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    21 views26 pages

    Batley R-2001 Public-Private Partnerships For Urban Services

    Uploaded by

    Vanessa Gimenez

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    © All Rights Reserved
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    Prone ttenet he Po f Pai Series Public Private Partnerships for Urban Services Richard Batley ‘The lene Developing countries are experiencing a push for privatization from sev- feral sources, partly from their own expetience ofthe fiscal dificlty of ‘staining services But also tnder pressure of donor influence, particu Inrly through tuctural adjustment programs, and of the example cf those advance countries which have gone den this path. Where privatization ‘or commersialzation has taken place developing countries, it has ust Sly ist ben of smaller, potentially competitive state-ovened enterprises producing tradable goods (Cook and Kikpatrick 1988; Kiker, Nelis, and Shirley 1992; Adam, Cavendish, and Mistry 1995; Odle 1993) The intro- Guction of private involvement in large strategic enterprises and in public Services has been slower and raises more dificult issue, a least of public interest and acceptability (Cook and Minogue 1990). The fundamental aim is that incensed fficences should follow from the replacement of public ‘monopaly by private competition or even, given the rigidities of public [Sdmimistration and the tendency t "goverment failure,” by private mo> ‘Bopely (Wol! 1988), This article examines the argument for privatesector involvement in urban service suppl considers alterative forms of pubic: private peinership, and queries the evidence that private participation ‘rakes for greater efiency "Te service sectors that have received most comprehensive evaluation resold waste colicin, water, and electricity supply (Ascher 1987; Vickers ‘and Yarrow 1990, p40; Walsh 1985, p. 23D). A widespread conclusion is tha the introduction of competition has a more significant effect on perfor: ‘mance than change of awnership, expecially if privatized bodies com tinue to come under detailed regulation (Cook and Kirkpatrick 188.22: “Vickers and Yarrow 1988, pp. 40-1; Shapiro and Wilig 1990, p38. Ts cea that "privatiation” takes many forms (Cook and Kirkpatrick 1988), Most often, the public rle changes but does net disappee: Rather ‘hana simple trans fasets rom pubicto pevate sectors, we ae usually talking about changing their roles and relationships with repard to owner Ship, operation, contro, and regulation (Foster 1992, p. 2). The capacity of {governments to perform these ew rles and to manage new relationships twit the private sector isan important poi ssue that hasso farbeen given litle attenon in research on developing countries Batley 1994, 1956 Heart te cornet Pin Prin Reling Bask te State ‘The question whether the publica he private sectors should deliver par- ticularurban services is resolved diferent indifferent counties but most are under some pressure to move towards greater private involvement. ‘Three processes canbe identified: *+ Programmed pricatizaton, where governments make policy decisions to sell assets, to franchise the whole operation orto contract out particular aspeets of + Pragmatic privatization, where an inital decision to involve the private sector is made, due to necessity or to management ‘conveninee, and leads 19 growing commitment, + Injomal or unintended prceiauon, where the failure of public ser vices lads private fins, communities or households o step into makeup the deficiency. [nmost developing countries, there has probably been faster “progress” {n informal than in programmed privatization. Formal programs of privatization have been modest, except in the moze obviously “produc tivo" activities previously underiaken By state-owned enterprises (come mere, Industry agricultural marketing) a i indntrutural services ele communications, electricity generauon and, to 8 mich more limited ex tent, gas clistibution, ports, rallways, and water supply) Word Beak 199 . 64) These programs have often been imposed by fsa esis, debt, do- ‘hor pressure, and political lst resort and have often been prepared (Cook and Kirkpatrick 1988; Edwards and Baer 1992; Pez 1994) “normal Privatization,” where households and enterprises find their own solutions {response to the failure of public services, may be more common in the ‘Poorer countries, especially inthe sphere of essential personal services (transport health, education) and basic infrastructure (Water and power) (Moser, Herbert, and Makonnen 1955; Batley 1999) ‘Where ther has been movement tem public secorsupply tothe involve ‘ment ofthe private and commuruty sear i has often ba or purely page ‘matic reasons Most developing countries are under pressure fo privatize due to the scarcity of government resources cr the influence of aid donors Zo. bbw, for example, is embarking on widespread contracting out of manip ‘services, panty on the initiative of central government in esponse to struc ‘uralagjstment What begins asa pragmatistep often leds toa more whole Ihearted commitment to privatization for example, in the contacting of sole waste collection in Penang, Malaysia and Recife, Brazil (Batley 1956), ee | {ie Line ee for Seren arventon [Neociasical economic theory and recent theories f state failure advocate compeitive market mechaniems estetilly om the grounds of efficiency It {s argued that, by comparison, non-competitive provision