1. The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/0951-3558.htm
IJPSM
17,5 Success and failure mechanisms
of public private partnerships
(PPPs) in developing countries
414
Insights from the Lebanese context
Dima Jamali
Suliman S. Olayan School of Business, American University of Beirut,
Beirut, Lebanon
Keywords Public sector organizations, Private sector organizations, Partnership,
Telecommunications, Developing countries, Lebanon
Abstract The concept of public private partnerships (PPPs) has attracted worldwide attention
and acquired a new resonance in the context of developing countries. PPPs are increasingly
heralded as an innovative policy tool for remedying the lack of dynamism in traditional public
service delivery. However PPPs have also become mired in a muddle of conceptual ambiguities.
This paper sheds light on the PPP concept and the rationale for invoking private participation in
developing countries. It also identifies critical success factors and policy requirements for successful
PPP implementation. Finally, the paper presents a case study assessment of a post-war PPP
initiative in the Lebanese telecommunications sector and draws out lessons for improving the
effectiveness and viability of PPP projects in the context of developing countries.
Introduction
Following the end of the cold war and a global disillusionment with statist and socialist
ideals, much of the developing world has been adopting principles of free markets and
seeking participation in the world trade system. Growing appreciation of the
importance of the market mechanism, coupled with the success of privatization in
various countries have sharply increased interest in the continuously emerging
public-private partnership (PPP) phenomenon. PPPs have become a rather popular
institutional arrangement, as they are perceived to remedy a lack of dynamism in
traditional public service delivery. Yet there has been no systematic evaluation of the
policy requirements for successful PPP implementation. This is particularly true in
developing countries that have only recently started to experiment with various
practical applications of cooperation between the public and private sectors.
Several factors help account for the increased interest and popularity of PPPs. The
promise of efficiency savings and a reduced burden on strained public resources has
certainly struck a positive chord in countries operating under tight budgets. The
appeal of PPPs can more generally be explained in terms of their expected benefits,
including access to private finance for expanding services, clearer objectives, new
The International Journal of Public The author would like to extend special thanks to individuals who contributed indirectly to this
Sector Management
Vol. 17 No. 5, 2004 study by agreeing to be interviewed in particular: Mr Naji Indraous and Mr Ahmad Oeidat,
pp. 414-430 Directors General at the Ministry of Post and Telecommunications, Mr Hussein Rifaii, Chairman
q Emerald Group Publishing Limited
0951-3558
and General Manager of Libancell, and Dr Kamal Shehadi, Regional Telecommunications
DOI 10.1108/09513550410546598 Expert/Advisor to the Minister of Economy.
2. ideas, flexibility, better planning, improved incentives for competitive tendering and Success and
greater value for money for public projects (Spackman, 2002; Nijkamp et al., 2002). failure of PPPs
There is also the added pressure in the context of developing countries from
international financial institutions such as the World Bank and the International
Monetary Fund to shift to an efficient and facilitative role of government and adopt
principles of market liberalization and privatization. Financial assistance is often
linked to changing the focus and orientation of government from direct involvement 415
and intervention to a role revolving around partnership and facilitation (Hughes, 1998).
Along with the concepts of economic adjustment, privatization and deregulation, PPPs
indeed evolved over the past decade as an important aspect of donor-country
development thinking and a central component of foreign policy toward developing
countries (Mitchell-Weaver and Manning, 1991).
In this context, many developing countries have initiated PPPs in various sectors
including infrastructure, manufacturing and services. Investment in infrastructure
projects with private sector participation in developing countries by sector is depicted
in Figure 1 (Roger, 1999). Evidently, the telecommunications and energy sectors have
led the growth in private activity in the 1990s. 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 PPP debate is
still conducted in the terms “public bad, private good”, on the basis of selective
evidence (Spackman, 2002; Broadbent and Laughlin, 2003). This is particularly the case
in developing countries, where distrust of government prevails.
This paper presents a case study assessment of a recent PPP initiative in the
telecommunications sector of Lebanon – a developing economy – and draws out
lessons for improving the viability and effectiveness of PPP projects in the context of
developing countries. First, the research sheds light on the PPP concept and the
rationale for invoking private participation. Based on the literature, critical success
factors and policy requirements for successful PPP implementation are identified. The
Figure 1.
