The Benefits And Challenges Of Public Private Partnership (P3)

Project and Seminar Material for Business Administration and Management BAM

Chapter One

Introduction

1.1 Background of the Study

This research examines the benefits and challenges of public private partnership (P3) in Akwa Ibom State of Nigeria. Focusing primarily on its challenges and benefits as a process of greater avenue for wider citizens participation in public sector management. Akwa Ibom, a public service dominated state, looks forward to open up her economy to industrialization. To this end, the state gets a number of public sector reform programmes. Inspite of this move to set her economy on a progressive level, inefficiency, corruption and mismanagement thrive. It is a generally accepted fact that in a free enterprise economy, the problem of national economic development and growth sustainance is usually the join responsibility of the public private sectors. The public sector combats adverse challenges to development and creates an enabling environment for effective private sector participation in development process. While the private sector responds to the favourable environment by increasing investment in the State Akpakpan (2013).

In addition to the above, Ekpo (2017) observes that the pursuit of a nation’s economic growth through public sector institutions is usually considered to be slow, bureaucratic and weak in enforcing discipline and risk avoiding. Whereas development through private sector institutions are usually considered to be dynamic, innovative, risk taking and forward looking. However, the manufacturing Association of Nigeria (MAN) asserts that the functions of the two sectors must complement each other for a meaningful economic growth to take place.

Toyo (2010) in his contribution says that the productive activity of these two sectors depends on the quality of labour, degree of capital accumulation, the progress of technology and the effectiveness of management. The effective utilization of these factors constitutes the key to achieving economic growth. In Akwa Ibom State, a look at the economic landscape reveals a more than proportionate public sector dominance over the private sector. This might be the result of the pre-independence structure of the economy which was dominated by the multinational corporations in Nigeria. Infact, in the post-independence era, government participation in economic activities was seen as a useful countervailing force against the multinationals dominance. A substitute for the absence of the private sector in key areas of the economy TOYO (2011). During this period, public enterprises played a key role in supporting economic growth. At a point, government economic activities became pervasive, as a result of managerial incompetence, corruption and politics. The result was distortions in investment decisions leading to economic decline and shortages.

According to Ike (2012) as well intentioned as the government programmes and policies have been the private sector’s performance has been observed to be dismal. Even though the economy has been experiencing substantial growth during the Structural Adjustment Programme (SAP) period as reflected in the Gross Domestic Product (GDP) growth of 1.2% in 1987, 4.2% in 1988, 4.0% in 1989 and 5.2% in 1990. the private sector is sick. Ejiofor (2011) in his contribution notes that the contribution from the private sector has been minimal. This situation has attracted adverse criticism of the sector by top government functionaries. They specifically accused it of consuming almost 70% of the nation’s total foreign exchange earning, while contributing very little to the economy. Further accusation include the inability of the sector to look inwards for raw-materials supply but rather depending on imported inputs to produce and inflating of product price to make jumbo profits.

The private sector through the manufacturing Association of Nigeria (MAN) has blamed its inability to perform on conflict and inconsistency in government policies, bureaucracy in implementation of policies and leakages within the economy. Government has been blamed for baning some of the essential raw materials without adequate local substitute, high cost of foreign exchange etc. From the afore-expression, this study seek to identify the challenges and benefits of public private partnership in AKwa Ibom State, that the intended partners may stand to get in their partnership dealings. Thus formed the background of this study.

1.2 Statement of the Problem

Akwa Ibom State with a population of 3.4 million is richly endowed with oil and solid minerals. Being the second largest oil producing state in Nigeria, it has strong cash flows from the federation account. Abundant agricultural resources (Land, farm, livestock, forestry, fisheries, Access to Sea/ocean etc). Has unexploited Maritime resources along its long coast line (Natural harbour which can be developed into Seaport and beaches for vessels of different sizes and for tourism and commerce). Couple with large presence of human capital, skill base and international good will and much more AK-SEEDS(2004). A survey conducted by AK-SEEDs (2004) shows that the average income per capita in Akwa Ibom State is $10. this implies that an average citizen survives on N50 per day. Too low amount for any decent living.