leads to (a) lloctive inefficiency: services allocated do nt correspond to consumers’ preferences and/or ae charged at prices (excessive or subsidized) that do hot reflect producers’ rea costs and (b) productive Gometimes known as {internal or technica inefiiciency: resources are not used economically to produce a given outpt. or the given love of resources is not used opt ‘mally to maxizize outputs In this view, the cae for public intervention therefore has to be excep tional, resting on the argument that there are situations where the market ‘wil al to perform efcentlyor at all World Bank 1997). simple classif- {ation of such situations follows: “+ Private ims ace no cence to proie goa or src for wich is not jeasbe fo chrge proportion fo consump. Ths will arise where ‘users cannot be excluded from consumption and/or where their ‘onsumption snot rivalrous (in competition) with that of ater con suamers of thesame service, Such “pubic goods” would include for teample set lighting or police services + Prat rms ll nt prove cet wkee markts are incomplete oF non-competitfor example, where there is natural monopoly (eg piped water where the investment iso lage ast restrict compe ftion, where consumers are i-nformed to jadge between alterna tives (eg, medizal or legal services) Private fs on hr oc il gore She css and henfits of consump= tion by tose ole eyo the reac of te ale. The wider society may Binet from the extension of a service even though the diect ‘Consumers may be unable or unvllng to pay forty an example of Such “positive exteraity” i vacination Conversely, a “negative ‘externality is industrial pollution where nonconsumers may pay the price of other people's consurnptin. + Markets rn nt aces socially acceptable ee ofyuity. “Merit goods" are those that ate defined in any society as basic condition of it Zenship, regardless of ability to pay: Primary health and eduestion| {peal come ito this category ‘These concepis provide a set of considerations against which to con= sider the case for govemment intervention, but they should be tested with WEBB fh Cornet eli nd Pris ‘caution. There are few services that all ely andl wholly into any cat legory, and where they do belong depends party on local icunistances and judgemens (Malkin and Wildavsky 1991), The theoretical approach does, however, have the virtue of bringing these considerations int the ‘open, forcing usto identify the reasons for ntervention, By identifying the specific case for intervention, those who argue for restricting the rle of government can pin it down to specific atvites. Thus, even where there {Is case for intervetion, government doesnot necessarily ave to assume the entire responsibilty fr the provision ofa service ‘Governments esponsibility canbe ested by narrowing town to ts strely necessary fnctions. One way to “bundle” services inthe co [ponent pars so that only those elements that really requize dic public ‘sector involvement are subjected to (Wer Bank 1997, p51). For example lectricty generation can be put ontoacampeaive bass, while is distribu tion to homes may’ be monopolistic and therefore kept in the publi sector Altematively, thre may be scope for “borzontal unbundling” ia which ‘monopoly senace may be broken up geographically asin the xs of Bish ‘water supply Thisallows performance comparian between district manope- lisand promotes “canestabiity” by redveing the cost of entry to andthe fore of competing for a place inthe marke (Vining and Walmer 199), “Tneother sy is by separating reoponsibily for arranging or aervie to be delivered from the actual production of the service Savas 1987, p 61), Aconting to this argument, government cold, in princlpe usually achieve their objectives without geting involved in the direct production lor delivery ofservices Several writets(Rolderie 1986, Wunsch 191; Ostrom, Schroeder, and Wynne 1993) distinguish between the responsibility for “provision” which might be governments concern, and “productio which might be done by private or community actors. [think a clearer dlistncion is between (2) “nee provision” whichis the at of physically producing (constructing, creating, maintaining) and delivering 3 service and (b) “indirect provision,” that is ensuring that a service available by setting policy and service standards coorinaing,ftancing, enabling, and regulating procucers Ac ‘Using these concepts, we can anal2e the characteristics of ome particular services to compare the theoretical case for private-sector involvement. The following briely analyzes (a) two forms of urban infrastructural service ‘water supply and sewerage: (b) twoaspectfintastactaral development — cation of Pb Services Pro heionmt ithe PineabieSovcs infasricrre inealaion an shim improvement and (© two personal or ousshold servicee—primary education and solid waste management. The analysis i for ilsstaton’ proper analysis of particular cases would have to take into account particule local rcumstances, Goods and services do nothave fixed characterstesthe tendency to monopely informational roby lems the significance of sale and of “externalities” wll vary by location, prevalng institutions and level of technology. For example, when water i ‘roht from the river is piped connections to heuseelds tis turned from {2 "public ood" intoa “private good” for which ts feasible to charge com Sumers and exclude nor payers Piped Sewerage Systems: These are atthe “public goods” end ofthe spec trum excludable but norsvalrous); they are