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Analysis

PPP projects spur economic growth

To deliver more productive outputs in the mixed economy today, private-public partnerships (PPP) are gaining importance as a delivery approach. The potential of implementing PPP projects is substantial, especially in the transportation, energy (especially renewables), and water sectors. The question is, how do leaders ensure the positive impact of PPPs on economic growth?

David Baxter, PPP expertLinh Pham spoke with David Baxter, International PPP specialist, navigator, and advisor, to understand more about the opportunities brought about by PPP in the MENA region. He shed light on the key enablers of a successful PPP project along with the technology advancement.

Leveraging PPP to drive innovation
At the forefront, the partnership between the public and private sectors helps to increase net
investment and project growth in major infrastructure sectors, particularly in the Middle East, like water and transportation. The adoption of PPPs essentially bridges the financial gap of the government’s intertemporal budget constraints. “It is important to note that without partnerships with the private sector through PPPs,” Baxter said.

“Many critically important projects most likely would not get built at all, leaving countries without the critical infrastructure that they need to kickstart economic growth and achievement of national goals regarding the SDGs.”

Not only do PPPs mobilise financing sources on a global, regional, and national scale, they are also transforming the public sector by introducing international best practices and knowledge to government entities, allowing them to reap more benefits from these projects. As mentioned by Baxter: “This enables governments to avoid making mistakes and leveraging innovation that gives them access to qualified implementers that have the potential to be more successful.”

Key factors for successful PPPs
With such potential for economic growth, there are certain requirements for PPP projects to yield significant results. Baxter stressed established legal frameworks as the foundational attribute of any effective partnership, and the importance of a supportive enabling environment. With a focus on public sector capacity building on both organisational and individual levels, public sector employees are expected to implement competitive and transparent PPP procurements.

These skillsets, combined with the proper prioritisation of national, provincial, and local government objectives being built into national PPP pipelines will ensure that only the best and bankable proposals are selected for PPP projects. Of course, national leadership commitment by informed leaders is crucial in anchoring the entire project, specifically in risks management, to avoid running into budgeting or financing problems.

Another key aspect to consider is the adoption of PFM systems to ensure that the public sector has budgeted funding to back up projects. Regarding technology capabilities, Baxter added: “It is time that countries invest in IT and software systems that allow them to track procurements, data, PFM, and national priorities so that only informed decisions are made on choosing the right projects.”

Challenges in executing PPP projects

Based on the key requirements above, he further addressed the following global challenges that are commonly experienced by countries adopting PPP project delivery:
§ The absence of legal frameworks and enabling environments
§ Lack of public sector institutional capacity to implement PPPs
§ The proliferation of unsolicited proposals that have resulted in projects being chosen that
are not bankable and which have not undergone a good feasibility analysis to decide
whether they offer value for money
§ Projects being chosen for PPPs that should have been procured through traditional
procurement approaches
§ Lack of understanding of the differences between PPPs and privatisation
§ Lack of understanding of the long-term commitments that are required of governments
§ The proliferation of “white elephant” projects often procured through dubious decisions
making, lack of transparency and non-competitive bids
§ Ongoing political interventions and corruptions

In terms of digital adoption, while it is noble for organisations to develop new technologies that will benefit services for the general public, Baxter shared his concern about the risks associated with technological investment within the public sector. He stated: “The most expensive and state-of-the-art innovations can often prove to be costly and prone to failure.”

Therefore, it is important to assess the affordability as well as hidden operational and maintenance costs when exploring technological innovations with the private sector.

Leadership role in PPP projects
As architects and implementers of successful PPPs, government leaders are expected to take on unprecedented roles to build strategic partnership initiatives. The top priority is, according to Baxter, to align the implementing organization’s vision and objectives with national visions. It is important that implementers clearly understand the differences between private-public partnerships and privatisation.

Long-term commitment from the leaders, regardless of the sector is also required. Furthermore, a leader must identify proficient and empowered advisors who can assist in decision making as well as managing project risks, based factors that include the identification of pertinent economic and social values, depoliticised PPPs, and building confidence in national priorities.

Being an International PPP navigator and advisor himself, Baxter reiterate his leadership principles which consist of integrity, honesty and ethical behaviour, and teamwork. Elaborating on the most important leadership traits, he said: “Understanding that I alone do not have all the answers – I will never know everything, is a critical success factor.”

He further said: “A manager is not a team of one, so it’s important to leverage hands-on management and delegation when needed.”

He also emphasised empowerment to make decisions in an environment that is non-threatening, and most importantly, to learn from mistakes.

Baxter is attending the upcoming MENA PPP Forum in Dubai with his exclusive workshop entitled “Determining Value for Money, Public Sector Comparator, Bankability of Projects”.

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