AK-SEEDS went further to notes that Akwa Ibom State is noted as the 7th poorest state in Nigeria. Poverty is widespread and deep-rooted because of lack of opportunities for sustainable livelihood. Youth unemployment is estimated at about 60%, about 5% of the people turned out of school system get jobs. This is a crisis of wastage in human resources. The public sector is the dominant job provider and the prospect for playing such role is fast declining. Agriculture is the dominant pursuit engaging more than 90% of the people. This sector which includes livestock, fisheries, forest resources, cash crops, tree crops, etc are yet to be exploited because of low investment and technology. The informal sector is characterized by low productivity, low income and use of manual technology.

Akwa Ibom State has a weak small and medium industrial sector. It inherited a good number of state-owned enterprises, but moribund, some privatized. The low level of industrialization in the state has deprived it of the dynamic potentials to drive development. Thereby making the state critically dependent on the public sector for livelihood. Lack of a number of modern entrepreneurs largely account for the low level of industrialization in the state.

1.3 Objectives of the Study

In Akwa Ibom State, the public sector partner with the private sector in various capacity of human endeavours, thereby this research work looks forward to evaluate the benefits and the challenges this partnership dealings open up to the state.

Specific objectives include;

To examine the benefits of public private partnership
To examine its challenges
To provide a possible solution to public private partnership

1.4 Research Questions

What is the benefit of public private partnership?
What are the challenges?
Is there any possible solution to public private partnership?

1.5 Research Hypotheses

Hypothesis I

H0: There is no benefit of public private partnership
H1: There is a benefit of public private partnership

1.6 Significance of the Study

This study bent on providing better information on the benefits and challenges that are at presents unfold to Akwa Ibom State due to public private partnership. To the public private sectors, the study will increase an understanding of the possible benefits and challenges at presents and the issues they may likely come across in case of future plan for partnership dealings. It will also be of immense importance to researchers who may wish to carry out further studies on the level at which the people of Akwa Ibom State benefits on P3 and the challenges they faced (it will add to the existing literature and research work on the benefits and challenges of P3 in Akwa Ibom State). Lastly, this study is significance to the researcher as this is considered as his partial fulfillment of his award of Bachelor of degree in economics.

1.7 Scope of the Study

This study is on the benefits and challenges of public private partnership. (P3)

The study will make use of both primary and secondary data. Questionnaires will be distributed and used to find out the correlation between teachers’ characteristics and academic performance.

1.8 Limitations of the Study

The demanding schedule of respondents at work made it very difficult getting the respondents to participate in the survey. As a result, retrieving copies of questionnaire in timely fashion is very challenging. Also, the researcher is a student and therefore has limited time as well as resources in covering extensive literature available in conducting this research. Information provided by the researcher may not hold true for all institutions but is restricted to the selected organization used as a study in this research especially in the locality where this study is being conducted.

Financial Constraint:

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time Constraint:

The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

Finally, the researcher is restricted only to the evidence provided by the participants in the research and therefore cannot determine the reliability and accuracy of the information provided.

1.9 Definition of Terms

Some of the terms used in this study is defined so as to provide easy understanding of the research work, than its conventional meaning. Thus eliminate possible confusion.

Public Private Partnership (P3):

Are arrangement between government and the private sector for the purpose of providing public infrastructure and services. This is characterized by sharing of investment, risk, responsibilities and benefits among partners Uzodinma (2014).

Public Sector:

Has been defined as that portion of an economy whose activities (economic and non economic) are under the control and direction of the state Todaro (2015).

Private Sector:

Has been defined as that part of an economy whose activities are under the control and direction of non-governmental economic units such as households or firms. Todaro (2015).

Partnership:

Is a mutual relationship that calls for agreement between two or among several interested partners; that aims at achieving a common goal and benefits to the group Uzodinma (2014).

Public Servant:

Those who work in the public sector Onu (2010).