Investment in
infrastructure projects
with private sector
participation in
developing countries by
sector, 1990-1998
3. IJPSM research methodology is then presented and the record of the aforementioned PPP
17,5 project examined. Lessons and relevant policy recommendations are delineated in light
of the findings.
PPPs: definition and rationale
416 The recent ascendancy of ideals of free market economy in developing countries –
whether willingly or under the impetus of subtle persuasion – has invited a revisiting
of the respective roles of the state and the private sector. The traditional neat
assignment of roles and functions between the sectors has been challenged, with the
interdependencies of the free market economy often necessitating new forms of
partnerships and collaboration across organizational boundaries. Pongsiri (2002)
writes of a blurring of activities and responsibilities and the public sector moving
towards a diffuse force field in which public and private interests have to be reconciled.
These new dynamics, among others, have acted as a catalyst in many countries to
seek a new modus operandi with the private sector. In consequence, PPPs have evolved
as a popular institutional arrangement. A PPP is an institutionalized form of
cooperation of public and private actors, which, on the basis of their own indigenous
objectives, work together towards a joint target (Nijkamp et al., 2002). While PPPs were
originally treated as a derivative of the privatization movement, there is a growing
consensus today that PPPs do not simply mean the introduction of market mechanisms
or the privatization of public services. PPPs rather imply a sort of collaboration to
pursue common goals, while leveraging joint resources and capitalizing on the
respective competences and strengths of the public and private partners (Widdus,
2001; Pongsiri, 2002; Nijkamp et al., 2002).
Unfortunately, the term PPP has been abused and become mired in a muddle of
conceptual ambiguities. The PPP concept is indeed commonly used to describe a
spectrum of possible relationships between public and private actors for the
cooperative provision of services (Figure 2). Admitting that there is no single PPP
model and that a diversity of arrangements may be distinguished, varying with regard
to legal status, governance, management, policy-setting prerogatives, contributions
and operational roles, it should be emphasized that actual partnering involves
collaboration in the pursuit of a common objective. A relationship qualifies as a
partnership if it involves the joint definition of specific goals, and a clear assignment of
responsibilities and areas of competence between the partners in the pursuit of a
common endeavor. Most supposed PPPs in third world development do not seem to
meet this criterion. Donor agencies often promote privatization and government
subsidies to private entrepreneurs in the name of building PPPs. However,
privatization and subsidies should not be confused with PPPs (Mitchell-Weaver and
Manning, 1991).
Some conceive PPPs as representing a middle path between state capitalism and
privatization (Leitch and Motion, 2003). General disillusionment with privatization has
led to explicit attempts to engage with the private sector in a different way.
Privatization indeed did not result in massive reductions in national debts, nor did the
private sector demonstrate the universal superiority in running businesses that had
provided the philosophical underpinnings of the privatization process (Broadbent and
Laughlin, 2003; Leitch and Motion, 2003). PPPs were therefore seen as a way of
4. Success and
failure of PPPs
417
Figure 2.
The spectrum of
public-private
partnerships
involving the private sector in projects of national importance, while avoiding the
problems associated with the extensive privatizations that occurred in the 1980s.
In the context of developing countries, the recent proliferation of PPPs has been
attributed to several explicitly stated reasons, including: the desire to improve the
performance of the public sector by employing innovative operation and maintenance
methods; reducing and stabilizing costs of providing services; improving
environmental protection by ensuring compliance with environmental requirements;
reinforcing competition; and reducing government budgetary constraints by accessing
private capital for infrastructure investments (Miller, 2000; Savas, 2000). The latent
reasons for contemplating a PPP lie in the inherent differences between the public and
private sectors, which are outlined in Figure 3. These differences imply that PPPs can,
under the right conditions, provide an effective mechanism for capitalizing on the
peculiarities and strengths of each sector in the pursuit of common objectives.
Public agencies and private organizations can indeed seek mutual advantages in
developing a PPP, particularly when the latter is characterized by trust, openness,
fairness and mutual respect. For the public agency, the main rewards from partnering
with the private sector are improvement of program performance, cost-efficiencies,
better service provisions and appropriate allocation of risks and responsibilities
(Pongsiri, 2002). The good faith approach indeed takes as proven that private
participation results in a combination of lower cost and less risk for the public sector
(Miller, 2000; Leitch and Motion, 2003). The private sector on the other hand expects to
have a better investment potential, to make a reasonable profit, and to have more
opportunities to expand its business interests. A good return on investment is
definitely an essential consideration from the private partner perspective (Scharle,
2002).
