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Anewtypeofpartnership|GELookahead|TheEconomist
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A new type of partnership

How public private partnerships are incorporating shared value
By GE Look ahead Posted July 13, 2014

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In recent decades, public-private partnerships (PPPs)

have been embraced by governments as an ideal
means for tackling development issues. By
establishing, as the IMF defines it, the transfer to the
private sector of investment projects that
traditionally have been executed or financed by the
public sector, PPPs can leverage the efficiency of the
private sector to create better, more effective and
more sustainable solutions for global challenges,
proponents argue.

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The worlds greatest problems todayincluding climate change, resource scarcity

and civil conflictforeign policy analyst Anne-Marie Slaughter says, cannot be
solved by governments alone, much less governments increasingly strapped for
funds. In practice, however, PPPs often face deep challenges, suffering from a lack
of coordination, clear alignment of stakeholder interests and perhaps, in the worst
cases, resembling what economist Joseph Stiglitz has described as a partnership in
which the public shoulders all the risk, and the private sector gets all the profit.

Future Scope

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Anewtypeofpartnership|GELookahead|TheEconomist

In recent years, challenges encountered during several

large-scale infrastructural projects have demonstrated
varieties of this fallibility. In 2010, the city of Paris
decided not to renew a PPP with multinationals Suez and
Veolia for water distribution after they were found to be
reaping astronomical profits.

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One of Australias largest early PPPs, the Reliance Rail

consortium, also notably ran over budget. Similarly, in
Canada, where public-private partnerships have been
galvanised by the creation of federal corporation PPP
Canada, Inc, researchers found that a total of 28 projects
worth more than $7bn cost an average of 16% more than
those done under conventionally tendered contracts.The
problem is not specific to OECD countries. In India, for
example, PPP projects worth around $70bn in 2012 have
suffered from murky terms, bad loans and massive delays.
One potential solution to conflict of interests and
mismanagement is the public-social-private-partnership
(PSPP), which has emerged in recent years as a means of
more closely aligning stakeholder interests, focusing not
on profit maximisation, but on creating broader social
value. Rather than creating situations in which society
and business are at odds, as Harvard Business School
professor Michael Porter wrote in 2011, the concept of
shared value centres on the idea that societal needs, not
just conventional economic needs, define markets. A
relatively new phenomenon, PSPPs are particularly wellsuited to agriculture, healthcare and large-scale
infrastructuredomains that address fundamental public
needs where the public sector often lacks the resources
for a comprehensive solution.

Ideally, PSPPs can fulfill Mr Porters mandate to not

merely emulate corporate social responsibility
How scientists hope to cure breast
programmes but to expand the total pool of economic
cancer
and social value. While PPPs remain essential to India,
From diagnostics to theragnostics
the country has also emerged as a PSPP centre. In
to metatsasis, researchers are
developing novel ways of
building the Delhi-Mumbai economic corridor, the
countrys $90bn PPP-funded infrastructure project, the
government is taking environmental and social impact
into account. In the agricultural sector, Tata Consultancys Rallis India, in
partnership with the Maharashtra government among others, won the Porter
Prize last year for its work with local farmers to improve productivity.
To transform its healthcare sector, the government of Maharashtra has also
partnered with GE in a consortium involving Wipro GE Healthcare Pvt. Ltd. and
Ensocare by Enso Group to establish advanced diagnostic facilities at 22
government district and womens hospitals; these will provide free treatment to
those living below the poverty line. The $25m projectone of the largest
investments in healthcare in India to datefollows GEs earlier partnership with
the Maharashtra government to set up a multi-modal manufacturing plant. Africa
is another global hotbed.
One of that continents prominent PSPP in agriculture is Mars Chocolates cocoa
sustainability program, which will build 75 Cocoa Development Centres (CDCs) to
train and assist cocoa farmers in Cote DIvoire, the worlds leading cocoa producer.
The programme, which involves partnership with the World Bank, the Agence
Franaise de Dveloppement, and the governmental Conseil du Caf et Cacao,
aims to triple cocoa production in the country by 2020 to prevent an impending
global shortage.

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Anewtypeofpartnership|GELookahead|TheEconomist

Critics of the concept of shared value point to the idea that it is not always a
comprehensive solution to the clash between economic and social valuethat a
win-win scenario is not always possible. Yet these public social private
partnerships demonstrate the power of a social mandate to galvanise
development and perhaps optimise the future impact of PPPs.
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