I had an engaging conversation with a group of employees of a multilateral development bank (MDB) early this month. It began with a very direct question: Why should MDBs support Public Private Partnerships (PPPs) as components of their loans? Is it not too risky?
I have been a PPP practitioner for over ten years. During this time I have defended the use of PPPs in many different contexts to several different audiences. I have talked service users into supporting PPPs on the basis of better services and operational flexibility that could empower users. I have convinced political player to approve PPPs because they would benefit from faster delivery of assets and fewer government-retained risks. I have brought bureaucrats on board after stressing that they would achieve value for money and retain a more noble role of service regulation, instead of execution.
However, despite of having effectively defended PPPs in front of all those audiences, the answer to my colleague’s question did not come naturally. I was surprised to realize that the convergence of PPPs and MDB was one of those concepts I took for granted, without consciously articulating its content. To my regret, my end of the conversation was vague and imprecise.
Having had a couple of days to think it over, here is my second shot at answering the question.
Success stories are all around us! I have seen PPPs improve the quality of services for those that need it the most, and I worked on several projects myself, bringing to life initiatives that effectively delivered value for money for taxpayers and end users. This is naturally where one could begin, since MDBs’ focus on the developmental challenges should translate into a permanent quest to improve the economic efficiency of infrastructure services. This much has been repeatedly said here and elsewhere, but what about the failure and mistakes? Don’t they make PPPs too risky?
Failures should not discourage forward movement! Just the opposite: failures should inspire the international community of practitioners to understand and identify the drivers for success. Gathering knowledge, processing data, and spreading effective policy and project recommendation should continue to be a winning strategy. That is precisely what World Bank initiatives such as the PPP Knowledge Lab and the Massive Open Online Course (MOOC) are designed to accomplish. I have been the beneficiary of such initiatives and I can say confidently that it is much easier to get PPPs right today than it has ever been. There is simply more knowledge available than ever before. But then, why should MDBs go through all this trouble when it could go back to pushing for increasing the effectiveness of traditional procurement?
PPPs can provide managerial accountability for results that traditional procurement simply cannot! PPP contracts can articulate the outputs and outcomes of infrastructure projects, in terms of service delivery, and therefore provide lenders with a much clearer description of policy objectives, instead of building objectives. In many ways this creates the conditions for the international development community to acquire a better understanding of the outcomes and outputs of the policy they support.
So, if I could stand in front of an MDB decision maker, I would eagerly explain that PPPs can enhance the reach of development related loans, can be designed to avoid mistakes and failures (if based on sound knowledge), and can offer lenders mechanisms to better understand the impact of the policy they support. PPPs should continue to be one of MDBs’ strategic – and strongest – focuses.