Box 2: The Potential of Public–Private Partnerships, International Experience
Sectoral Coverage. Public–private partnerships (PPPs) can be used in a range of sectors, including the economic and the social sectors as well as sectors where there are varying extents of competition. But they are more widely used in the economic sectors, especially infrastructure. Moreover, wherever they are used, they should be seen as fostering and supplementing but not substituting for the role and obligations of the state in ensuring populations have access to vital services such as transport and education.
Spectrum of PPP Models. There is a broad range of PPP options. In the case of infrastructure, the options range from design–build to outright privatization, where the government transfers all responsibilities, risks, and rewards for service delivery to the private sector. Within this spectrum, PPP options can be categorized based on the extent of public and private sector involvement and the degree of risk allocation—with an operation and maintenance PPP, for example, involving less private sector involvement and less private sector risk than a design–build–finance–maintain–operate PPP.
Preconditions for PPPs. While there are varying perspectives on the notion of preconditions for implementing PPPs, most experience would suggest that a clear and transparent legal and regulatory framework is essential to prevent abuses, including corruption, ensure that social and environmental issues are properly addressed, enhance the effectiveness and efficiency of PPPs, and ensure an appropriate balance of risks and rewards between the public and private sectors. In assessing the desirability and feasibility of a PPP, it is especially important that the level of public risk, including from the guarantees associated with PPP projects, is well-understood and appropriately reflected in the budget.
Potential. It is also important to manage expectations regarding what can be expected from private participation in infrastructure and other sectors, with respect to the size of the private sector’s contribution and the time required for processing PPP operations. While the private sector can significantly contribute to public services provision, international experience suggests that the bulk of infrastructure and social sector investment will remain a government responsibility. For example, in the United Kingdom, Spain, and the Republic of Korea (all countries where PPPs have been active for at least a decade), PPP projects account for no more than 10%–20% of public sector investment. Also, and in light of the complexity of designing PPPs, they require a lead time that can be longer than those needed under public procurement.
Sources: Shendy, Kaplan, and Mousely 2011; Amran and Crawford 2011; and Alexander 2012.
D. Enhancing the Efficiency and Effectiveness of Public Expenditures
Careful allocation of public expenditures will increase the likelihood that the government can achieve its sectoral goals and its broader economic and social objectives; but also crucial will be the efficiency with which public expenditure resources are used. This in turn will be determined in large measure by the quality of the governance structures and institutions responsible for the planning, implementation, and monitoring of specific programs.
The conceptual framework for addressing issues concerning the efficiency and effectiveness of public expenditures is clear (Figure 3) and much work has been done in recent years to examine such issues in both developed and developing countries. In the health sector, for example, much work has been done around the overall issue of health system performance and how inputs into the health sector (as measured by health expenditures) translate into outputs in terms of the improved health of the population. In this regard, one 2001 study of health system performance concluded that Myanmar’s performance was 190th among the 191 countries studied (Tandon et al. 2001).