Public–private partnerships (PPPs) have helped many emerging-market countries modernize their highways and telephone networks and build new power plants. However, the PPPs that have been effective in building infrastructure have not translated well to projects involving public services, including healthcare, education, and e-services such as electronic payments. Now, a new model of partnership is emerging that may transform how public-services projects are structured.
In the joint ownership model, the government and a private-sector partner team up to start a for-profit company. The government provides concession rights to its private partner and handles the political and legal roadblocks faced by the new company. The private partner designs and ultimately operates the service.
The government’s position as a financial stakeholder does create some risks: There is the potential for the government to create a monopoly and experience conflicts of interest.
Conversely, the new service may not generate the expected level of revenue. It is ultimately up to the government to mitigate these risks.
Joint ownership must be seen as a temporary solution that can be used to launch new services quickly. In the long run, the government partner should look to spin off its stake. It is vital for the government to look for ways to address the legal, regulatory, and institutional problems that initially prevented the service from being launched by the private sector alone.