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Bringing Something Different to the Table: Potentials of Public-Private Partnerships For Armenia and Other Developing/Transition Nations Richard Beilock.

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Presentation on theme: "Bringing Something Different to the Table: Potentials of Public-Private Partnerships For Armenia and Other Developing/Transition Nations Richard Beilock."— Presentation transcript:

1 Bringing Something Different to the Table: Potentials of Public-Private Partnerships For Armenia and Other Developing/Transition Nations Richard Beilock AIPRG and University of Florida David A. Grigorian AIPRG and International Monetary Fund Yvonne Reinertson University of Florida

2 3 Darn Good Stereotypes 1.Private Sector is more efficient Public sectors in Developing/Trans. (D/T) tend to: 2.Be more inefficient & corrupt than in developed nations 3.Operate in spheres better served by private sector.

3 Following from these… Privatizations are encouraged Higher share GDP from private sector considered to be a measure of progress. Public-Private Partnerships (PPPs) encouraged

4 The unwanted partner Privatization …. Preferred PPP …To minimize a governments harm when it (ungraciously) refuses to exit the stage completely. These views are usually right. Evidence is overwhelming that the 3 stereotypes are, indeed, darn good.

5 But…. There may be cases where PPP is better than either all public or all private Always assuming private is best may not encourage cooperation from governments.

6 A Caution PPPs can improve performance But… this mixing of public & private can present opportunities for: Businesspersons Oligarchs Bureaucrats Corruption We address this partially later under Special Interests

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

8 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

9 Public-Private Differences Always considerable Particularly large in D/Ts, such as 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

10 PPP 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 Ownership-based Coop (JOC) Our org.s jointly own this venture.

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

12 PPPs, not just for D/Ts PPPs in the Republic of Ireland National Roads Authority 10 Courts Service 1 Department of Education and Science 4 Department of Health and Children 1 Arts, Sport, and Tourism 1 Office of Public Works 1 Irish Prison Service/Department of Justice Equality and Law Reform 2 Department of Transport/Railway Procurement Agency 3 Department of Environment, Heritage, and Local Government 30 TOTAL VALUE Billion

13 PPP SURPLUS SOURCES Improving Public Sector Performance Improving Private Sector Performance

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

15 Private Sector Reducing the Knowledge and Information Gaps –Development Associates Correcting Inefficiencies Related to Collective Action Problems –Wine –Fisheries State power essential to manage free-rider problems

16 Private Sector (contd.) Ensuring Quality and Adherence to Standards –Tourism –Food –Medicine

17 Private Sector (contd.) Reducing Problems Related to Small Size and Thin Markets –Tourism Concessions Problems: Thin markets … B&B in Dilijan Deteriorating archeological/natural sites Critical mass & uncertainty problems for normal intl. Tourists Free-rider problem for collective action

18 Private Sector (contd.) Imagine: A concession for a Capitalist In-Tourist Responsible to: Rationalize remaining State hotels, etc. Restore/operate/transfer (or privatize) viable ones Manage/maintain parks Manage/restore/study archeological sites Encourage private tourism industry Build links with tourism for other areas – Caucasus, Turkey, Holy Land Provide generic advertising/quality ratings/bookings Revenues: Customer fees at managed facilities Share of tourist-linked taxes, such as hotel taxes Commission for arranging bookings with private vendors Ideal concessionaire Intl. Tourist promoter Major university

19 SPECIAL INTEREST An individual or organization with a unique set of goals and the will to act. If consistent with societal goals…wonderful If not…

20 SPECIAL INTEREST …Range Shirking ….Worker sneaking off for a smoke Petty theft…stealing pencils Firm opting out of a generic advertising effort Local NGO promoting cleaner environment in Sisian Petty corruption…small bribes Diaspora Association seeking to reduce poverty Firm attempting to influence officials to secure government contracts Director of government agency extorting funds from foreign and domestic business and embezzling agency funds.

21 SPECIAL INTERESTS Strategies for Dealing with SIs –Suppress/Destroy –Ignore –Buy off –Make Part of the System

22 SUMMARY AND CONCLUSIONS 1.When reluctant to exit entirely, PPPs can infuse some of the benefits of the private sector…. 2.In some cases, PPPs can be superior to either all public or all private…there may be a surplus Keep your pro-private sector philosophies, but recognize this possibility.

23 SUMMARY AND CONCLUSIONS 3.D/T nations may be particularly fertile grounds for PPPs 4.Special interests can offer both opportunities and dangers for societies and PPPs can play a role in exploiting positive aspects & controlling negatives. Thank you


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