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THE ROLE OF AND POTENTIAL FOR PUBLIC-PRIVATE COOPERATION IN ARMENIA Richard Beilock AIPRGand University of Florida David A. Grigorian AIPRGand International.

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Presentation on theme: "THE ROLE OF AND POTENTIAL FOR PUBLIC-PRIVATE COOPERATION IN ARMENIA Richard Beilock AIPRGand University of Florida David A. Grigorian AIPRGand International."— Presentation transcript:

1 THE ROLE OF AND POTENTIAL FOR PUBLIC-PRIVATE COOPERATION IN ARMENIA Richard Beilock AIPRGand University of Florida David A. Grigorian AIPRGand International Monetary Fund

2 Structure of the Paper Introduction Rationales and Organizational Alternatives for PPCs Potential Applications for PPCs in Armenia Special Interests

3 Introduction Karl Marx vs. Adam Smith: is there generally a role for governments to play? How is the reality shaping for Armenia: transition vs. Armenia-specific issues? We assert that: –Dirrefences would encourage PPCs –Declining returns to PPCs would benefit developing countries more –The range of possible alternative arrangements for PPCs is wide

4 Surplus additional value possible together over sum of individual efforts Mutual Advantage Needed for All Viable Partnerships

5 Difference, the Soul of Partnership Without differences, no potential for SURPLUS, no potential for viable partnerships Different types and relative endowments of Assets Knowledge Talents Rights/Powers

6 Public-Private Differences Always considerable Particularly large in Armenia owing to: –Inadequate means and capacity of the government –Emerging, but not fully developed, domestic private sector –Involvement (and potential) of the Diaspora, NGOs, and multilaterals

7 PPC Organizational Alternatives Non-Invasive Coop (NIC) Your org. does this and mine does that. Management Contract (MC) Your org. runs these parts of my org. for these incentives. Concession (CONC) Your org. runs these parts of my org. for these incentives…AND you make investments Joint Onwership-based Coop (JOC) Our org.s jointly own this venture. Our org.s jointly own this venture.

8 PPC Alternatives TypeStrengthsWeaknesses NIC Easy est. & end Few turf battles Limited use of comparative adv.s MC Contract flexible Easy getting bidders Contractor retains control control Possible incentive problems, esp. toward end of contract CONC Fewer incentive problems problems Contract flexible Harder to attract bidders bidders End of contract incentives incentives JOC Liquidity, ease of altering ownership altering ownership structure structure JOC, connotes ownership structure, but not cooperative system

9 PPC SURPLUS SOURCES Improving Public Sector Performance Improving Private Sector Performance

10 Public Sector Improving: Efficiency of Core Functions –Tourism, Research (CRO), Environment (ATP) Law- and (Executive) Decision-making –Diaspora Agency, Anti-Corruption Agency, and Deregulation Agency Management of Inherently Private, but Publicly-owned Assets –Armenian Railways

11 Private Sector Reducing the Knowledge and Information Gaps –Development Associates –Credit Rating Agency –Business Incubators Correcting Inefficiencies Related to Collective Action Problems –Wine –Housing –Fisheries

12 Private Sector (contd.) Reducing Problems Related to Small Size and Thin Markets –Tourism Concessions Ensuring Quality and Adherence to Standards –Tourism –Food –Medicine

13 SPECIAL INTERESTS Special Interests (SIs) –Ind./groups working to further their goals Core Functions –Well-defined set of objectives Territoriality –Actions to enhance prestige and gain control beyond necessary to perform core functions Shirkers Bad Guys Shirkers Bad Guys

14 STRATEGIES OF DEALING WITH SIs Suppress/Destroy When the harm is considerable, and tolerating it exacerbates the costs Ignore Power/harm is not considerable, and costs of dealing exceeds potential gains Buy off The SI faces costs, and would rather see itself legalized, which would result in net benefit for both Make Part of the System Interests of both sides are consistent, and it is possible to develop rewards to make them more consistent

15 STRATEGY OF DEALING WITH SIs Which method do I apply?

16 STRATEGY OF DEALING WITH SIs Shirkers Bad Guys Make part Destroy Make part Destroy of the system (Zero tolerance)

17 CONCLUSIONS Potential for PPCs in Armenia is great PPCs could be used to: –Improve efficiency of the Public Sector –Improve efficiency of the Private Sector Treat Special Interests to: –Reduce the costs associated with their actions –Generate positive returns from their involvement


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