Wednesday, May 21, 2008

Making Public Private Partnerships work

The second session of the 3 April Development Policy Roundtable, hosted in Brussels by the Friends of Europe, saw Business, Governments and NGOs discuss ingredients of successful public private partnerships (PPP) for development. [the first session considered the role of business in development].

Amongst the discussants there was surprisingly little criticism of PPPs. Instead many listed the factors they felt had made their partnerships successful. Since participants were mainly drawn from larger international companies such as De Beers, Unilever, Cargill and Cadbury Schweppes, discussion of local public private partnerships was limited.

Andrew Bone from De Beers stressed the importance of working in partnership. He presented the partnership of his company with the government of Botswana. He pointed out that during the last 40 years of this agreement, De Beers and the government had both profited. So, for example, no-one in Botswana is today more than 15KM from a health facility. He stressed that it was important that 80% of revenues earned from Southern Africa by De Beers stay in the region.

In his experience, the two scarcest resources were political courage and the management capacity to implement Public Private Partnerships.

Lawrence Carter explained the IFC's role in advising government and the private sector on PPPs. He warned of the need to be sensitive to the political concerns of the government in the partnership. Subsidies were often needed to allow tariffs to change gradually. The injection of foreign investment would not always be popular within a country. Interestingly, bearing in mind his first statement that IFC advises both sides in the PPPs, he finished by stressing that the role of the IFC was how to involve the private sector.

The final speaker from Cargill argued that there is a need to move development efforts from subsistence farming to commercial farming through multi-stakeholder partnerships. As an example, Cargill works with the Ministry of Agriculture in Vietnam and the Dutch government on a project to grow cocoa in place of coffee in the central highlands.

Sean De Cleene of Yara emphasised three qualities needed for successful PPPs:
  • political courage;
  • management skills - although these can be developed by PPP;
  • good corporate governance and the involvement of state owned enterprises. In many countries, 70-80% of business is through state owned enterprises.
In many cases, governments have to rethink subsidies with smart subsidies for PPPs. Planning needs to include good exit strategies and pay particular attention to support for SMEs.

Design for Aids recounted the success of a PPP with H&M fashion in a campaign against AIDS in which 650 stores raised AIDS awareness using celebrities. The partnership has now broadened to include the sourcing of organic cotton T shirts from Lesotho.

Standard Chartered operates a number of public/partnerships supported by NGOs and policy groups. It found that the success factors for PPPs were:
  • Overlapping agendas
  • Designing programs together
  • Using core skills of the business
A representative of the WHO said that their PPPs had worked in the area of technology transfer, eg vaccine production, but failed where there was little political stability and country capacity.

Traidlinks was concerned that the meeting was not able to hear from any SMEs. In their view ,the key concerns are:
  • Access to finance requires a policy change in donors and governments.
  • There is still little SME assistance
  • NGO and donors pay 3-6 times what an SME can pay and so can be responsible for a brain drain from business.
by Chris Addison