Exploring Public-Private Partnerships in Singapore

The Success-Failure Continuum

Soojin Kim, Kai Xiang Kwa

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781000769180
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book looks at what drives effective management of public-private partnerships (PPPs). It examines widely cited Singaporean cases pertaining to successful PPPs as well as those in failure (and subsequently contracted back in the public-sector provision) in diverse areas of public service, such as water services, educational services, trade and logistical data services, residential services, acquisition and maintenance of military systems, research and development services, infrastructure, and sport services.

The book begins each case with an overview (e.g., project goals (motivators), types of PPPs, stakeholders, time period, assigned budget, and capital planning) and then specifically discusses critical success factors and/or risk factors pertaining to the decisions to proceed with ongoing PPPs or to return to self-operation (in-house public production) of services later, respectively. The book concludes with a discussion of lessons learned from Singaporean cases and contexts of PPPs and suggests more feasible strategies and conditions toward successful collaborative governance between public agencies and private counterparts for the new century.

This book will appeal especially to public policymakers.

1
Introduction

Why Public-Private Partnerships (PPPs)?

1 The historical background of PPPs

Over the past few decades, spurred on by cost-efficient and business-like government reforms (e.g., Reinventing Government and New Public Management) and the change in demographic structure (e.g., aging population), many developed and developing countries have continued to pursue their production and delivery of public goods and services by awarding contracts to the private sector. Such change in governance, for example, using privatization or contracting-out, has aimed to achieve cost savings and ensure government responsibility toward the modern welfare state without compromising public policy goals and heightened citizens’ needs for more and better services. Scholars and practitioners have described this global phenomenon using diverse terms like ‘third-party governance’ (Salamon, 1981), ‘government by proxy’ (Kettl, 1988), ‘hollow state’ (Milward & Provan, 2000), and ‘contracting regime’ (Smith & Lipsky, 1993) – all of which encompass the broadening of new public management strategies in the context of contractual relationships between public and nongovernment organizations outside the public sector (Kim, 2015).

In recent decades, this line of discussion has been extended to public-private partnerships (hereafter, PPPs), which are based on long-term cooperation and mutual understanding between the public- and private-sector actors. A huge volume of literature, particularly evidence-based research on PPPs, has flourished in the area of public administration and policy since the late 1990s (Leigland, 2018). Scholars have started to call PPPs ‘hybrid forms’ (Koppell, 2003), ‘third way governments’ (Hodge & Greve, 2007), and ‘cross-sectoral collaboration’ (Brinkerhoff & Brinkerhoff, 2011).

In history, the concept of using private capital to provide public services, especially public facilities (i.e., repairing the roads, paying debt by charging bridge tolls), seems to be quite old (Yescombe, 2007). Western countries, as pioneers of this practice, started to allow private firms to enter the public sphere in the 18th century (Gunawansa, 2010; Kumaraswamy & Morris, 2002). For example, in France, the construction of canals with private capital began through the concession type of practice (e.g., charging toll fees to pay back the initial investment) (Yescombe, 2007, p. 5). Likewise, most of London’s bridges and tunnels were financed by private investors, and the private counterparts were allowed to charge so-called public service fees to bridge users. The Brooklyn Bridge in New York was also built in the same way. This was to help finance the building of public facilities and to substantially lower debt burdens shouldered by governments.

PPPs have started to elicit a great deal of attention globally in the scholarship as well as the practice since the United Kingdom (UK) first introduced PPPs at the national level in 1992 (Gunawansa, 2010; Lam, 2004; Leigland, 2018). As an innovative strategy for effectively delivering public services to the people, the UK government executed the Private Finance Initiative (PFI), which enabled the government to use alternative sources of (private) funds for infrastructure. By April 2003, about 560 PFI contracts had been executed, which made up more than 10 percent of the total investment in the UK public sector in 2003–2004 (Corner, 2005, p. 44). In response to the UK’s successful PPP operations, other European countries (e.g., PPPs were first introduced in France in 2004) and the United States have increasingly relied on PPPs, not only to finance their infrastructure building/renovation but also to enhance urban renewal and local economic development in the long term (Hodge & Greve, 2007; Osborne, 2001).

