1. Bringing PPPs to the BOP(Bottom of the Pyramid) Paul O’Connor Sessional Lecturer/Doctoral Candidate School of Property Construction and Project Management

2. RMIT University © 2011 Paul O'Connor 2 Scope of this discussion Quick history of PPPs PPPs are the answer to which question? Issues for the BOP (Bottom of the Pyramid) Is this a procurement model for the elite? Can PPPs solve entrenched political inequity? How can PPPs serve the BOP? Research gaps and questions

3. Quick history of PPPs (1) PPPs have been around for hundreds of years Perrier Brothers had a drinking water concession in 1700s Modern PPPs started with the UK’s Private Financing Initiative launched in 1992: Policy to extend Thatcher’s near-complete privatisation push Kept and embraced by ‘New Labour’ when elected in 1997 Seen as a way to smooth out demands upon the capital account for developed economies with high deficits Seen as one of Tony Blair’s “third way” vehicles to engage with the private sector and achieve public goals Seen as a way to speed up social and economic infrastructure renewal & promote delivery effectiveness RMIT University © 2011 Paul O'Connor 3

4. Quick history of PPPs (2) UK has 500+ PFI projects with a capital value in excess of £28 billion Victoria has A$10.5 billion contracted Detailed policy and guidance suites have been developed in UK and Australia World Bank and ADB actively promoting PPPs PPPs are being adopted in many emerging economies as the infrastructure “answer” RMIT University © 2011 Paul O'Connor 4

5. PPPs are answer to which question? Quest for modernity and economic growth means every Asian country wants to look like Singapore in 5 years without 50 years of conscientious effort Political elites in developing nations see PPPs as “free money or “other people’s money” – a bit like a giant sovereign risk credit card (pre-approved!) Allocation decisions still opaque & often irrational Corruption and kick-backs dilute available spend Governance & technical capability generally poor RMIT University © 2011 Paul O'Connor 5

6. RMIT University © 2011 Paul O'Connor 6

7. Issues for BOP (Bottom of the Pyramid) C.K Prahalad discussed the BOP in the Harvard Business Review and asks large corporations to re-consider their attitudes about the poorest Simple fact = bottom of the pyramid are the bulk of the world’s population in developing nations Usually have the lowest private capacity, so therefore have the highest public service needs However, capacity to pay is extremely limited, and political enfranchisement is patchy or non-existent, so are cut out of the PPP conversation RMIT University © 2011 Paul O'Connor 7

8. Is this an elite procurement model? Why are the poorest countries of the world looking to use a procurement/business model that was developed in industrialised economies? Desperation? Hope? Please their multilateral funders? Respond to internal economic elites? How about social infrastructure, particularly education and healthcare? Who (should) pay(s) for these facilities? RMIT University © 2011 Paul O'Connor 8

9. Are PPPs solving entrenched inequity? If PPPs in developing countries are mainly economic or user-pays infrastructure, how can equitable access be assured to the BOP? Subsidy or guarantee for PPP revenues? Capital assistance to bidding consortia? Why can’t/won’t these central governments fund availability payments for social infrastructure? but willing to keep spending bulk of revenues on military, internal security and bureaucracies RMIT University © 2011 Paul O'Connor 9

10. How can PPPs serve the BOP? If developing nations are to take infrastructure challenges seriously they have to understand the great potential and threat from the BOP issue BOPs are a real challenge for the PPP model, but it can be solved by: specifying service outcomes to include the BOP harnessing private sector innovation embedding cross-subsidisation in user fees focus on outcomes for the poor, not just elites RMIT University © 2011 Paul O'Connor 10

11. Research gaps and questions Relativity of time and cost performance of various procurement models in developing economies vs. the waste from bad governance and corruption? Does the current mega-project focus of PPPs miss the obvious issue of the efficacy of pro-poor infrastructure funding from aid budgets? Linking the impact of ‘macro’ economic infrastructure with ‘micro’ economic outcomes Crowding out of future BOP social spending by long term debt repayment liability from PPPs RMIT University © 2011 Paul O'Connor 11

12. RMIT University © 2011 Paul O'Connor 12 Any questions? My contact details: Paul O’Connor DipPer&OpsMgt, DipGovMgt, BA(AsianStudies), GradCertPPPs (Melb.), MPubInfra (Melb.) School of Property, Construction and Project Management RMIT University E: <paul.oconnor@rmit.edu.au> M: +61 438 077 469