6. The respective roles of the private and the public partner are therefore neither Success and
antagonistic nor identical, but complementary. The public sector controls several key failure of PPPs
legal and regulatory assets to implement a project within the context of an overall
development program. The private sector brings outside capital, technical expertise
and an incentive structure. The essence is the cooperative and mutually supporting
nature of the relationship. Actual partnering therefore involves collaboration and
leveraging the strengths of both the private sector (more competitive and efficient in 419
economic terms) and the public sector (more responsible and accountable to society).
PPPs may therefore, under the right conditions, bring the discipline of the market into
public administration and promote a synergistic combination of the strengths,
resources and expertise of the different sectors. The question then arises as to under
what conditions do PPPs create win-win situations as a result of mutual benefits or
socio-economic symbiosis. This question will be addressed in the next section.
Critical success factors
While PPPs can provide a mechanism for exploiting the comparative advantages of
public and private sectors in mutually supportive ways, several issues are salient and
deserve careful consideration when contemplating a PPP. To start with, the
government needs to maintain its involvement, whether in its capacity as partner or
regulator. This is especially true where accountability is critical, cost-shifting presents
problems, the timeframe is long, or societal normative choices are more important than
costs (Spackman, 2002). PPPs should not be expected to substitute for action nor
responsibilities that properly rest elsewhere. In particular, the public sector should
continue to set standards and monitor product safety, efficacy and quality and
establish systems whereby citizens have adequate access to the products and services
they need. In other words, PPPs do not imply “less government” but a different
governmental role. Because of the stronger position of the private partner, more skilled
government participation is often needed (Scharle, 2002).
Pongsiri (2002) emphasizes the establishment of a transparent and sound regulatory
framework as a necessary precursor to private sector participation in a PPP.
Regulation provides assurance to the private partner that the regulatory system
includes protection from expropriation, arbitration of commercial disputes, respect for
contract agreements, and legitimate recovery of costs and profit proportional to the
risks undertaken. A sound regulatory framework can also increase benefits to the
government by ensuring that essential partnerships operate efficiently and optimizing
the resources available to them in line with broader policy objectives (Di Lodovico,
1998; Zouggari, 2003). Baker (2003) similarly demonstrates that the nature of
regulation and control are crucial in decisions about PPPs, outlining that PPPs
generally necessitate a more direct control relationship between the public and private
sector than would be achieved by a simple (legally-protected) market-based and
arms-length purchase.
Samii et al. (2002) highlight the key formation requirements of effective PPPs,
including resource dependency, commitment symmetry, common goal symmetry,
intensive communication, alignment of cooperation learning capability, and
converging working cultures while Kanter (1994) emphasizes individual excellence,
importance, interdependence, investment, information, integration, institutionalization,
and integrity as the key ingredients of effective collaboration (Table I). Both the appeal
7. IJPSM Based on Requirement Description
17,5
Samii et al. (2002) Resource Recognition by the partners that what can be achieved
dependency together can not be achieved alone
Commitment Equal commitment from partners confirmed through the
symmetry allocation of time and resources
420 Common goal Individual goals as an output or a subset of the overall
symmetry program objectives
Intensive Regular communication through different channels/means
communication
Alignment of The sharing of knowledge across organizational
cooperation boundaries to alleviate problems of information
working capability asymmetry and ensure convergence in learning skills and
speed
Converging The joint development of a set of working practices and
working cultures procedures to level out differences in working style/culture
Kanter (1994) Individual Both partners are strong and have something of value to
excellence contribute to the relationship. Their motives for entering
into the relationship are positive (to pursue future
opportunities), not negative (to mask weaknesses or escape
a difficult situation)
Importance The relationship fits major strategic objectives of partners
so they want to make it work. Partners have long-term
goals in which the relationship plays a key role
Interdependence The partners need each other. They have complementary
assets and skills. Neither can accomplish alone what they
both can together
Investment The partners invest in each other (e.g. equity swaps or
mutual board service) to demonstrate their respective
stakes in the relationship and each other
Information Communication is reasonably open. Partners share
information required to make the relationship work,
including their objectives/goals, technical data/knowledge
of conflicts, trouble spots or changing situations
Integration The partners develop linkages and shared ways of
operation so they can work together smoothly
Institutionalization The relationship is given a formal status, with clear
responsibilities and decision-making processes
Table I. Integrity Partners behave toward each other in honorable ways that
PPP key formation enhance mutual trust without abusing the information they
requirements gain, nor undermining each other
and the challenge inherent in PPP arrangements arise from the notion of building new
relationships between actors that have drastically different constituencies/interests,
along with divergent strategic and operational realities.
