Bringing PPPs to the BOP


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Bringing PPPs to the BOP

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