Public-Private Partnership and Sustainable Development

काठमाण्डु टुडे २०७० साउन २५ गते ५:२९ मा प्रकाशित

                                                       Dr Baburam Bhattarai


The issue holds a special significance because the core of development challenge today is to ensure productive work and better quality of life to the growing population in a way that is economically, socially and environmentally sustainable.  To achieve this goal, we are trying to embrace public-private partnership model of development, which is expected to perform better than those followed in the past.

In the last six decades, we have seen a marked change in the intellectual  approach to development. The success of Soviet Union and China after the Second World War led to the adoption of planning model in many developing countries with state control of the economy and state ownership of enterprises and production. However, this model fell into refute after three decades, as many countries adopting the planning model and state-led growth experienced slow growth and stagnation, for reasons which cannot be solely attributed to state control and planning. By 1980s, there was a shift towards market mediated development and private sector driven growth. This involved elimination of legal and bureaucratic restrictions on economic activity, including price controls, quantitative restrictions on foreign trade, entry barriers to private firms and privatization of state enterprises. But these have not also produced the desired outcome, because in less developed countries markets do not function the way expected of it. There are market imperfections and distortions in all types of countries and more so in the developing countries. There is no doubt that private sector is an important driver of growth, but its penchant for profit and myopic view may be sometimes detrimental to sustainable development. It is, therefore, questionable whether leaving everything to the market and the private sector would produce the desired economic outcome. So I think the choice between public sector and private sector or between the market and the government is a false dichotomy. This overlooks what we take to be a viable and effective middle path to development in which the emphasis is    combining the efficiency and productivity of private sector with the public concern for social justice and welfare of people. This is exactly what we intend to accomplish through public-private partnerships.

It goes without saying that Nepal is in the process of political as well as economic transition. We are effortful to shorten the period of transition so that we can march forward to a more dynamic economy and people’s true polity. As a move to end the political transition, we are going to fresh polls within November this year to elect a new constitutional body that will write the new constitution. The election is also expected to result in a stable government, which has become a prerequisite for improving and strengthening governance. Various governance related factors, such as policy instability, administrative delays, corruption, crime and consequent insecurity, which hinder development, are directly political in nature, and hence can be effectively addressed only by a stable government.

The new federal political system that we are going to institute will be fragile without a strong economic foundation. Hence, efforts are especially needed to make a jump to a high growth trajectory and sustain that growth over a long period of time. Nepal’s growth rate in the last one decade has remained very low and lowest in the South Asian region. Even though the incidence of poverty has declined, the level of poverty remains high. Although official data shows low unemployment rate, the problem of underemployment is very acute. The exodus of thousands of youth every year to gulf and other countries for employment clearly reveals how severe the underemployment problem is. What these imply is that the growth strategy geared towards achieving high growth rate has to be inclusive and broad based.  Only then we would be able to create new jobs and increase people’s income.

High growth strategy calls for large investment in order to overcome the critical constraints to growth. Infrastructure is the major critical constraint to growth in Nepal and overcoming this constraint requires large amount of investment. Unless we significantly step up investment in power, transport and communication, we may not be able to realize the underlying growth potentials of the economy. However, the government alone can hardly meet the required funds and technology for the projects.  This clearly calls for private sector involvement. Even though, private sector involvement has existed in Nepal since long time back, this has been limited to either independent business or as contractor to the government financed public works. We have also carried out privatization of public enterprises. However, contracting out of public works to the private sector and privatization of public enterprises have not shown encouraging results.

The public-private partnership concept is a step forward to the existing narrow view and envisages private sector as an investment partner with temporary ownership of the assets and earnings there from. These features make the public-private partnerships distinct from and even better than privatization.

We find the use of public-private partnerships by both the developed and the developing countries, mostly in the provision of infrastructure services.   However, in some developed countries, the scope of public-private partnership has been extended to housing and urban development and even to health and education services and social security systems, such as pension scheme to help people in retirement. While opting for public-private partnerships, it is very important to plan and implement the modality of partnership very carefully in order to succeed. A major factor determining the success of public-private partnerships is the development of sound legal procedures, and agreements and contracts that define the relationship between the government and the private investors.  It is also important to clearly delineate the authority and responsibility of the government, in addition to its role as facilitator and enabler. Sometimes there may be conflict of interest because of differing goals of public and private sector. The goal of the former is to protect public interest, while the goal of the latter is to garner maximum profit. This necessitates alignment of differing goals to a certain desired level, so as to maintain trust and confidence between the two sectors.

I would like to conclude by saying that the CEDA has taken a right step, but this should not be a once-for-all event. We still have a long journey ahead of us and I hope that your deliberations today will provide new insights and innovative ideas. We can also learn valuable lessons from the experience of Korea about which our Korean friends will be highlighting in the next sessions. As academics, development practitioners and policy makers, the greatest challenge we face today is how to improve the quality of people’s lives. Certainly this calls for higher incomes and availability as well as access to higher standards of education, health and nutrition, and cleaner environment. In this regard we should not forget that our concern should be development needs of poor and deprived people. This is vital for sustainable development. I would, therefore, like to stress that in our endeavor to advance public-private partnerships in various economic as well as social fields, we must remain focused on this.

Former Prime Minister of Nepal Dr Bhattarai delivered this speech at a programme in August 8, 2013 organized by Centre for Economic Development and Administration (CEDA) 

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