Later in the 20th century, Asian countries have not been an exception to this trend. This is because many countries in the Asian and Pacific region pursued greater efficiency (associated with rapid economic growth) through private involvement in public-sector works and subsequently recovered citizens’ trust in government through such strategic public management. As a result, PPPs initially tended to appear in the area of large-scale urban infrastructure and related services, mostly in terms of public transport infrastructure projects such as highways (express lanes), inter-state bridges, airports, harbors, and tunnels (Ni, 2012; Velotti, Botti, & Vesci, 2012). However, to date, PPPs have spread to other industries (service areas), including information technology (IT), medical services, residential services, military/defense, sport stadiums and sewerage (recycled water) treatment, to mention a few.

Notably, it has been argued that PPPs are different from the traditional bureaucratic public service delivery method (including competitive tendering) or privatization (Hodge & Greve, 2007). Rather, PPPs seem to go beyond the traditional government purchase of goods and services through procurement/contracting-out in that the operator or service provider (and its financiers) in the private sector has specific roles even in the design, construction (including renovation), and financing stages in addition to their operational roles (Bovaird, 2004; Hodge & Greve, 2005; Wang & Zhao, 2014). To manage PPPs successfully, consistent intersectoral collaborations between the two sector bodies are required for promising long-term contractual relationships (i.e., concession periods)¹ (Forrer, Kee, Newcomer, & Boyer, 2010).

According to Forrer and his colleagues (2010), in a traditional competitive approach, governments tend to dictate the terms and conditions of service production and delivery, and private vendors are expected to comply with the contractual specifications. However, in a PPP project, both government agencies and private partners are actively engaged in the pre- and post-award negotiations to determine how the good or service might be provided (Forrer et al., 2010, pp. 476–477). In other words, under the PPPs, two or more stake-holders (partners per se), at least one of which is a public entity and one a private entity (a private company or consortium), not only proceed with joint decision-making but also share risks (and costs and resources related to the products and services if necessary), responsibilities for the outcome, and further returns on investment in the long-term relationship (Evans & Bowman, 2005; Hodge & Greve, 2007; Marques & Berg, 2011; Ni, 2012). However, it should be noted that as in the PPP Handbook developed by the Ministry of Finance (MOF), Singapore, governments utilizing PPPs are allowed to invite private-sector entities to finance and develop infrastructure projects without losing the state control over the regulatory aspects of service delivery, including the pricing of services provided by the infrastructure facility (MOF, 2012, p. 4). This is reminiscent of Baker’s (2016) argument that “[a] PPP is a hybrid structure that lies between the traditional provision of public goods and services by the government and pure privatization” (p. 433).

Although the public and private partners are expected to work together toward a common goal (e.g., providing better performance of targeted services to fulfill citizens’ expectations) in the PPP relationships, each sector actor needs to play an independent, significant role in improving public services or creating innovation. Under PPPs, a public entity is typically in charge of specifying the outputs or services required, whereas a private company or consortium (known as a project developer) should be responsible for financing, designing, construction, operation and maintenance of a facility (service) (Gunawansa, 2010; MOF, 2012). More specifically, in the words of Ni (2012),

[t]he public sector contributes social responsibility, public accountability, political responsiveness, environmental awareness, local knowledge, and job creation and equity concerns; while the private sector encompasses efficiency, access to finance and resources, knowledge of technologies, innovativeness and nimbleness, and entrepreneurism.

(p. 256)

2 Global trends of PPPs

As a result of the widespread popularity of PPPs around the world in the 1990s, diverse public infrastructure projects, such as building and renewing highways, roads, tunnels, sewerage (recycled water) treatment, harbors, airports, or sport stadiums, have been earmarked as a typical example of PPPs. In particular, as noted above, since the UK’s Private Finance Initiative (PFI) in 1992, many European countries have introduced the number of PPPs considerably for the provision of diverse public services, beyond mere infrastructure-related projects.

According to one data portal of the European Investment Bank (2017) dealing with 28 EU countries, Turkey, and countries of the Western Balkans region (1990–2016), it was found that aside from the transport infrastructure projects, other service areas, including environment, education, public order and safety, defense, healthcare, housing, and telecommunications, have been provided for in the form of PPPs. As Table 1.1 shows, in terms of total PPP investments in European countries, as predicted, the transport sector has been the most prolific. Interestingly, healthcare, education, and the environment sectors have a relatively higher portion of total PPP investment value as compared with other sectors.