Privatization:

To sell public owned enterprise to private individual’s for efficient management Iyoha (2014).

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary of Findings

The purpose of this study was to examine the benefits and challenges of public private partnership (P3)
Hypotheses were formulated (generated) to guide the researcher.

Hypothesis I

H0: There is no benefit of public private partnership
H1: There is a benefit of public private partnership

The objectives of the study were to;

To examine the benefits of public private partnership
To examine its challenges
To provide a possible solution to public private partnership

5.2 Conclusion

The issues discussed in this report all raise significant challenges to conduct of successful PPPs. The complexity of such arrangements and the high costs involved is enough cause for the Government to take a careful approach to PPPs. It should also recognise that PPPs pose many of the same problems inherent in procurement or privatisation and are not a panacea for development. There is need for the Government to establish clear operational guidelines with respect to:

Acceptable forms of PPPs and their prioritization;
Procedural clarity on the basic steps in establishing PPP projects (conceptualization and initiation);
Basic approaches to risk allocation, value for money and principles around the provision of guarantees;
Financial and budget evaluation criteria;
Approaches to regulation (especially cross-sectoral considerations);
Parameters for the management of privatisation issues (retrenchments, empowerment, etc.);
Project feasibility appraisal criteria;
Authorization procedures;
Recourse procedures and dispute resolution; and
Treatment of unsolicited bids The Government intends to establish a Public Private Partnerships (PPP) Unit.

There are two key tasks that must be done before the Unit is operational as a Unit within the Privatisation Commission.

Firstly, there is a need to review, analyze, and recommend draft amendments to existing legislation clarifying the power and authority of local and central governments as well as public enterprises to enter into long-term contractual arrangements with private sector service providers. Secondly, there is a need to develop minimum standards and regulations governing PPP contracts. There is a strong possibility that existing laws will be amended so that PPPs can become a more widely used option for government managers. The expected PPP framework would then lead to a transparent and successful development of infrastructure projects and services in Awka Ibom.

The PPP Unit will need to establish policies and procedures for preparing and packaging projects, and ensure quality control over these activities. A well established and operated PPP unit should help strengthen investor confidence in the government’s ability to facilitate responsible private sector participation in key sectors. Any PPP initiatives undertaken without creating an environment conducive for investing in PPP projects could result in a low uptake rate and high perceived risks, both of which can be detrimental to investor confidence. A number of PPP projects are either on-going or at various stages of project development. The success of these PPPs will depend, to a large extent on the establishment of a strategic framework comprising of: a clear guiding policy; appropriate legal provisions and institutional set up capable of efficient implementation of PPP projects; standard procedural guidelines for the process; and adequate transaction, technical, contract management and project monitoring expertise. Capacity building in project planning, co-ordination and monitoring of PPP projects

5.3 Recommendations

A comprehensive policy, legislative and institutional framework has already been passed in Awka Ibom to serve the needs of the Government’s privatisation programme. Among other things this framework provides for implementation of non-privatization transactions, such as PPPs, under the Privatization Commission and the established legal framework and process if the Government considers it necessary.

In this respect it is possible to blend a framework for PPPs into that for the privatisation programme with suitable enhancements to cater for the formal and institutional needs of a PPP programme. Specifically there will be need to provide for strong post closure contract management. As the set of skills needed to implement a privatisation programme are similar in many respects to that needed to implement PPPs, the PPP programme is likely to benefit from the legal framework which has already been passed by Parliament, the oversight of the Commission and transaction and infrastructure skills available under the Commission.

Meanwhile before the Commission is fully established, it would be possible for the PPP programme to benefit from the transaction and infrastructure development expertise available in the Department of Government Investments and Public Enterprises (DGIPE), which is currently representing the Treasury in matters relating to PPPs. In the long run it would also be possible for the Programme to benefit from capacity created under the Commission once the privatization programme is phased out. Placing the PPP unit under the Privatization Commission would also enable the PPP unit to pay reasonable/market rates of remuneration to enable the Unit to attract the required expertise.