Public-private partnerships: trends and challenges at the subnational level

Abstract

Public Private Partnerships (PPPs) are increasingly being used at the subnational level as an innovative means of providing a cost-effective use of resources and improved service delivery. This is especially the case as many subnational governments have become key players in the management of public services and in the development agenda of their countries as a result of the decentralization reforms that have swept the region over the last couple of decades. PPPs can play a critical role in addressing the growing demand for services, by combining the financial resources, technological capacity, and managerial effectiveness of the private sector with the local knowledge and information, public accountability and social responsibility of the subnational government. Other benefits commonly mentioned include the sharing of risks and the freeing up of resources that would have been used for infrastructure for social programs.

Private sector participation in infrastructure and services is not new at this level. What has changed however is how widely they have become accepted and implemented in the region, as well as the extent of innovation into new areas and types of arrangements and problems that are addressed.

While many features of PPPs are the same at the national as lower levels of government, there are important distinctions that should be considered in order for local PPP programs to live up to their potential. There is no one-size fits all model for PPPs, and in the end, success or failure depends on good governance. Consequently, PPPs pose special challenges for local governments, which are often the weakest level and least able to adapt to the new role that such arrangements entail. There are also factors in the environment that subnational governments are subject to that can limit their capacity to carry out effective programs. To that regard, this paper will analyze PPPs from the perspective of the subnational level, providing a review of some of the main trends and challenges.