02 Oct 2019

CAN PPPS HELP GOVERNMENTS DELIVER THEIR DEVELOPMENT PROJECTS

Dr Mohan Kaul, President of the Indian Professionals Forum and Executive Chairman of Global Investment Advisory Ltd.

This month saw Uganda host its first-ever high profile Public-Private Partnership (PPP) conference with a focus on infrastructural development. At the same time, The Dubai government's Department of Finance has set up a new public-private partnership unit, which will encourage the development of projects and initiatives that can be funded by global infrastructure investors.

Increasingly, governments are seeking novel ways to fund development projects. The reason being government budgets are shrinking. They need to allocate funds for everything from education, healthcare, police, to infrastructure. PPPs help governments address this challenge.

PPPs are a cooperative arrangement between Governments and private sector or Non –profit sector for building long term infrastructure. It is an efficient method that allows governments to procure major infrastructure and social projects from project developers and investors who design, build and then manage facilities for periods of up to 30 years in return for revenue generated by users of the asset.

Investment in Public Sector infrastructure is seen as an important means of maintaining economic activity. PPPs can offer significant returns and have been important and very effective in building physical infrastructure in roads, railways, airports, electricity, and water.

Certain sectors attracted significant interest in the UK. In fact, electricity distribution companies and drinking water companies were the first waves of companies for privation in the UK.  In some cases, a government transfers the exclusive rights to a private operator or an investor to develop and operate an infrastructure under certain conditions for a fixed period of time. In some sections, though,  it is being felt that the share of private-sector profit is more than the benefits received by Governments.

However, it has been proven in many cases that PPPs can deliver results to populations at least cost and least time. Thames Water was identified as one of the most successful PPP when it started but lately it has come under criticism.  

For private sector companies, the challenge is to estimate correctly costs of operation and time of completion of the projects. Many infrastructure PPP projects have revised the estimates of cost and time of completion after implementing the project.

I personally have seen the PPP model succeed in the Education and Health care sectors, both in developed and developing countries. PPP in health care in China and India alone is likely to be in the order of $70 trillion in the next 10 years. There is a great opportunity here.

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