Edited by Graeme A. Hodge, Carsten Greve and Anthony E. Boardman
Chapter 23: PPPs in Developed and Developing Economies: What Lessons can be Learned?
David Parker and Catarina Figueira It is now generally acknowledged that a prerequisite for economic growth is the provision of efficient, reliable and affordable infrastructure services, such as water, electricity, roads, hospitals, schools, airports, ports and public transport. The question is, are they better privately or publicly supplied? The history of state provision reveals many examples of service failure and huge cost overruns, which led to the programmes of privatization and market liberalization from the 1980s. But in many cases governments have proved unwilling to give up control of infrastructure services because of their strategic importance to the economy and because of obvious direct effects on social welfare. This has meant that the services have not been privatized in the usual way through share flotations, sales to other companies or management and employee buyouts. This is complete privatization. Rather, the approach has been to retain a high degree of public funding and public control but to attract private capital because of perceived management and risk-taking benefits. There has therefore been a growing trend towards publicly funded but privately supplied infrastructure services, in the form of public–private partnerships (PPP). In the UK this development is commonly referred to as ‘the Private Finance Initiative’ (PFI). PPP is the label used to cover a range of different types of partnerships with the private sector, of which PFI is a type formulated in the UK; HM Treasury (2008). For most purposes the two terms can be used interchangeably, and this is the case...
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