Alliance research similarly suggests that the failure of many alliances can be traced
to the partner selection and planning stages and identifies the four Cs of compatibility,
capability, commitment and control as critical for successful pre-selection of alliance
8. partners (Hagen, 2002). Particularly important are the notions of compatibility, which Success and
entails identifying complementary strengths and weaknesses and commitment as
reflected in the formalized commitment of necessary time energy and resources. This
failure of PPPs
stream of literature generally points out that partnerships are high-risk strategies,
particularly at the level of implementation, but that the advantages/mutual benefits in
case of success by far outweigh the risks involved.
Some of the traditional constraints in the way of a successful realization of a PPP 421
configuration include: the long-term planning horizon; the complexity of various
projects; the institutionalized competition rules for public projects; the hold-up problem
caused by a change in the position of partners; a technocratic implementation;
reductionist measures instilling competitive norms instead of cooperative ones; and
cultural differences between private and public partners (Nijkamp et al., 2002; Scharle,
2002). For Spackman (2002), a key characteristic of a successful PPP project is a
trusting relationship between the parties based on a shared vision.
Partnerships appear to be most justified where: traditional ways of working
independently have a limited impact on a problem; the specific desired goals can be
agreed on by potential collaborators; there is relevant complementary expertise in both
sectors; the long-term interests of each sector are fulfilled; and the contributions of
expertise of the different sectors are reasonably balanced (Linder, 1999). Generally, the
public sector’s concerns for transparency and accountability need to be accommodated,
and the private sector needs reassurance about safety and return on investments. The
challenge therefore is to ensure that the multiple interests of key participants are
skillfully negotiated and packaged.
In addition, experience with PPP suggests that there are several principles and
guidelines worth applying during project preparation. Some have to do with the
quality of the participants and the relationships among them. Others are more
important during the phase when the financing and implementation are negotiated.
Such considerations include but are not limited to (Wallin, 1997; Savas, 2000; Roseneau,
2000; Widdus, 2001; Nijkamp et al., 2002; Spackman, 2002; Scharle, 2002; Sussex, 2003;
Zouggari, 2003):
.
a careful consideration and precise articulation of the purposes of the partnership;
.
a clear delineation of targets and goals;
.
a timely and transparent mapping of all costs, revenues and profitability aspects
of a PPP;
.
a clear insight into the planning of projects parts, the risk profiles involved and
the ways in which various partners are involved;
.
clear boundaries, measurable output performance and transparency;
. specific reporting and record keeping requirements;
.
a strong central structure at the level of central administration, using private
sector expertise to promote and guide policy implementation;
.
provisions for contract re-negotiation and for adjusting contractual terms
particularly in countries where administrative capacity is weak;
.
an appropriately designed legal framework;
.
a consideration of environmental, safety, and health responsibilities; and
.
control over and close monitoring of monopolistic situations.
9. IJPSM PPP in Lebanon
17,5 The Lebanese economy has traditionally been dominated by the private sector. After
nearly two decades of civil unrest, the performance of the public sector deteriorated due
to physical damage, lack of government supervision, and scarcity of resources.
Repeated pledges for administrative reforms did not materialize and the performance
of the public sector did not improve. The government considered restructuring and
422 reforming public enterprises, which required significant financial resources that were
lacking. Considering the cumulative negative effects of operational, financial,
institutional, and environmental problems, PPPs were proposed as a possible
solution to leverage needed technical and managerial expertise, secure capital
injections and greater efficiency. PPPs were thus initiated in several sectors including
telecommunications, post and solid waste management. In an attempt to assess the
extent to which the PPP experience has been effective and sustainable, the record of
one of the earliest post-war PPP initiatives is examined. The case was specifically
selected because it represents a failing PPP initiative in a vital infrastructure sector and
very few PPP failures have been openly reported in the literature.
