Public-private Partnership (seminar Presentation) (september'06)

Institutional Prerequisites for 3Ps in Developing Countries Submitted to The First Seminar of I2ED Research Team

Aung Kyaw Oo Ph.D. Student SNU-TEMAP September 12, 2006.

Reviewed Papers: (1)Dima Jamali, American Univ. of Beirut: A publicprivate partnership in the Lebanese Telecommunications Industry: Critical Success factors and Policy Lessons; Public Works management and Policy Vol 9, No. 2. (2)Axel Borrmann and Matthias Busse: Institutional Prerequisites of Economic Partnership Agreements; Intereconomics, July/ August, 2006. (3)Axel Borrmann, Matthias Busse and Silke Neuhaus : Institutional Qualities and the Gains from Trade; HWWA Discussion Paper 341. I 2ED First Seminar

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Reviewed Papers:

( Cont’d)


Werner Heinz: Public-Private Partnerships: Principles, Opportunities and Risks; Lecture given in AER CENTURIO INTERREG III Conference, May 6, 2005.
UNIDO: Building Productive Capacity for Poverty Alleviations in LDCs; The Role of Industry– Executive Summary, 2001.

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Outline









Definition Public-Private Partnership Institutional Infrastructure Past Experiences Prerequisites between partners PPP in developing countries Case Study : Lebanese Telecom Comments on Prerequisites for PPP I 2ED First Seminar

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Definition:
Institution can be defined as humanly devised constraints that structure political, economic and social interactions (North, 1990).


A PPP is an institutionalized form of cooperation of public and private actors, who on the basis of their own indigenous objectives, work together toward a joint target (Nijkamp et al., 2002).

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Public-Private Partnership A contractual arrangement whereby, according to a shared ownership agreement, the resources, risks, and rewards of both the public agency and the private company are pooled to create greater efficiency in the production and provision of public or private goods. The term classifies a spectrum of possible relationships oriented variously to the development and dissemination of wholly public or relatively private goods. I 2ED First Seminar

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Institutional Infrastructure ( UNIDO) Policy should focus on development of public-private consultation and partnership mechanisms, as well as fostering clusters and networking among enterprises both at national and international levels. This requires development of appropriate regulatory regimes, appraisal of existing institutional structures and firmand branch-level diagnostic surveys for promotion of international institutional linkages.

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Past Experiences:
Although private-sector participation is increasingly invoked in the context of developing countries, the success or failure of PPP projects has not been systematically assessed (Roseneau, 1999).
The opportunities and challenges posed by these new partnering arrangements have also not been systematically explored, including longterm benefits to participants as well as potential conflicts of interest and cost-shifting problems.

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Prerequisites between the Partners
Pongsiri (2002) emphasizes the establishment of a transparent and sound regulatory framework as a necessary precursor to private-sector participation in a PPP.
Commitment Symmetry, Common Goal Symmetry, Resource dependency, Intensive communication, and Converging working culture among others. ( Samii et al.,2002)
Partner Selection. ( Hagen ,2002)

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Investment in Developing Countries Applying PPP

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Case Study: Lebanese Telecomm: PPP

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Implementation of PPP :1994-1999
In 1994, two cellular operators were granted 10-year GSM concessions under a build, operate, and transfer (BOT) contract (with a possible extension of 2 years) that entailed an escalating revenuesharing scheme.

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Aftermath of PPP implementation
The alleged violations primarily relate to surpassing the 125,000 subscriber limit specified in each contract, unpaid fees and taxes especially for microwave links, and insufficient geographic and network coverage (Anchassi, 2000, pp. 53-55). The government has even threatened to cancel the contracts and seize the two companies’ assets if an agreement is not reached through negotiation. I 2ED First Seminar

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Aftermath

( Cont’d)


However, even the international consulting firm, Booz Allen and Hamilton, called on to mediate and interpret the contract, concluded that there could be two legal interpretations of the same clause. Excerpts from their report indeed confirm that, in certain respects, the terms of the contracts are not transparent and the impact of supervening law, documentation, and discussions not clear (Vance, 2000).
Not a single coordination meeting has been held between the partners since December 1998!
GL cancelled BOT of two operators in the late 2001 ahead of (3) years’ contract terms. I 2ED First Seminar

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Success from PPP

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Lessons Learnt from PPP MPT found responsible for supervising the BOT contracts that were granted to Cellis and Libancell overnight. MPT, however, was not ready for this responsibility. It did not have the technical/ organizational capacity to exercise adequate control and supervision over the newly established GSM concessions. The conflict arose that the operators have gone beyond the scope of the contract, which specified a maximum subscriber base of 250,000. The GSM operators also introduced a range of new services that were not foreseen in the contracts. (A. Oueidat, Director General, personal interview, July 21, 2002) I 2ED First Seminar

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Issues at Hand: Between the Partners
Conflicts of Interest-- informational confidential for proprietary reasons
Value for Money – Contentious –Performance measurement System by Procurer (e.g. performance, pricing, feedback from users, etc…)
Risks transfer lies at the heart of PPP-Technical, construction, revenue, operating, financial, regulatory, environmental, etc..
Regular and intense communication between the parties I 2ED First Seminar

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Partnership Results ???
This stream of literature generally indicates that partnerships are high-risk strategies, particularly at the level of implementation; however, the advantages and/ or mutual benefits, when successful, by far outweigh the risks involved (Hagen, 2002;Horton, 1998).

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Comments on Prerequisites for PPP
Technical expertise ( Fields of mutual interest).
Organizational Capacity ( Both parties).
Foresightedness in contractual terms ( Private actor).
Proper allocation of Risks.
Legal & Regulatory scheme should be done favoring one’s social groundings. I 2ED First Seminar

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Thank you. Q & A

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