Institutional Prerequisites for 3Ps in

Developing Countries

Submitted to

The First Seminar of

I2ED Research Team

Aung Kyaw Oo
Ph.D. Student
SNU-TEMAP
September 12, 2006.
Reviewed Papers:
(1)Dima Jamali, American Univ. of Beirut: A public-
private partnership in the Lebanese
Telecommunications Industry: Critical Success
factors and Policy Lessons; Public Works
management and Policy Vol 9, No. 2.
(2)Axel Borrmann and Matthias Busse: Institutional
Prerequisites of Economic Partnership
Agreements; Intereconomics, July/ August, 2006.
(3)Axel Borrmann, Matthias Busse and Silke
Neuhaus : Institutional Qualities and the Gains
from Trade; HWWA Discussion Paper 341.
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Reviewed Papers: ( Cont’d)

Werner Heinz: Public-Private Partnerships:
Principles, Opportunities and Risks; Lecture
given in AER CENTURIO INTERREG III
Conference, May 6, 2005.

UNIDO: Building Productive Capacity for Poverty
Alleviations in LDCs; The Role of Industry–
Executive Summary, 2001.

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Outline

Definition

Public-Private Partnership

Institutional Infrastructure

Past Experiences

Prerequisites between partners

PPP in developing countries

Case Study : Lebanese Telecom

Comments on Prerequisites for PPP

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Definition:

Institution can be defined as humanly devised
constraints that structure political, economic and
social interactions (North, 1990).

A PPP is an institutionalized form of cooperation
of public and private actors, who on the basis of
their own indigenous objectives, work together
toward a joint target (Nijkamp et al., 2002).

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Public-Private Partnership

A contractual arrangement whereby, according

to a shared ownership agreement, the
resources, risks, and rewards of both the public
agency and the private company are pooled to
create greater efficiency in the production and
provision of public or private goods.
The term classifies a spectrum of possible
relationships oriented variously to the
development and dissemination of wholly public
or relatively private goods.

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Institutional Infrastructure ( UNIDO)

Policy should focus on development of public-private

consultation and partnership mechanisms, as well as
fostering clusters and networking among enterprises
both at national and international levels. This requires
development of appropriate regulatory regimes,
appraisal of existing institutional structures and firm-
and branch-level diagnostic surveys for promotion of
international institutional linkages.

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Past Experiences:

Although private-sector participation is

increasingly invoked in the context of developing
countries, the success or failure of PPP projects
has not been systematically assessed
(Roseneau, 1999).

The opportunities and challenges posed by these
new partnering arrangements have also not
been systematically explored, including long-
term benefits to participants as well as potential
conflicts of interest and cost-shifting problems.

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Prerequisites between the Partners

Pongsiri (2002) emphasizes the establishment of
a transparent and sound regulatory
framework as a necessary precursor to
private-sector participation in a PPP.

Commitment Symmetry, Common Goal
Symmetry, Resource dependency, Intensive
communication, and Converging working culture
among others. ( Samii et al.,2002)

Partner Selection. ( Hagen ,2002)

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Investment in Developing Countries Applying
PPP

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Case Study: Lebanese Telecomm: PPP

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Implementation of PPP :1994-1999

In 1994, two cellular operators were

granted 10-year GSM concessions under a
build, operate, and transfer (BOT)
contract (with a possible extension of 2
years) that entailed an escalating revenue-
sharing scheme.

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Aftermath of PPP implementation

The alleged violations primarily relate to
surpassing the 125,000 subscriber limit
specified in each contract, unpaid fees and
taxes especially for microwave links, and
insufficient geographic and network
coverage (Anchassi, 2000, pp. 53-55). The
government has even threatened to
cancel the contracts and seize the two
companies’ assets if an agreement is not
reached through negotiation.
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Aftermath ( Cont’d)

However, even the international consulting firm, Booz
Allen and Hamilton, called on to mediate and interpret
the contract, concluded that there could be two legal
interpretations of the same clause. Excerpts from their
report indeed confirm that, in certain respects, the terms
of the contracts are not transparent and the impact of
supervening law, documentation, and discussions not
clear (Vance, 2000).

Not a single coordination meeting has been held
between the partners since December 1998!

GL cancelled BOT of two operators in the late 2001
ahead of (3) years’ contract terms.

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Success from PPP

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Lessons Learnt from PPP
MPT found responsible for supervising the BOT
contracts that were granted to Cellis and Libancell
overnight. MPT, however, was not ready for this
responsibility. It did not have the technical/
organizational capacity to exercise adequate
control and supervision over the newly
established GSM concessions. The conflict arose
that the operators have gone beyond the scope of
the contract, which specified a maximum subscriber
base of 250,000. The GSM operators also
introduced a range of new services that were
not foreseen in the contracts. (A. Oueidat,
Director General, personal interview, July 21, 2002)
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Issues at Hand: Between the Partners

Conflicts of Interest-- informational
confidential for proprietary reasons

Value for Money – Contentious –Performance
measurement System by Procurer (e.g.
performance, pricing, feedback from users,
etc…)

Risks transfer lies at the heart of PPP--
Technical, construction, revenue, operating,
financial, regulatory, environmental, etc..

Regular and intense communication between
the parties

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Partnership Results ???

This stream of literature generally indicates that
partnerships are high-risk strategies, particularly
at the level of implementation; however, the
advantages and/ or mutual benefits, when
successful, by far outweigh the risks involved
(Hagen, 2002;Horton, 1998).

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Comments on Prerequisites for PPP

Technical expertise ( Fields of mutual

interest).

Organizational Capacity ( Both parties).

Foresightedness in contractual terms
( Private actor).

Proper allocation of Risks.

Legal & Regulatory scheme should be
done favoring one’s social groundings.
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Thank you.

Q & A

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