monopolistic lage-scale and ‘vith both high postive extemalites (health benefits), and negative exter alte (neighborhood pollaton). These are ikely tobe eases or direct pub- li provision, although private ime could be contacied for specie works. "str Supply: Piped water could be operated as a fully commercial enterprize, beng excindabe and rvalrous. However ts characteristics 2¢ ‘natural monopoly, thescaleof necessary investment, significant exter rales and is essential "meri goods” nature lend to the cae for govern- ‘ment involvement ast in ensuring and regulating provision. These con= "iderations may also sugges dzet provision by pubicagencies, especially {nthe case of wells and steststandposts, where difcultes of charging ‘ndkate the need or dinec community contro Tinfasrctaral Development Ths area canbe considered in four respects the assembly of lan, the installation of inastuctue a primary (ity) and secondary (neighborhcod) levels, and the making of tertiary (household) ‘connections. The state has a necessary’ role only inthe Sense of ensuring, facating, and regulating primary and secondary infrastructure (indirect provision) It may also adopt auch a role inthe assembly af Ind, but the Srguments forts doing 9 are less convincing; there ae no great probes ‘ol sil for private developers and the external impacts on wider society ‘remare modest than inthe cas of basic infrastructure. Als, private own ‘rsmay wellbe more succesful than government in esciading non-payers from land invasion. If there san argument for an involvement of the state inthe direct provision of develope land, may ret principally ont pow= es of compuleory purchase, and on the desire t ensue planned, rather than market-ied, development Public agencies may eed tobe involved in ‘the dzet installation of city-wide primary infrasmacture where there are no ims of sufficient sale to bear the investment costs long-term returns, and associated rss, o inorder to avoid private monopoly. Stun Upgrading: Improvement of slums has the qualities of» public 00d: it is not posibe to exclude nom-payers from the benefis, and the benefits can be shred without rivalry acoss the community It has 8 Po tentially high postive impact on surrounding areas, indicating «strong «ase for publicsectorinvolvement, butts suffcenty small-scale fr com munity to substite fer government in aspects of provision Solif Wise Colleton This doesnot have public good attributes: itis, principle, possible to charge users and to excde non- payers A fully con ‘mercial operation might apply most readily in the case ofthe collection of business waste, However the high negative impact of uncolleted waste on surrounding areas indicates the need for public-sector involvement least in ensuring provision, although the operation ofthe service could be ‘oniracted out fms or communities, The case for public-sector involve- ‘ment, charged tothe genera tx revenue, pareularlystrongin the case cof poor residential neighborhoods, producing low volumes in dificult rain and with love willingness to pay by direct beneficiaries, Waste Disposal The disposal of waste approximates a public good: itis difficult though not imposible to exclude non-payers, and one customer use of disposal space hardly restricts that of others. The service has ome ofthe features ofa monopoly—once establishes, the cat of extending it ‘addtional users is lowe. Disposal ster ar key to be cific for private firms to acquire without recourse to state powers of compulsory purchase ‘There are considerable negative external effects on those living near die- posal sites: these can only be compensated by some goverament interven tion in charges and reallocation ofbenefits. These are arguments ordre! pbc contol a the provision ofthe service Primary Ect: Ths does not have pubic good characteristics; it is moderately valous (tothe extent that classroom space and teachers ae in short supply) and ti posible to chargeand to exclude non payers ts scale is sufficiently small or private and community involvement in ts delivery: However there are Benefits for society ata whole and thee are also clear equity considerations, both of which indicate the necessity for ‘governmental role at est in ensuring that there is acequate provision and in subsidizing acess forthe poor. Dilicules of identifying the neces {ous who are to receive subsidies argue forthe existence of open access public schools. From this analysis we can see thatthe mast likely candidates fr pi- vate involvement are solid waste collection land assembly, infrastructate installation atthe local level, contracted-ont pubic works, and education, Similar analysis might ade housing, markets, curative health, public ee | transport electricity generation, tlecommunications (Roth 1987, 199). However all these activites ae likely to need some oversight, regulation ‘or financial support by the eat to ensure their provision. Water supply, ‘Sewerage, solid waste disposal, and city-scaleinfrastractre systems are ‘mort likely to require diect government involvement in the actual pro- duction or delivery ofthe service. ‘rgnztinsArangement or Service Provision Recognizing that there are diffrent functions in the supply ofa service al lowes ts toe that there wil rarely bea straight and simple choice between publi versus private provision Rather there are diferent ways of combi Ing the public and peivate sectors in various organizational avangements

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