Table 1.1 Breakdown of Total PPP Value by Sector

From a broader perspective, other countries in Asia, Latin America, the Middle East, and Africa have not been spared from such a worldwide governance change toward PPPs. The World Bank’s (n.d.) Private Participation in Infrastructure (PPI) Project database has dealt with over 6,400 PPP projects in approximately 130 low- and mid-income countries. This database has recorded not only the number and investment value of PPI projects (aggregated ones and divided ones by region or sector) but also their historical changes over the period 1990–2018 in six regions of the world: (1) East Asia and Pacific, (2) Europe and Central Asia, (3) Latin America and the Caribbean, (4) Middle East and North Africa, (5) South Asia, and (6) Sub-Saharan Africa (see Table 1.2, Table 1.3, and Figure 1.1 below).

Table 1.2 Breakdown of PPI Projects by Region

Table 1.3 Breakdown of Total PPI Investment by Sector

According to Table 1.2, among many countries having transitional economies, with respect to the number of PPI projects, Latin America and the Caribbean region are ranked first; East Asia and Pacific are ranked second; and South Asia is ranked third. In addition, Table 1.3 shows the total US dollar PPI investment by sector. As opposed to expectations, the private sector’s involvement in energy service areas such as electricity and natural gas has been quite huge and even bigger than that in transport service areas (see Table 1.3). It is also notable that PPI projects have increased in the industry associated with information and communication technology (ICT) over the last two decades.

Figure 1.1 Historical Trend of PPI Projects by Region (over the period 1990–2018)

Source: Figure 1.1 was made based on data adapted from World Bank (n.d.). Private participation in infrastructure (PPI) project database. Retrieved June 30, 2019, from https://ppi.worldbank.org/en/ppidata

Another interesting piece of evidence from the database is that the historical trend of PPI projects across regions during the period 1990–2018 has been nonlinear. As shown in Figure 1.1, in the early 1990s, countries in Europe and the Cemtral Asia region were most likely to allow PPI projects in the public sector rather than other countries, but in the mid-1990s, countries in Latin America and the Caribbean region started to introduce PPI projects and in turn they had a peak in the number of projects during 1997. In addition, it is notable that after their recovery from the financial crisis in the late 1990s, mid-income countries (i.e., Hong Kong, South Korea, Taiwan, Malaysia, Singapore, and Indonesia) in East and South Asia have exceeded countries in other regions with respect to the number of PPI projects. This change may be due to the rapid growth in economic development (globalization) in those countries during the 1970s and 1980s and by the so-called top-down national planning and development designed to attract foreign direct investment which in turn helped to bring modern jobs and goods to the region (Common, 2000, pp. 135–136).

Figure 1.2 PPI Projects by Sector (Disaggregated by Region)

Source: Figure 1.2 was made based on data adapted from World Bank (n.d.). Private participation in infrastructure (PPI) project database. Retrieved June 30, 2019, from https://ppi.worldbank.org/en/ppidata

Furthermore, Figure 1.2 shows the degree to which countries in each region have implemented PPI projects across industry sectors (service areas). It appears that in East Asia countries, PPI projects are largely implemented in the areas of energy and water, and sewerage services. In South Asian countries, the projects have come about to support public energy services as well as transport services. Other countries in the remaining regions, including Europe, Latin America, the Middle East and Africa, seem to have actively allowed the private sector’s participation (investment) in projects in the energy sector rather than in other sectors (see Figure 1.2).

3 Definition of PPPs

Despite the widespread attention given to PPPs and their growing popularity in practice around the world, it is interesting to note that there is a lack of an agreed-upon definition of P...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Acknowledgments
• List of abbreviations
• 1 Introduction: why Public-Private Partnerships (PPPs)?
• 2 Singapore-context PPPs
• 3 Case studies I: success of PPPs in Singapore
• 4 Case studies II: failure of PPPs in Singapore
• 5 Conclusion: lessons learned from practice
• Index