Economy, opinion, Public-Private Partnership, Publications, Research

Public-Private Partnership: Experience from the UK to Nepal

  1. Introduction

The figure of the world is changing fast due to the size of population, technology, public aspiration and development approach. Hunger used to be the problem of developing world but now obesity has also been added to the urgent list . Health care was insufficient and the mortality rate was high but now it has been technologically improved and added ageing population as another challenging issue. Migration creates a manpower shortage in one place and over in another place. Hence, poverty and inequality used to be the problem of underdeveloped society but now they have been moving into developed area, towns and cities. Beside that, resource constraints are the biggest challenge; not enough to cover the need.

Considering the fact, the governance system cannot ignore the financial role of private sector to fulfil the gap of the budget in infrastructure development. The private sector is doing well to earn the profit by expanding their business however, the government that provides an essential welfare is being forced to adopt austerity. Taxation is the biggest source of government revenue and the private sector i.e. business is the biggest sector to generate national income. However, it is obvious to the private sector to be manipulative to survive in the competitive market more profit and the business. Private sector cares less about paying more taxation and state welfare. Hence, the Public-Private Partnership (PPP) is there to appreciate the role of private sector and to recognise the capacity of a local community to fulfill the need of increasing national financial requirement. Here, I am viewing PPP as a case study of Nepal, Lesotho, and the UK whether it is a sustainable way of modernisation approach. Moreover, whether the improved services provided by a PPP investment are accessible to the poor in terms of cost whereas PPP is the best way to partnership and alternative resources.

  1. What is PPP?

The PPP is a collaborative work between local authorities and central government or public bodies and private companies. The beliefs behind the emergence of PPP is “private companies are often more efficient and better run than bureaucratic public bodies” (BBC, 2003). Under PPP, the role of government is defined as a service purchaser from private entrepreneur; also, the government is sole responsible to create an atmosphere of the investment-friendly environment in terms of legal, political and financial stability including a necessary arrangement of fixed assets. It can also be understood that after the PPP contract, the government would be a service buyer and private sector expand their profit-oriented rights on public goods (Loevinshn, et.al, 2005; Hebson, et.al. 2003).  In this regard, the public sector is bound to maintain strict rules of contract on PPP. In general, PPP is an innovative approach to extend services and flexible methods of financing’ (GOV.UK, 2013) for the public infrastructure such as health, education, telecommunication and roads that includes planning, funding, construction, operation, maintenance and even include subsidiary business. PPP encourages the private investment in public sectors by sharing the risks throughout the life of the project. There are various types of PPP, by which it offers a flexible way of managing projects such as   Design-Build-Finance-Operate (DBFO), Build-Own-Operate (BOO), Build-Own-Operate-Transfer (BOOT), Buy-Build-Operate (BBO), Build-lease-operate-transfer (BLOT), Design-Build (DB), Design- Operation License (DOL), Finance Only and Operation & Maintenance Contract (O & M) (BBC, 2003; GOV.UK,2013).


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  1. PPP in the UK: The birthplace

The UK government developed and implemented the PPP approach in health services in 1991 for the public services projects through with the private sector. Moreover, UK launched private finance initiative (PFI) a modality of private investment under PPP. Norwich’s 1000 bed hospital was the first project under PPP started from 1996. Now, UK has three-decade long experience of PPP in healthcare services as it has more than 130 projects and £12 billion of capital value (GOV.UK, 2013). Now, this approach is being promoted globally by the World Bank (WB), International Monetary Fund (IMF) and the United Nation’s agencies.

3.1 Employment  

National Health Services (NHS) has been purchasing skilled and unskilled labour from private sector’s employment agencies. “Recruitment agencies are becoming more active participants in the health sector” (Bach, 2003). The contract between government and agency about hiring staffs has reduced the commitment of public sector on staff welfare and changed the way of governance in terms of introducing several laws relating to the migration policies. The effects of migration are “labour supplier countries loss the skilled personnel and economic investment on them and ethical issues including non-citizen status, right and the potential exploitation of foreign worker (Kline, 2003).” Ultimately, migration has driven the UK towards Brexit pro-nationalist concept against globalisation.

  • Infrastructure development

Dunn et.al, (2016) on in-depth study report says that NHS is in financial crisis with a clear deficit of £1.85 billion. Critiques argue that ‘the financial problems of the NHS are now endemic… and the situation is no longer sustainable’ (Syal, 2016). In the NHS, the average annual cost rise was just about 4% since 1984 until 1995 but from 1996/97 to 2009/10 it was closer to 7%’ (Triggle, 2017). The NHS has been promoted under PPP since 1996. There are no valid evidence to support the theory that PFI provides cost efficiency in the UK and there is no clear evidence of savings and benefits in other areas of PFI to offset the significantly higher cost of private finance (Marriott, 2014)

  1. PPP and the developing countries

4.1 Nepal

Nepal is a landlocked nation having unique geopolitical features which are at the 131st position of its infrastructure development in the world (Schwab, 2009). The country needs more investment in infrastructure and other basic services. However, only the government’s investment is not enough. To fulfil the investment gap, the GoN has decided to implement big projects in PPP model are Kathmandu- Hetauda Tunnel Road Project (60 Km) estimated cost 330 million US $; Kathmandu- Tarai Fast Track Expressway Road (78 Km) Estimated construction cost 1 Billion US $; Budhi Gandaki Hydro Power Project and Pokhara Cable Car Project (Srivastav, et.al, 2012). Kathmandu- Tarai Fast Track Expressway Road (78 Km) had been ‘in limbo for the past 10 years and now it has been handed over to the Nepalese Army’ (Kathmandu post, 2017). Melamchi-Kathmandu drinking water project and Arun-third (1991) with Enron, Pokhara Airport and other big projects have not been sharing good experiences. Although, these projects were not under PPP; disputes from land acquisition to political level are considerable facts in introducing the new project in Nepal. Similarly, GoN has introduced private investment scheme in hospital sector too. In the new state structure of federalism, it is important to allocate more cost on infrastructure and service sectors. However, national political level does not seem very optimistic in terms of mitigating and sharing risks like political and financial instability, market’s turmoil, technological influence and public ignorance and so on.

