Sustained political commitment and support is vital for a PPP programme. Some of the main social issues that need to be addressed through such commitment and support include:
| • Pricing and profit motivation of the private sector • Inclusion of pro-poor elements • Resettlement, rehabilitation and compensation • Information disclosure and public participation | Social issues in PPPs |
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| Over the years, many infrastructure services and public utilities, water supply and roads for example, have acquired the perception of “public good”. As such, the social and political acceptability of PPP projects may be a key issue in many developing societies. The perception of public good has made the tasks of government more crucial as the issues of equity and efficiencies have to be dealt simultaneously in a PPP policy framework. As such, price setting can be a sensitive issue for many projects. Price setting or any revision of price in later years is an important governance issue. A major responsibility of the government (or the regulator) is not to allow any excessive profit to the private sector. Ideally, the price should be set at a level that allows a fair return on the investment to recover the cost of financing and to meet the contractual obligations. | Pricing principle |
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| The issue of subsidy may also come into consideration when the pricing structure of infrastructure services is established. PPP does not mean that there would not be any element of subsidy in pricing. Even when government subsidy is not available, pricing may be based on cross- subsidization between two groups of users of a facility. For example, cross-subsidization of domestic users by industrial and commercial users can be considered while the pricing structure of water from a water project is considered. The government may also consider providing price subsidy to a particular group in society to achieve its broader social and political objectives. | Cross-subsidization in PPPs |
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It is important to realize that private participation does not mean that the government loses control over the infrastructure facilities that may have the character of a “public good”. Rather, the government adopts a set of new rules whereby it assumes the role of facilitator and regulator, based on its comparative advantage and ability to apply its leverage to achieve social and political objectives.
| Addressing the issue of pro-poor element in PPP projects could be very important, particularly in developing countries. A built-in mechanism can be devised in designing private projects to protect the interests of disadvantaged groups as well as increase the visibility and social acceptability of PPPs. Promotion, regulation and facilitation may be considered as the tactical means to create a conducive environment for pro-poor PPPs. Education and training programmes for both the public and private sector may be organized and demonstration projects may also be considered to create positive impressions of PPPs. Subsidies that are transparent, targeted and non-distorting could be devised. Policies and regulations guaranteeing government support for pro-poor PPP projects can be considered. It is important to follow certain core principles of good governance, namely, transparency and accountability, to promote pro-poor PPPs. Promotion of pro-poor PPP projects through incentives and technical assistance to the private sector can also be a government policy. | How to address pro-poor issues in PPPs |
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| Large tracts of land may be required for many infrastructure projects, particularly for projects in the transport, and energy and power sectors. In such cases, resettlement and rehabilitation of the affected people and compensation for the acquired land/property may become major issues in project implementation. The problem may be of serious nature if the government does not have any fair policies and legal measures to deal with these complex social issues which may also have deep financial as well as political implications. In the absence of generally acceptable policies and measures, project implementation may become difficult due to resistance from the affected people and other interested groups. Fair policies on compensation, and resettlement and rehabilitation of the affected people can greatly help in overcoming these issues. Some governments have formulated clear policies on these matters and those have been applied in recent projects. | Land acquisition, resettlement and rehabilitation |
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| One of the core principles of good governance is to facilitate public participation in the decision-making process. Public participation increases the likelihood that actions taken or services provided by public agencies more adequately reflect the needs of people and that the benefits of development are more equitably shared. Equitable sharing of resources and benefits is also an issue of sustainable development. As such, public participation has been recognized as one of the core principles of sustainable development. Here, participation means contributing to development, benefiting from development and taking part in decision-making about development, which could be realized through activities facilitated by authorities. | The need for public participation |
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| Information disclosure on PPP projects and its dissemination through the media and other means should be enhanced. It helps in better understanding of the project by the general public, can help in removing misgivings, and facilitates public participation. It is important to mention here the public participation is extremely important for social sector infrastructure projects (schools, community/civic facilities, housing, etc.) as well as for many economic infrastructure projects. Many governments have devised an in-built mechanism for public participation at the planning and design stage of a project. | The need for information disclosure |
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