A partnership to viable growth

LAHORE: Infrastructure deficit in Pakistan is very high. The state lacks the resources and the expertise to build and operate public sector projects efficiently. Public-private partnership if carried out transparently could reduce this deficit in a short time.

The private sector has expertise as well resources to carry out development projects capable of improving the economics of the country. Public-private partnership concept is based on a mutual contract between a government body and private sector for providing a public asset or service like public transport, healthcare, education etc. It involves sharing and transferring risks and rewards between the public sector and the partners. It delivers high quality infrastructure in the shortest possible time. Public-private partnership is about creating, nurturing, and sustaining an effective relationship between the government and the private sector. Public and private sectors each retain their own identity.

They collaborate on the basis of a clear division of tasks and risks. Such partnerships attempt to utilise multi-sectoral and multi-disciplinary expertise to structure, finance, and deliver desired policy outcomes that are of public interest.

In Canada, public–private partnerships have become significant in both social and infrastructure development. Projects include Canada Line rapid transit line; Abbotsford Hospital and Cancer Centre, Sea-to-Sky Highway project, McGill University Health Centre, new western extension of Autoroute 30, and many more.

There are 12 public-private partnerships in France, Greece, Ireland, and Spain, in road transport, information and communications sectors. In the USA, there has been interest in expanding public-private partnerships to multiple infrastructure projects, such as schools, universities, government buildings, waste, and water.

Private sector mostly acts as a non-profit entity to serve the citizens. The state generates nominal profits to ensure the sustainability of the project. But its operation progressively becomes inefficient over time and the cost of services or goods become expensive. It starts suffering losses endangering the sustainability of the project.

The private sector operates on a commercial basis in such a manner that ensures reasonable profit on investment and upgrade of the project.

There are many modes of this partnership that include BOLT (Build Lease Operate Transfer), BOT (Build Operate Transfer), BOO (Build Own Operate), BOOT (Build Own Operate Transfer), DBF (Design Build Finance), DBFO (Design Build Finance Operate), DBO (Design Build Operate), BLT (Build Lease Transfer), BTO (Build Transfer Operate), DBFOM (Design Build Finance Operate Manage) and many more.

The state should select any of these modes for these ventures after in-depth and transparent analysis of each mode.

A successful launch of public-private projects would be a win-win situation for the resource-starved government, investment-opportunity-deficient private sector and citizens who are suffering for the lack of basic facilities.

Mohsin Syed, a public-private partnership expert, has advised the economic planners to study the pros and cons of this concept before signing any agreements with the private sector. He said benefits of such collaborations include better infrastructure solutions than an initiative that is wholly public or private. The completion time of these projects is short as delays are taken care off before the signing of the deal.

The return on investment could be higher than projects with all government or all private fulfillments. Risks are fully appraised early on to determine project feasibility. Syed however, cautioned these projects could increase the government costs. These agreements also limit the competitiveness required for cost effective partnering.

He said profits of projects could vary depending on assumed risk, the level of competition, and complexity, and scope of the project. If the expertise in the partnership lies heavily on the private sector partners the government would be at an inherent disadvantage.