Public-Private Sector Partnerships in Developing Countries: Prospects and Drawbacks

Many developing countries are searching positive impacts on the efficiency, equity and quality provision of the public services through increasing competition and active participation of the private sector, considering public-private partnerships (PPPs) as the appropriate instrument to attain such endeavour. Accordingly, PPPs have been used for many and widespread purposes, ranging from the construction of physical infrastructure, to the provision of health and social services, to public administration. But, while the idea of a PPP in general is theoretically appealing, its practical implementation in developing countries is not so easy as theory suggests. Perhaps partly for that reason, a large number of implemented PPPs have left the contractual parties dissatisfied, which may indicate that, either developing country authorities, or investors (or both) may have had too high expectations to what could be attained. Though some contracts have been granted under circumstances that made them susceptible to changes in the political environment, the large majority of the others have also suffered from inflated or unrealistic expectations. So, the need for a legal and regulatory framework, which can guarantee a transparent and credible relationship between the different actors, is critical. Unfortunately many, if not all, regulators in developing countries lack one, or more, qualities required for an effective regulation.