Research methodology
An in-depth investigation of one post-war PPP initiative in the telecommunications
sector has been conducted combining fieldwork and review of relevant literature and
data. The assessment has drawn on multiple sources of data (e.g. documentation,
archival records, interviews with key sector informants) to develop converging lines of
inquiry through a process of cross validation or multiple triangulation. Success of the
PPP initiative was gauged based on a quantitative and qualitative assessment of
typical performance indicators of PPP effectiveness (Table II). Given that most
information acquired from field interviews and literature searches is non-numerical, a
quantitative comparative assessment was provided when practically feasible.
Nevertheless, the analysis provides interesting insights and, where possible, a
quantitative assessment of the effectiveness of the PPP in question.
Case example: a post-war PPP initiative in the telecommunications sector
Background information. Prior to the war (1975-1991), the telecommunications system
in Lebanon was among the most advanced in the Middle East region. Both the local
and international networks, however, incurred substantial damage throughout the 16
years of civil unrest. Therefore, in view of the deteriorated state of the fixed line
network in the wake of the war, the Lebanese Government initiated in 1994 a PPP in
the mobile segment by awarding two Global System for Mobile (GSM) communication
concessions to private companies. Accordingly, in 1994, two cellular operators were
granted ten-year GSM concessions under a build operate and transfer (BOT) contract
(with a possible extension of two years) and subjected to an escalating revenue sharing
scheme.
The two operators are France Telecom Mobile Liban (FTML), commercially known
as Cellis, a joint venture between France Telecom (66.6 percent) and local investors
(33.3 percent) and Libancell, a joint venture between Telecom Finland (14 percent) and
local investors (86 percent). The BOT agreements stipulated an eight-year exclusivity
period and a ten-year operating license. The agreement included a 20 percent gross
revenue share in the first eight years, rising to 40 percent in the final two years and 50
10. Quantitative indicators Description Example from telecommunications
Inputs The amount of resources used in delivering the service Investment; personnel; equipment
Outputs Measurable units of the services that are delivered in a Cellular penetration or the number of lines per 100
given time frame inhabitants
Effectiveness Indicators that reflect timeliness, compliance or satisfaction Error rates (e.g. faults per line and call completion rates)
with services delivered Volume of complaints
Efficiency The cost per unit of output Revenues per line (RPM) and revenues per employee (RPE)
Regulatory framework A stable and trusted system of enforceable laws designed to A system of enforceable laws concerning property rights,
protect collective welfare, ensure open competition and contracts, disputes and liabilities
promote the advantages of market discipline
Division of labor and Clear assignment of areas of competence and expertise, Unbundling of policy-making, operation and regulation
commitment symmetry division of roles and functions, and delineation of areas for functions
cooperation Demonstrated commitment and stake in the relationship
Communication and Communication through different channels regarding Regular meetings and exchange of relevant information;
integration goal-related progress, technical data, trouble spots or development of linkages/shared ways of operation
changing situations Specific reporting and record-keeping requirements
Typical performance
effectiveness
failure of PPPs
indicators of PPP
Success and
423
Table II.
11. IJPSM percent should the two companies opt for a further two-year license. These revenues
17,5 are collected by the Ministry of Post and Telecommunications (MPT), which
maintained a regulatory function in the mobile telephone and the data and Internet
services, while continuing to operate the fixed telephone service both locally and
internationally. The partnership was therefore conceived as one in which the private
partner would be responsible for building and operating the network and the public
424 sector would be responsible for regulation.
The cellular market consists of 759,300 subscribers (June 2001). The networks of the
two operators cover more than 80 percent of Lebanon and the GSM penetration rate is
around 22 percent, almost equally shared between the two operators. The operators
have also increased their international coverage. Roaming arrangements have reached
67 countries and more than 75 operators for Cellis and 80 live networks in 55 countries
for Libancell (Middle East Communications, 1999). Tariffs for cellular services are set
by the government that fixed a tariff ceiling of US$0.05 per minute for all domestic
calls, to which is added a 10 percent municipal tax. The end-user price for a minute is
therefore US$0.0779, which is one of the lowest in the world. This low price made the
service very affordable and resulted in a high average use of 750 minutes per
subscriber per month. The government also sets an annual 5 percent cap on increases
in tariffs and fees, as well as on connection and rental charges. The operators are free,
however, to set the rates for all other value-added services. Table III highlights some
key current market data for this segment. The table indicates that subscription prices
are high (US$25 per month) but usage charges are low (US7.79 cents per minute).
