Public-Private Partnerships to Develop Water Resources

Transcription

1 Public-Private Partnerships to Develop Water Resources Alan M. Trager Visiting Scholar and Professorial Lecturer, Johns Hopkins School of Advanced International Studies

2 What is a Public-Private Partnership (PPP)? [A] partnership is a collaboration among business, nonprofit organizations, and government in which risks, resources, and skills are shared in projects that benefit each partner as well as the community. Stratton (1989) in Mechanisms for Job Creation, OECD PPP features Sharing of risks, resources, and decisions Allocation of risks and opportunities Assessment of motivations and incentives for each partner Collaboration through negotiation

3 Public-Private Partnerships: A closer look 4 Public-private partnerships (PPPs) use an interdisciplinary approach to address complex public policy problems eligible for a multistakeholder solution PPPs can be used on a multi-asset, multi-country, multi-sector basis Multicountry Multiasset Multi-sector/ stakeholder PPPs offer the potential to improve country competitiveness in sectors such as water, healthcare, education, and infrastructure PPPs are a flexible organizational model

4 The potential for PPP value creation Private Sector Version Public Sector Version Private Value Public Value Demand Operational Capacity Operational Capacity Legitimacy & Support

5 Optimal configuration Private Value Public Value Demand Legitimacy & Support Operational Operational Capacity Capacity

6 Traditional models in water are increasingly facing their limits When a unit of government runs a water system, inefficiency too often exists throughout the value chain production, distribution, and fee collection When a unit of the private sector company runs a water system, low income populations may be at risk of being underserved Water is considered a right at what price? Is a two-tier system of distribution and pricing appropriate? Source: NYT and

7 Both sectors face new risks which demand a new application of PPPs Government faces new risks and pressures e.g. preserving water for natural habitat, damage from pollution, damage from development, climate change, and more demand for public accountability Private sector faces new risks e.g. liquidity constraints, uncertain macro and political environment, and pressure to hold down price increases/csr Neither sector has the ability to hedge these risks by themselves

8 Moreover, there are particular challenges associated with water Water is essential to life, generally underpriced, not well understood as an industry, and has no substitute Demand for water is outstripping supply, requiring large capital expenditures in the sector globally Contradictions between the supply and demand for water Underpriced but also overpriced Of different qualities Measured, rationed, and conserved Stolen and polluted

9 Example: United Water and the Atlanta government (2003) A case of poor due diligence, limited visibility on existing infrastructure, and lack of flexibility leading to the termination of a concession arrangement with the private sector and the return of water management to public control United Water and City of Atlanta.

10 Example: Singapore Public Utilities Board (PUB) A case of the successful use of a DBOO (Design, Build, Own, and Operate) contract to build NEWater plants in Singapore to produce ultra-clean, high-grade reclaimed water Singapore s Public Utilities Board.

11 A broader look at PPPs in Singapore PPPs are not new in Singapore, a state characterized by fiscal health and strong public sector capacity However, traditional concession models may no longer be sufficient to attain the optimal configuration Largest PPP to date: Sports Hub (award-winning) Government had to step in to provide loan support during the financial crisis Fresh perspectives on PPP Private sector can foster innovation and competition Opportunity for the state to co-create with the non-state sector Success requires a flexible organizational and financial model along a risk curve, not a template mentality This calls for a different set of skills for public sector officials

12 Implications for Singapore and the region on PPP skills development Political management PPP decisions are based on necessity and political considerations Government has to decide whether the resulting political risk of involving the private sector is worth it Negotiation Collaboration through negotiation Appreciation of motivations and incentives of various parties Financial structuring More about assumptions than models Does government truly transfer the liabilities? Innovation Through innovation and creativity, government can reduce the need for private sector financing, thus reducing risks

13 PPPs to develop water resources: Implications from Singapore PPPs offer a flexible organization model that can attract capital, skills, and innovation to develop water resources Governments have an obligation to provide safe and adequate supplies of water but may lack the operational capacity to do it efficiently The economics of water, impacted by serious supply/demand imbalances, add material risks to private investors Ex-post negotiations or re-negotiations can be used to navigate dynamic changes and are not necessarily a sign of failure The politics of managing multiple stakeholders in a water PPP require governments to commit to serving or subsidizing low income populations Singapore s openness to partner with other governments on PPPs, as an investor, technical advisor, demonstrates an expanded opportunity for public-public-private partnerships to develop water resources

14 15 THANK YOU.