Towards a New Model of PPPs: Can Public Private Partnerships Deliver Basic Services to the Poor?

M. Pérez-Ludeña
2009

Summary

This paper from the United Nations Economic and Social Commission for Asia and the Pacific examines the difficulties of reaching the poor through Public Private Partnerships (PPPs). However, case studies show that ‘pro-poor PPPs’ are possible; they need to incorporate some of the strategies and methods of the informal sector, and include civil society organisations among their partners. Governments should adapt regulations to accommodate these arrangements and encourage the participation of private companies, NGOs and community organisations.

A PPP is an agreement between the public and the private sector for the construction of public infrastructure or the delivery of a public service in which resources, risks and responsibilities are shared among both partners. PPPs are a way of combining the social responsibility and public interest of the government with the efficiency, management and financial resources of the private sector. This paper focuses on the water sector but its implications are relevant to other basic services.

Since the early 1990s PPPs have been frequently implemented in developing countries, but their capacity to bring water and other basic services to the poor is viewed as questionable and their popularity with governments (and voters) is low. The regulatory framework for PPPs in most countries has been perceived as inadequate or inconsistent and this has deterred investors to these industries. Some ‘pro-poor PPPs’ have, however, combined the capital, technology and managerial capacity of formal companies with the informal sector’s ability to reach the poorest customers. 

The function of the public sector partner in a PPP is to look at the broader interest of the community and defend the long-term public interest. In pro-poor PPPs, a community organisation or an NGO can be the public partner or perform some of the roles traditionally played by government agencies. Further findings are that: 

  • The most effective way to ensure that a PPP in water will benefit the poor is to engage the poor themselves in its design and management. NGOs can help to engage community organisations.
  • In many of the cases documented, an NGO has developed the idea and convinced other partners to join. This role may be centred on a single person.
  • If private companies are to be attracted to the provision of water to the poor, they will need to be convinced of its profitability.
  • Although most of the cases have benefited from some external aid or subsidy, this was typically provided as a start-up grant; they all rely on the principle that the poor can pay for the services to make this approach sustainable.

These practices have introduced new institutional arrangements that extend the market for basic services to areas previously served through imperfect informal mechanisms or not served at all.  The main challenge is to expand the coverage of such initiatives, mainstream them into national policies and implement them on a wider scale. Implications include the following:

  • Local actors must be given the space to pursue these initiatives.
  • National governments should create a conducive environment for pro-poor PPPs by improving the general investment environment.
  • Governments should adapt the regulations of the water sector to the conditions of small-scale providers and poor users. Many of the poor, for example, have no legal title to their houses, so government regulation needs to respond flexibly.
  • Lessons learned from pro-poor PPP cases that have been tested and proved to be efficient and sustainable should be disseminated. 

Source

Pérez-Ludeña, M., 2009, 'Towards a New Model of PPPs: Can Public Private Partnerships Deliver Basic Services to the Poor?', UNESCAP Working Paper, United Nations Economic and Social Commission for Asia and the Pacific, Bangkok.