Despite the success of the Lebanese cellular segment, the future of the GSM
networks is far from decided. The massive take-up in GSM subscription levels has
prompted a recent dispute between the government and the private cellular operators
causing the government to limit each operator’s subscriber totals to 125,000. With
Lebanon’s tremendous cellular growth, the two operators had reached that mark by
late 1998, resulting in the current stagnation in GSM market growth. Both operators
deny the ceiling constraint and defend their obligation, under contractual terms, to
fulfill market demand. They maintain that the decision to cap subscriptions is
counterproductive because it deprives the government of additional revenues.
While the initial dispute between the cellular companies and the government
revolved around the 250,000 subscriber ceiling in their contracts, the conflict has
acquired new dimensions in recent years, as the MPT unilaterally raised taxes on
mobile calls by 4 cents per minute in April 1999. Matters came to a head in June 1999,
when the State Audit Department produced a report accusing the two cellular
companies of systematically violating the terms of their contracts and imposing on
Number of subscribers 700,000
Consumption (airtime minutes per month) 750
Installation fee (US$) 500
Monthly subscription 25
Price per minute (US$) 0.079
Table III. Average revenue from value added services (US$/month/subscriber) 10
The Lebanese cellular Estimated average revenue per user (US$) 90
segment: key current Estimated gross yearly revenues (US$ millions) 486
market data Sources: FTML (2000) and LibanCell (2000)
12. them over US$1 billion in penalties and fines. The alleged violations primarily relate to Success and
surpassing the 125,000 subscriber limit specified in each contract, unpaid fees and failure of PPPs
taxes especially for microwave links, and insufficient geographic and network
coverage (Lebanon Opportunities, 2000, pp. 53-5). The government has even threatened
to cancel the contracts and seize the two companies’ assets if an agreement is not
reached through negotiation.
Both companies have reacted defiantly to the MPT and the government’s 425
accusations and fines. Cellis and Libancell maintain that arbitration should be
conducted under Lebanese Law with an arbitrator appointed by the International
Chamber of Commerce in Paris as stipulated in their contracts. But even the
international law firm Booz Allen and Hamilton, which was called upon 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 (Executive, 2000).
PPP effectiveness: an assessment of quantitative indicators. By all quantitative
measures, the PPP experience has been a success. The cellular market peaked at
759,300 subscribers in June 2001, an increase from 267,350 in July 1997 (Table IV). The
Lebanese mobile segment has indeed reached high penetration levels even by regional
standards. Figure 4 reveals that Lebanon had in 2002 a ratio of cellular subscribers per
capita higher than Egypt, Morocco, Jordan, Saudi Arabia and Oman.
Other quantitative measures similarly suggest that the PPP experience has been
successful. Table V illustrates the consistent growth in the revenues of both operators
from 1995 to 2001. Mobile operators produced revenues of US$3,095 million in 2001 of
Operator System Launch Subscribers Annual growth (%)
Cellis GSM 1994 384,335 8.14
LibanCell GSM 1994 375,000 9.91 Table IV.
Total 759,335 9.01 Mobile subscribers: June
Source: Budde Communications (2002) 2001
Figure 4.
Cellular penetration rates
(subscribers per 100
inhabitants)
13. IJPSM Revenues State revenuesa Net profit
17,5 Year Cellis Libancell Cellis Libancell Cellis Libancell
1995 55 52 24 21 1 5
1996 113 92 44 42 14 13
1997 184 155 74 75 31 26
426 1998 241 219 104 115 37 45
1999 303 282 136 188 41 52
2000 363 316 170 211 57 54
2001 374 346 169 211 60 82
Table V. Total 1,633 1,462 721 863 241 277
Mobile sector revenues in Note: a State revenues include all taxes and international communications
US$ millions Source: MPT (2003)
which US$1,584 million went to the treasury. The call success (or call completion) rate
is close to 96 percent and revenues per line reached US$900 in 2001.
