Governments and businesses under-taking public-private partnerships (PPPs) need to be aware of the challenges such arrangements present in small island states.
This is according to Inter-American Development Bank (IDB) executive director for the Caribbean Kurt Kisto who said PPPs required a change in the role of public servants and in designing, awarding and servicing contracts.
“A lack of appropriate management capacity, problems of coordination and clear asymmetries in knowledge and expertise between the partners can pose significant challenges,” he said.
Kisto made the comments during the recent Caribbean PPP Forum at Hilton Barbados.
He said governments embarking on PPPs must invest in specialized expertise, effective risk evaluation and contract management as well as legislate strong governance structures driven by transparency and accountability and develop robust reporting mechanisms.
“Citizens in the region depend on their governments for the production and supply of public goods and services. In this regard we must be cognizant to the possible cultural resistance and as such have strong effective mechanisms of consultation, communication and consensus building before embarking on PPPs,” he said.
Kisto said businesses had to “engender a new culture and new processes” since they were being entrusted with the production and delivery of public goods and services.
“They must have a strong sense of corporate social engagement and be able to make the trade-off between the profit maximization motive, with that of product quality and service delivery costs at a fair return on investment,” he said.
The executive director said that PPP models in small island states should be inclusive, developmental and participatory since opportunities for PPPs of economic scale were usually limited.
“We must ensure that while some PPPs will require the participation of large foreign companies for the necessary know- how and financing, we must structure them in such a way that local businesses at all levels have the opportunity through the PPP design to participate as service providers and value chain suppliers,” he said.
He suggested that where possible, large foreign or local PPP operators could be listed on local stock exchanges allowing for widespread participation and distribution of profits, thereby making financial gains available to the general public.
Kisto noted that in small islands the challenges to successful PPPs were exacerbated by scale, scope and capacity.
However, he pointed out that “if done properly and in theory at least”, PPP arrangements could offer substantial public benefits.
These include a strong governance culture, improved service quality, risk sharing with the private sector, access to investment capital and cost savings.
“In practice, however, the challenges that PPPs pose if not well conceived, mitigated and operationalized can undermine their successful implementation and performance,” he said. (NB)
