s are simply one of the privatization strategies under the third wave of privatization. In the 90’s, P3s would normally involve large scale transactions and initiatives meant for big-ticket public utilities in the water, power, transport, airports and the like. It could be undertaken via joint venture arrangements, build-operate-transfer schemes and its variants, including financing through the private sector or individuals (e.g. bonds). It differs from privatization, in its strictest sense, as the latter primarily involves a full or partial transfer of ownership, management or operation of state-owned assets or shares of stocks to the private sector with the view that the latter can effectively and efficiently handle and operate said assets and companies. Just like in the fashion industry, privatization has latest trends and innovations and in this case, P3s are considered as the avant-garde and arty ways of allowing the private sector to build, manage and operate the needed infrastructures or to engage in social services (health and educations sectors) in collaboration with Governments for economic development, so to speak. Through the years, P3s have evolved and these days, they  are also being employed for other non-public utility, small and medium scale  transactions (i.e. providing cheaper medicines, encouraging people to plant more, etc. ) which could likewise assist developing economies in meeting their MDGs.

So, how would P3s be part of the cause of the UN under its MDG?  Briefly, MDG Goal No. 8, Target 8f, calls for global partnership for development in cooperation with the private sector, specifically in information and communications. This is especially true and imperative in least developed countries where information technology and telephone systems are lacking but are  essential to effectively address key humanitarian challenges such as health, education and other social services. The US Government and other more affluent nations like the European Union, in partnership with the UN and other private foundations have started and continued to encourage initiatives that supported the MDGs by reducing child mortality through immunization, improving maternal health, preventing malaria deaths, launching state-of-the-art information and communications technology, promoting opportunities for adolescent girls in the developing world, and helping the poorer nations to have access to clean energy. However, despite these aids from rich donor countries and private foundations and agencies, the developing countries are still struggling to overcome global challenges and meet the MDG targets. Hence, the need for developing economies and its Governments at all levels to strive to attain the MDG via P3s for the people’s well being.

While socio-economic development is the primary responsibility of the Government, the private sector and likewise the citizenry can also make the first move to complement the efforts of the Government, specifically on areas of healthcare, education, pension funds and other socio-economic services. On the other hand, there were instances wherein even if the Government and the private partners are willing and able to institute and implement changes but if the majority or the affected people cry no, consequently the purpose is defeated. There will always be skeptics and oppositions along the way and as such, it is always best to gain public support and acceptance for such complicated and large scale financing arrangements especially in the provision of social services. Thus, I believe that all stakeholders should be involved in this undertaking coupled with appropriate policies, transparency and disclosures and right directions to make P3s-related activities successful.

Public-private partnerships in industrialized countries like the US have been proven to be advantageous and essential in helping the poorer nations. As a matter of fact, NYC area alone has thousands of large and small non-profit organizations and foundations which help or even initiate various socio-economic projects in least developed economies. The UN Foundation itself have had successful partnerships in the past embarking on P3s, making both the public and the private sectors work together through them. One of its recently launched project is the Girl Up Campaign which basically helps adolescent girls in developing nations in certain areas such as health care and life skills education to keep them from violence. The Girl Up Campaign has adopted a unique way of partnering with the private sector, not under the traditional “corporate partnership” but thru other means. Under its existing set up, American girls are given the opportunity to interact with their counterparts in the other side of the globe who are not as fortunate as they are. This is just one example of a PPP activity undertaken by a large organization, like the UN Foundation. However, it is also equally worth noting that there are small non government organizations here in NYC which have been actively helping families in poorer countries even before the formulation of the MDG. One case in point is the advocacy of Orphans International which, for the past years,  has partnered with corporate or individual donors to provide monthly stipends for the financial, health and educational support of certain poor families of the orphaned child in a developing country. Orphans International  has been able to send orphaned kids to school, including after school tutoring and has provided decent shelter to them. It also exposed the kids to information technology from around the globe via the internet. This is also one excellent way of achieving certain goals of the MDG.

While providing aid and delivering the needed social services to poor countries are laudable, it may be necessary to monitor the progress of said donations, particularly on how it helps the marginalized groups. Otherwise, the benefits of P3s may not be received and felt by the lowly and the disadvantaged, especially if “chunks” of foreign assistance are being wasted or diverted to few people’s pockets.

 In my involvement on privatization for the past decade, the private sector investment have had contributions to economic growth in a developing country, including, among others, deepening the capital market, generating revenues, broadening ownership base, attracting foreign investors, which leads to generation or increase in employment . In the same manner, private sector participation related activities especially in the water and the power sector have provided enhancements, although there were some hitches and perceived anomalous transactions found down the road ( I refrain to elaborate on this, in the next succeeding blogs perhaps). While water and electricity were serviced to the poorest sector of the urban community, the impact on their lifestyle was minimal as the provision of said services was limited. On the part of the Government, there were financial and related risks (e.g. market risks, foreign exchange risks, and other negative shocks) associated to said P3s, leaving the Government shouldering the bills and the public consumers paying more, especially if government guarantees have been provided!

The benefits of P3s could have fruitful impact on and could be meaningful to the lives of the poorer sector of the society if the proivision of social services is done propery, as earlier mentioned.   The payback of P3s are evident and clear to the poor if: a) they will have access to communications technology so they can easily be in touch with health services; b) they will have access to energy that will make them productive and that the poor children can study their lessons and do their assignments at night; c) they will have access to farm- to-market roads so farmers can deliver their produce on time  and sell the same fresh to consumers, thereby earning more; d) they will have access to clean water and sanitation so as to prevent them from acquiring diseases and so on and so forth.

As previously indicated,  while the Government is accountable for delivering public services and infrastructure, the private industry has a crucial role to play in helping the Government steer the economy, much more in alleviating poverty thru designing and building the needed infrastructures and in the provision of social services sans guarantees from the Government.

With this, I say “kudos” to the private sector who has the genuine “heart and soul” to sincerely help the Government of poorer nations, ESPECIALLY to those with no hidden dubious agenda!

Please let me know your thoughts about this article. Thank you!