Few months ago the Honorable Minister of Finance and Acting Minister of Planning and Economic Affairs, Hon. Amara Konneh was on record talking about Private Public Partnership [PPP or P3] for short. I salute and congratulate Mr. Minister and hope that we will ‘change our thinking’ and take a serious look at this global phenomenon now engulfing the world in general and Africa in particular.
My reaction when the Honorable Minister spoke on this all important development in world investment, doing business or undertaking development in many nations was whether we do first and foremost have any understanding of what this trend is about. Secondly I want to know whether Liberia has any laws on our books concerning Private Public Partnership. If the answer is yes, do our people have enough knowledge about the law and what we in the private sector would do to benefit from what is on the books? If the answer is again yes, how can we as a nation go about benefiting from this idea? But if the answer is no and such laws are not existing in our books, then there is a need for a Bill and Policy formulation to create a conducive environment enabling investors to invest capital, skills and technology for the provision of public sectors utilization and education of our people.
Why PPP? PPP is to help tap into private resources for building public assets, creating avenues to raise funds for development projects, to open up the provision of public services for harnessing of private capital and expertise. High on the agenda for a successful implementation of PPP, a Bill should be established with a Centralized Institution that will regulate, facilitate, monitor, supervise and approve the PPP at all levels of governance. P3 helps resources retained in the resource communities and countries than when no signs of investment after the operation are over. Take a look at what happened with our diamond studded lands in the Western region of Liberia.
Can any one of us show signs of development in this region? Let me hit the nail on the head. Last year, one of the biggest diamonds was found in this region. It was according to some beneficiaries bought from the miners for some one million and a half United States dollars. All those who saw that stone, got rich without doing much other than connections and associations Go to that place where the stone was found and see the conditions of the place and people. All beneficiaries are gone and there is nothing else to show for that sort of money.
To answer why PPP, had that stone been mined under a P3 system, evidence would have shown that indeed a larger stone found from that place and that the proceeds did so and so. PPP or P3 enables communities see what is realized from their communities as benefits stay right there. To further this article, I want us to understand two major ideas worth knowing and these are: Global Development Alliance [GDA] and Resource Partners. They are very important for our food for thought.
Global Development Alliance [GDA] model allows US-AID to leverage resources in at least the ratio of 1”1 from Private sector partners and use those assets in a way to allow us to achieve the minimal goals of partnerships for a well constructed GDA furthers the objectives of US-AID Mission while benefiting of the resource partners.
Resourced Partners are defined as organizations [corporations, financial institutions, foundations, social entrepreneurs and diaspora organizations] that bring new technical expertise to the market. Public organizations around the world have turned to Public-Private Partnerships (P3s) to engage private sector investment in a wide range of services and infrastructure, such as transportation, utilities, ports, water, energy, mining, agriculture, schools, and hospitals.
Municipalities considering a public-private partnership should be aware of the full range of possible structures and arrangements. Those structures and arrangements are constantly evolving, and variations arise in response to several considerations. For example, questions like these have to be answered: Which party owns the asset during the partnership? Which party operates the asset? How are revenues that are generated by the asset shared between the two parties? What portion of the project risks, financial and otherwise, is borne by each partner? What portion is transferred from the public to the private sector, or vice versa? How the parties answer these and other questions define the structure, dynamics, and more than likely, the potential for success of the partnership.
P3 structures generally fall on a continuum with services provided entirely by the public sector at one end and services provided entirely by the private sector with government as the enabler or regulator at the other—with a number of hybrids in between. Here are some of those arrangements.
A national vision envisaging wide arrays of administrative support structures should be put in place well in advance. There is suppose to be a National blue print outlaying vast infrastructure covering roads, ports, telecom, education , health and agriculture. Coupled with this, will be commitment by government in payment of salaries, pensions and debt servicing put in place.
It also requires the harnessing of goods from Liberian investors who have money, foreign direct investors including equity funds, concessions and commercial lenders. Once this hurdle is crossed, government can now go into hiring private capital and expertise in provision of public services
We will be looking and talking of an enormous amount of money that has to go into this sort of programs. Lots of preparation work has to be done and good proposals marketed through international and national floras. Minister Konneh has to float PPP feasibility strategy for financing capital intensive and long term development programs. The reality is that financing of capital intensive projects require participation of private sectors with a clearly crafted legal framework necessary to mitigate the high risk associated with public goods.
Global investment in water supply infrastructure needs to increase from around $580 billion a year to more than $1,000 billion by 2025, according to the OECD. These figures dwarf those needed for roads and electricity, said Anthony Cox, head of the Environment and Economy Integration Division in the organization’s Environment Directorate.
Addressing the World Water-Tech Investment Summit in London this year, he said the private sector would be increasingly important in mobilizing this finance. He noted that there is no shortage of private capital with pension funds currently holding around $29 trillion. But less than 1% of this is invested in infrastructure and of that, only a small percentage goes into green infrastructure, he said.
Similarly, the water sectors currently attract only around 3% of venture capital. To help stimulate more finance from the private sector, we need better pricing signals and more coherent policy internationally. “Harmonizing regulations would be a ‘game-changer’ one of the largest firms dedicated solely to investments in high-growth water companies stated recently.
The industry is undergoing a massive transition. “10 years ago there were only two multinationals in water; now there are around 50-60,” he noted. “This is going to be one of the most exciting times to be in the water industry,” he predicted.
The recent financial crisis in Europe and the US, by curbing subsidies for infrastructure, “may have eliminated one of the biggest things holding back innovation”, he suggested when responding to suggestions that venture capital and private equity investors were cautious on water because they had seen few successful Venture Companies exits in the sector, a lot of money had already been made from water businesses, but mostly by technology companies rather than Venture Companies/Private Enterprises investors.
There has been $50 billion in excess from the sector in past 10 years, he estimated, which compares well with other industries. There are other sectors of our economy that can benefit from the P3 system like in agriculture, mining energy and fishing where large sums of funds are.
There is also a need for forming cooperatives in these sectors where communities and partners can work together. Forming cooperatives in these sectors become beneficial in that resources and funds are jointly shared and owned and the ownership of such joint cooperatives can become community owned. We all can work to make this happen.
S. Boakai Coomber
Mobile # +231886-534-448