3. Meeting Municipal Objective Through Partnerships

It is not surprising that, in many cases, municipalities are still unconvinced by the shift to private sector participation (PSP). For decades, many have accumulated a host of concerns over the whole idea of private sector involvement in basic service provision. Case study evidence suggests that some of this doubt is based on historical precedent - the very mention of 'private sector' conjures up images of monopolies and exploitative practices that ultimately lead to the public sector taking responsibility for basic services. Some of the doubt has been created through misinformation, hearsay and (sometimes inaccurate) assumptions. Other concerns have political foundations - the reluctance to allocate a large portion of municipal budgets and deplete the power of decision-making. Still other concerns are ideological - based on a fundamental opposition to market liberalisation and privatisation trends. However, some hesitations are due to the uncertainties surrounding costs and long-term benefits, particularly for disadvantaged groups.

It would be useful to present a comprehensive range of the objectives and reasons for private sector participation given in the existing literature. The advocacy provided by the World Bank has led to a wealth of literature that asserts the benefits of private sector participation, disseminates experience, and analyses (mostly in economic terms) the experience of private sector participation in both network and non-network services. This body of information forms an important source for municipal capacity building and is frequently cited throughout this book. However, with notable exceptions,1 there is still little mention of the possible disadvantages and the potential areas of private sector failure, especially in relation to the poor. In the rush towards private sector solutions to service deficiencies, much of the documentation seems to lack a rationale, preferring instead to make definitive policy statements. Many promotional documents produced by donors mix problems with policies and solutions. Other widely available toolkits and guidelines produced for developing countries launch quickly into how private sector participation can be achieved, without providing any justification of why private sector participation may be necessary or desirable. For municipal officials venturing down this path for the first time, a process of justification and clarification is crucial not only to understand the benefits of involving the private sector, but also to highlight the problems that may need to be mitigated.

As the objective of this sourcebook is to assist municipalities in building the capacity to develop public-private partnerships (PPPs) that are beneficial to the poor, an important starting point is to recognise that doubts over the role of the private sector may colour the perspective and capacity of local government to develop effective partnerships. A fundamental step is therefore to consider why the private sector should get involved at all. This chapter outlines municipal problems and possible objectives and opportunities, sets out the key reasons for involving the private sector, and introduces some of the unresolved areas. The details of this debate are an inherent part of the chapters that follow.

This discussion is supplemented by a wide range of perspectives on private sector involvement provided by participants of PPP arrangements. Each respondent was asked the same question: Why involve the private sector in service delivery? Their perspectives bring out some of the issues discussed in this chapter. Juxtaposing Boxes 3.2-3.8 is, however, an attempt to illustrate different views, from the guarded position of an NGO to the confident position of the financier.