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Bringing PPPs to the BOP
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Bringing PPPs to the BOP



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  • 1. Bringing PPPs to the BOP(Bottom of the Pyramid)
    Paul O’Connor
    Sessional Lecturer/Doctoral Candidate
    School of Property Construction and Project Management
  • 2. RMIT University © 2011
    Paul O'Connor
    Scope of this discussion
    Quick history of PPPs
    PPPs are the answer to which question?
    Issues for the BOP (Bottom of the Pyramid)
    Is this a procurement model for the elite?
    Can PPPs solve entrenched political inequity?
    How can PPPs serve the BOP?
    Research gaps and questions
  • 3. Quick history of PPPs (1)
    PPPs have been around for hundreds of years
    Perrier Brothers had a drinking water concession in 1700s
    Modern PPPs started with the UK’s Private Financing Initiative launched in 1992:
    Policy to extend Thatcher’s near-complete privatisation push
    Kept and embraced by ‘New Labour’ when elected in 1997
    Seen as a way to smooth out demands upon the capital account for developed economies with high deficits
    Seen as one of Tony Blair’s “third way” vehicles to engage with the private sector and achieve public goals
    Seen as a way to speed up social and economic infrastructure renewal & promote delivery effectiveness
    RMIT University © 2011
    Paul O'Connor
  • 4. Quick history of PPPs (2)
    UK has 500+ PFI projects with a capital value in excess of £28 billion
    Victoria has A$10.5 billion contracted
    Detailed policy and guidance suites have been developed in UK and Australia
    World Bank and ADB actively promoting PPPs
    PPPs are being adopted in many emerging economies as the infrastructure “answer”
    RMIT University © 2011
    Paul O'Connor
  • 5. PPPs are answer to which question?
    Quest for modernity and economic growth means every Asian country wants to look like Singapore in 5 years without 50 years of conscientious effort
    Political elites in developing nations see PPPs as “free money or “other people’s money” – a bit like a giant sovereign risk credit card (pre-approved!)
    Allocation decisions still opaque & often irrational
    Corruption and kick-backs dilute available spend
    Governance & technical capability generally poor
    RMIT University © 2011
    Paul O'Connor
  • 6. RMIT University © 2011
    Paul O'Connor
  • 7. Issues for BOP (Bottom of the Pyramid)
    C.K Prahalad discussed the BOP in the Harvard Business Review and asks large corporations to re-consider their attitudes about the poorest
    Simple fact = bottom of the pyramid are the bulk of the world’s population in developing nations
    Usually have the lowest private capacity, so therefore have the highest public service needs
    However, capacity to pay is extremely limited, and political enfranchisement is patchy or non-existent, so are cut out of the PPP conversation
    RMIT University © 2011
    Paul O'Connor
  • 8. Is this an elite procurement model?
    Why are the poorest countries of the world looking to use a procurement/business model that was developed in industrialised economies?
    Please their multilateral funders?
    Respond to internal economic elites?
    How about social infrastructure, particularly education and healthcare?
    Who (should) pay(s) for these facilities?
    RMIT University © 2011
    Paul O'Connor
  • 9. Are PPPs solving entrenched inequity?
    If PPPs in developing countries are mainly economic or user-pays infrastructure, how can equitable access be assured to the BOP?
    Subsidy or guarantee for PPP revenues?
    Capital assistance to bidding consortia?
    Why can’t/won’t these central governments fund availability payments for social infrastructure?
    but willing to keep spending bulk of revenues on military, internal security and bureaucracies
    RMIT University © 2011
    Paul O'Connor
  • 10. How can PPPs serve the BOP?
    If developing nations are to take infrastructure challenges seriously they have to understand the great potential and threat from the BOP issue
    BOPs are a real challenge for the PPP model, but it can be solved by:
    specifying service outcomes to include the BOP
    harnessing private sector innovation
    embedding cross-subsidisation in user fees
    focus on outcomes for the poor, not just elites
    RMIT University © 2011
    Paul O'Connor
  • 11. Research gaps and questions
    Relativity of time and cost performance of various procurement models in developing economies vs. the waste from bad governance and corruption?
    Does the current mega-project focus of PPPs miss the obvious issue of the efficacy of pro-poor infrastructure funding from aid budgets?
    Linking the impact of ‘macro’ economic infrastructure with ‘micro’ economic outcomes
    Crowding out of future BOP social spending by long term debt repayment liability from PPPs
    RMIT University © 2011
    Paul O'Connor
  • 12. RMIT University © 2011
    Paul O'Connor
    Any questions?
    My contact details:
    Paul O’Connor
    DipPer&OpsMgt, DipGovMgt, BA(AsianStudies), GradCertPPPs (Melb.), MPubInfra (Melb.)
    School of Property, Construction and Project Management
    RMIT University
    E: <>
    M: +61 438 077 469