The exponentially rising influence of private sector has led the country to the threshold of re-appraising the entire state structure
Chief Minister of Sindh, during his concluding address in the Sindh Development Forum on March 28, 2018 in Karachi, stressed the significance of public private partnerships in development sectors. There are many enterprises running in the province with active participation of the private sector, including mining coal in Thar.
Emphasis of the government of Sindh towards such a format of development management has evolved due to several reasons. It is generally believed that the capacity of public sector institutions has declined sharply, even in such domains where they were singular players. Under the overwhelming influence of corporate and venture capitalists, the Sindh government has been compelled to open up those sectors for entrepreneurship which were traditionally the spheres of operation in the public sector. And above all, there is a drastic paradigm shift in the organisation and working of the state. It is reducing its role from a provider and custodian to that of a facilitator! And the rules of the game obviously cannot be determined by the government alone.
The exponentially rising influence of private sector has led the country to the threshold of re-appraising the entire state structure under this visibly accepted paradigm shift. Many issues become crucial in this respect.
The context and background of public private partnerships has to be properly understood. A public private partnership is an institutional concept which was primarily introduced by international donor agencies as an alternative to straight public service provision. It exists in various forms and formats in different contexts depending upon the objectives of the project/programme, socio-economic conditions, and the institutional capacities.
Public private partnership, in a conventional sense, can be defined as a contractual arrangement between an agency or unit of the public sector and a private organisation for a defined scope of services. There are several pre-conditions that can lead to the public private partnership as a choice for service delivery or enterprise development. One, it requires recognition at the macro scale for it to be useful in service delivery. Two, it is normally effective in contexts where free market practices have a reasonable background. Three, it requires an aware clientele that considers the provision of an urban service to be a chargeable product depending upon the nature of production. Four, it needs a clientele that is socially and economically stable enough to pay for the services. And five, it needs a capable private sector that has the capacity to efficiently provide and sustain the contracted part of the service to the identified clientele.
There are several pre-requisites that are vital to be considered before a public private partnership approach is adopted. The experts, mostly international and hailing from corporate backgrounds, cite the existence of a favourable economic environment as one of the basic criterion. In conventional terms, it means that economic variables paint a rosy scenario. Low inflation rates, high GDP growth, rising real incomes, limited value of unemployment and inequality are the usual parameters.
But economists and experts from other domains agree that the stakeholders can twist and turn the value of these variables to suit their working agenda. Evidences from independent economic analysis carried out by research institutions have often validated this objection. What is more objectionable is the manner of economic decision making. Public private partnerships can be successfully created and function where the right institutions are involved in determining the priorities and choices after obtaining inputs from the concerned stakeholders. However, when the decisions are taken on a personalised basis bypassing institutions, the partnerships are not likely to sustain.
At present, an extremely centralised and non-transparent decision-making process is involved where neither the institutional viewpoints are incorporated nor any recourse to concerned laws is made. Any investor (including those who pretend to be one) seeks direct appointment with the chief minister. He arranges an attractive computer presentation for his proposed venture. Real estate, infrastructure, power, mining and investment are few of the usual sectors. If the CM (or those who matter at the CM House) is satisfied, they send the investor/venture capitalist to the leadership of the party. Once a nod is obtained from there, the decision is communicated to the concerned institutions, ministries and authorities to extend full cooperation to the ‘approved’ venture in the shortest possible time. Merit, transparency, binding rules and regulations are all mutilated in the name of ‘investment’ and progress.
Public private partnerships require corresponding inputs from several interest groups to make them sustainable ventures. The foremost among them are public sector institutions. As a norm, partnerships are created in a bid to hand over certain roles, responsibilities, services and opportunities controlled by public institutions to private groups. Institutional culture and psyche in our context is such that every public body wishes to acquire more and more control on various domains, even those that fall beyond their rational jurisdiction. As observed, the offers of partnerships are emanating from aggressive venture firms with little association with the local private sector. The sustainability of these ventures is greatly questionable because after the foreign groups would leave, the eventual responsibility to run the affairs will automatically fall on the local private sector.
The potential affectees in the process are not consulted in these decision-making exercises. Public criticism is on the rise on almost all such fiascoes and contractual arrangements. In other words, these partnerships are finalised as clandestine marriages of convenience rather than equal opportunity enterprises.
The Sindh government may consider using the partnership approach in a strategic manner. The input of private sector can be effective if applied to stimulate activity in dormant sectors. They can also be useful in creating solutions for non-conventional sectors such as housing for low income groups. An example of this partnership is the famous concept of incremental housing scheme created by SAIBAN — an action research NGO working on shelter issues. The partnership was structured with an objective to provide affordable housing to the urban poor in various cities.
By developing innovative solutions through research, the partnership demonstrated successfully that the needy people can be provided with housing effectively. Snags in allotment, speculation and affordability were successfully dealt in the process. While the partnership has been acclaimed as a worldwide success, it awaits the attention of policy makers and implementing agencies for the benefit of common people. Similar opportunities also there for public transport, environment friendly power generation technologies, water and sanitation as well as micro enterprises.
Merit in business and open competitiveness are two attributes which can be made the initiating virtues of public private partnerships. Whenever any contractual arrangement has to be finalised, it must be done through open invitation of proposals. This shall help build up the trust of stakeholders, break cartels and monopolies, strengthen the trust of ordinary private sector operators and also lead to the scaling up of local entrepreneurs.
By: Dr Noman Ahmed