Question

What type of economic development would be beneficial for the city you live in? Why do you think it would be beneficial to your city?

Public private partnership have become a very popular form of financing public projects.  Discuss in detail at least two risks/weaknesses/issues associated with such financing options?  

300-500 words

Answer 1

The type of economic development beneficial for my city is Transportation and Energy.

Transportation- a transport system that is both accessible and efficient in terms of time and money. The increasing population and immigration has made it imperative to develop an efficient public transport system to reduce conjestion and increase logistic performance. The growth of suburbs and urban conglomeration has made transport sector an attractive investment. This could also be useful in promoting intra and inter city trade in goods and services.

Energy- The rising need for energy both renewable and non renewable is need of the hour. A system of energy production and distribution that provides ample energy without polluting the environment. The focus towards renewable sources such as solar energy is crucial to meet the Natioanlly determined coeefficient of Paris agreement. Energy sector promotes both rise in industries and automobile sector.

Since the last two decades Public private partnership (PPP) has become a common source of funding public projects. There are various types of PPP model based on management control, ownership, annuity and toll collection. But there are few risks associated with public private partnership:

1. Lack of comprehensive legal and institutional framework- Environmental clerance and land acquition can be a cumbersome process which plays an important role in delaying of project, The delay in project increses the initial cost of the project. The bidding process is sometimes not very transparent which can be financially unviable. Some projects are socially and politically challenging to introduce and significant tariff increase is required to make it viable. Therefore a clear legal and regulatory framework is crucial to achieve sustainable solution.

2.Even after the completion of the project government responsibility continues . Citizens keep holding government accountable for quality of utility services. Government will also need to retain sufficient expertise, whether the implementing agency and/ or via a regulatory body, to be able to understand the PPP arrangements, to carry out its own obligations under the PPP agreement and to monitor performance of the private sector and enforce its obligations

3, Long term financing is sometimes not available with the private company involved in the project. The government has to introduce various financing facility like vaibility gap funding and banks should be able to extend long term loan by using various options like take out financing and credit default swap.  

Sometimes it is argued that PPP has become a mere language game by government when it is difficult for government to privatise because of common public opposition. Rise of crony capitalism is also associated with public private partnership.