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November 9, 2019

A good partnership: Part - I

Opinion

November 9, 2019

Since the universal agreement to the UN 2030 Agenda for Sustainable Development unanimously adopted by the UN General Assembly in 2015, there have been debates and discussions about the means of financing the agenda.

One of the key differences between the modes of financing for the Millennium Development Goals (MDGs) of the 2000-2015 era and the post-2015 Sustainable Development Goals (SDGs) is that in the case of the former, Official Development Assistance (ODA) or foreign aid was considered as an integral element, while in the case of the SDGs a number of means and mechanisms of financing have been identified.

For instance, Cambridge-based researcher and author of ‘From Recipients to Donors: The Emerging Powers and the Changing Development Landscape’, Professor Emma Mawdsley, with whom I have a couple of interactions during international conferences, is of the opinion that even if all OECD aid-providers are able to meet the UN recommended 0.7 percent target of ODA, it would merely address a small portion of the $3.3 trillion to $4.5 trillion needed annually to achieve the SDGs globally. Hence, there is no doubt that for the achieving the SDGs, relying only on foreign aid would be utterly inappropriate and illogical. Hence, there is a broader consensus among key stakeholders that accomplishing the ambitious 2030 Agenda requires a “greater policy coherence between aid and non-aid policies (trade, debt, agricultural subsidies, financial and tax regulations, technology etc.)”.

In view of this, public private partnership (PPP) is one of the several mechanisms and an essential model for achieving sustained economic growth in both developed and least developed countries (LDCs). It has actually become a buzzword in development literature. Jumping on the bandwagon, Pakistan also established the Public Private Partnership Authority via the Public Private Partnership Authority Act in 2017.

The main aim is to ‘establish a regulatory framework to attract domestic and foreign private investment in the development of public infrastructure through transparent and fair procurement processes’. The PPPA Act further states to work towards the promotion of domestic and foreign private investment in infrastructure, to increase availability of public infrastructure, reduce transaction costs, ensure appropriate regulatory control and provide legal and economic mechanism. Hence, like many other countries across the globe, Pakistan is cognizant of the fact that to better exploit the true potential of the private sector for sustainable development, there must be appropriate legal and institutional structures.

The PPP is generally created by the public sector with the coordination of one or multiple private-sector entities for the purpose of planning, financing, implementing, constructing and operating developmental projects. The primary focus of such partnerships is to mobilize resources for projects employing best practices to achieve the envisaged goals most effectively and efficiently. The PPP is popularly defined as merging of public and private services to attain specific objectives like sharing of costs, risks and gains by the public and private stakeholders to overcome each other’s limitations. The public sector, especially in developing countries like Pakistan, lacks financial resources, administrative capacity and technological competence. In such a scenario, the PPP is an appropriate model that can help overcome these limitations.

Academic and policy literature suggests the immense significance of public-private partnerships in view of the growing need for development infrastructure. There is particularly an added demand in the energy and transport and communication sector which require huge financial resources. Availability of reliable and cheap energy and efficient and modern communication infrastructure also has significant spillover effects on other sectors of the economy. Also, investors have unprecedented rate of return if wisely invested in feasible energy and transport projects. It is here that the private sector has the potential to address the systemic challenge of overcoming resource constraints.

Owing to the dominant role PPPs are expected to play in the post-2015 development landscape, Homi Kharas and his colleagues based at the Brookings Institution have aptly observed that “the new normal in the international development community is to emphasize action with the private sector”, “blended public-private instruments, and public private partnerships”. These authors further state that the private sector is very diverse and consists of a dynamic set of actors ranging from large foundations, international and national non-governmental organizations (NGOs) and multinational businesses, and the role of all these actors is clearly more visible in the development arena than it was one decade ago.

The creation of the Sustainable Development Investment Partnership (SDIP), which facilitates public private partnerships, is evidence of this shift. The SDIP is an initiative for financing sustainable development made up of development actors including USAID, the OECD, the World Economic Forum and the Swedish International Development Cooperation Agency. The key objective of the SDIP is to mobilize $100 billion in private financing over a period of five years to fund potential infrastructure projects in developing countries in line with the SDGs.

Consisting of key partners from both developing and developed countries, the aim of this partnership is to promote “cooperation among commercial investors, governments, development agencies and development banks” in support of the 2030 Agenda. In the long run, the main goal is to support inclusive growth and poverty alleviation through commercially feasible projects in areas such as water and sanitation, transportation, clean energy, agriculture, health and climate adaptation.

Thus, it is evident that Public Private Partnerships provide a way of delivering and financing public utilities following an investment framework where project gains and risks are shared between the public and private entities. Many countries in Latin America and Asia have benefitted from the participation of private actors in financing and implementing development initiatives based on mutual win-win principles.

To be continued

The writer holds a PhD from Massey University, New Zealand. He teaches at the University of Malakand.

Email: [email protected]

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