4.2 Lesotho

OXFAM has published a case study of Lesotho, a poorest landlocked country of South Africa, on PPP-health care service (Marriott, 2014). The report says- Lesotho’s the Queen ‘Mamohato Memorial Hospital was built to replace old hospital under PPP. New hospital’s cost under PPP went up between two to three times whereas 25 percent return was provided to the private partner.  Lesotho’s experience supports international evidence that PPP health of this kind is high risk and costly; and fail to advance the goal of universal and equitable health coverage” (Marriott, 2014). The report cited a contradictory interest of investing partner and service buyers. According to the Director of International Finance Corporation (IFC)- an investing partner and a member of the WB group, ‘This project provides a new model for governments and the private sector in providing health services for sub-Saharan Africa and other regions.’ However, according to the Minister of Government of Lesotho: ‘The PPP is ‘eating more than half of the health budget. It is hitting the government hard’. “The biggest losers of the health PPP in Lesotho are the majority of Basotho people who live below the poverty line in poor rural areas, who have little or no access to decent healthcare.” (Marriott, 2014)

  1. Is PPP bad?

Marriott, (2014) in the Oxfam paper highlights the growing economic activities in the local area of Mamohato Memorial Hospital, Lesotho. A study on health sector of the cases of Iran, UK, Spain, Brazil, Australia, Turkey, Canada and Lesotho shows PPP as an ‘effective’ approach to deal challenges of the health sector (Sadhegi, 2016). PPP is an approach to creating a long-term value of money by transferring traditional agrarian poor economy into industrialised one through the process of local entrepreneurship.

  1. Conclusion:

The PPP is an alternative source of funding for the infrastructure and it is the best way of participatory approach, transparency, and accountability in development process however it increases the cost of the services for the poorest. For the successful implementation of PPP, the role of a responsible and stable government and the accountable private sector is an essential condition. The problems are not with the system, but with how the system has been used.

 

REFERENCE

Bach, S., 2003. International migration of health workers: Labour and social issues. Geneva: International Labour Office.  Available at: https://assets.aspeninstitute.org/content/uploads/files/content/images/Bach%20Health%20worker%20Migration%20WP.pdf  accessed 25/11/2017

[BBC], 2003. What are Public-Private Partnerships?  Available at: http://news.bbc.co.uk/1/hi/uk/1518523.stm

Dunn, P., McKenna, H., Murray, R., 2016. The deficit in the NHS, The Kings Funds. Available at: https://www.kingsfund.org.uk/publications/deficits-nhs-2016   accessed 10/12/2017

GOV.UK, 2013. Healthcare: Public-Private Partnership. Available at:   https://www.gov.uk/government/publications/public-private-partnerships/public-private-partnerships

Hebson, G., Grimshaw, D. and Marchington, M., 2003. PPPs and the changing public sector ethos: case-study evidence from the health and local authority sectors. Work, employment and society, 17(3), pp.481-501. Available at http://journals.sagepub.com.idpproxy.reading.ac.uk/doi/pdf/10.1177/09500170030173005

Kline, D.S., 2003. Push and pull factors in international nurse migration. Journal of nursing scholarship, 35(2), pp.107-111.  DOI: 10.1111/j.1547-5069.2003.00107.x  accessed 25/11/2017

Loevinsohn, B. and Harding, A., 2005. Buying results? Contracting for health service delivery in developing countries. The Lancet, 366(9486), pp.676-681. DOI: http://dx.doi.org/10.1016/S0140-6736(05)67140-1 accessed 26/11/2017

Marriott, A., 2014. A Dangerous Diversion: Will the IFC’s flagship health PPP bankrupt Lesotho’s Ministry of Health?. Oxfam International. Available at:  https://policy-practice.oxfam.org.uk/publications/a-dangerous-diversion-will-the-ifcs-flagship-health-ppp-bankrupt-lesothos-minis-315183

Sadeghi, A., Barati, O., Bastani, P., Jafari, D.D. and Etemadian, M., 2016. Experiences of selected countries in the use of public-private partnership in hospital services provision. JPMA. The Journal of the Pakistan Medical Association, 66(11), pp.1401-1406. Available at: http://jpma.org.pk/PdfDownload/7962.pdf

Syal, R., 2016. NHS financial problems endemic and no longer sustainable, say, auditors, The Guardian. Available at: https://www.theguardian.com/society/2016/nov/22/nhs-financial-problems-endemic-and-no-longer-sustainable-national-audit-office-deficit    accessed 7/12/2017

Triggle, N., 2017. 10 charts that show why the NHS is in trouble, BBC. Available at: http://www.bbc.co.uk/news/health-38887694   accessed 7/12/2017

Srivastav, H., Shakya, P. L., 2012. Policy Framework for Public Private Partnership (PPP) Projects in Nepal Presented at the third Ministerial Meeting on PPP for Infrastructure Development, held in Tehran, Iran from 11-14 Nov. http://www.unescap.org/sites/default/files/3-Nepal.pdf

 Schwab, K. ed., 2009. The global competitiveness report 2009-2010. World Economic Forum. http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2009-10.pdf

Kathmandu Post, 2017. Fast track project handed over to Army officially, available at:
http://kathmandupost.ekantipur.com/news/2017-08-12/fast-track-project-handed-over-to-army-officially.html accessed 20/12/2017

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