PPP effectiveness: an assessment of qualitative indicators. It is on the qualitative
aspects/dimensions that the PPP experience has faltered. In general, little attention was
accorded in Lebanon to building the institutional framework for a functioning
competitive domestic market. Noting that regulatory capacity builds slowly, the
creation of a separate regulatory authority prior to the initiation of the PPP initiative
was not accorded enough attention. The MPT was assigned the regulation function,
although, as confessed by Ministry senior officials, MPT had neither the staff nor the
technical expertise to exercise adequate regulation and assume an active and
constructive role in the newly initiated partnership. This in turn reflected in limited
regulatory oversight, the undermining of the original division of roles and functions
between the partners, and the gradual build up of distrust and resentment, reflecting in
turn in poor patterns of communication and integration.
Given the novelty of the PPP experience in the Lebanese context, there was also no
systematic effort at mapping the costs, revenues and profitability aspects of the new
initiative. Government officials indeed openly admit that a major source of contention
is that many of the services now provided by the cellular operators were not foreseen in
the original contract. The introduction of prepaid cards in 1997 for example resulted in
intense debate as to whether they should be subjected to the same revenue sharing
scheme. Also, no provisions were made for contract re-negotiation or for adjusting
contractual terms. Such observations confirm the critical importance in any PPP
initiative of a strong structure at the level of central administration to promote and
steer policy implementation. It often goes unrecognized, particularly in developing
countries, that a PPP is an exercise in the implementation of a radically new and
complex policy, and that a great deal of good-quality, updated central technical
guidance is required.
Finally, neither the public nor the private sector approached the new project in a
spirit of true partnership. There was suspicion from the start in public circles about the
inclination of the new operators to openly share and disclose information. On the other
hand, the cellular companies did not have much faith in the technical competence of the
public partner given the predominant perception of the Lebanese public sector as
14. bloated and inefficient. Therefore aside from the contractual mandates and obligations, Success and
no systematic effort was expended at re-negotiating joint expectations, or developing failure of PPPs
the skills, mindsets and working practices to level out differences in working
style/culture.
While the partnership materialized in the context of high hopes and expectations
(being the first post-war PPP initiative in Lebanon), it gradually disintegrated into
patterns of mutual distrust, threats and accusations. Gaps in the original BOT 427
contracts were exploited and resulted in tension and contention over levels of
profitability, revenue sharing arrangements, and subscriber ceilings. The conflict was
allowed to escalate and several of the key requirements of successful PPPs were
compromised along the way including commitment symmetry, integration, and
regular, intense communication. For example, not a single coordination meeting was
held between the partners since December 1998.
The struggling partnership therefore managed to suppress conflict and substitute
compromise for consensus for a period of five years (1994-1999). Although there were
occasional tensions revolving around taxes, the conflict erupted in June 1999, when the
State Audit Department openly accused the two cellular companies of systematic
violations of the terms of their contracts. Following the long running feud, the
Lebanese government cancelled the two operators’ BOT contracts in late 2001, three
years before the anticipated termination date. An agreement was reached in 2002 to
continue to have Cellis and Libancell operate the nationwide GSM cellular network in
return for a fixed management fee of $7.6 million per month per operator. The
partnership faltered, because from the start, it was not based on firm foundations to
sustain the challenge of working across sectors with divergent strategic and
operational realities.
Concluding remarks
The appeal of PPPs as a new policy alternative in the context of developing countries is
growing. However, not only PPPs have become mired in a stream of conceptual
ambiguity, but also the logistics and policy requirements for successful PPP
implementation have not been systematically explored. This paper has attempted to
shed light on this relatively new and complex policy, both from a conceptual and
practical implementation perspectives. It has also presented a case study of a failing
PPP initiative in the Lebanese context, and critically examined the possible reasons
behind the failure.
Generally, trust, openness and fairness are basic foundational underpinnings of
successful PPPs. Partnering should be mutually viewed as representing an
opportunity rather than a threat and loss of control. In this context, while
recognizing the immense complexities in working across sectors with different
strategic and operational realities, the focus should be on identifying common goals,
delineating responsibilities, negotiating expectations and building bridges including
common working practices and specific reporting and record keeping requirements.
Attention needs to be accorded to developing mechanisms – structures, processes and
skills – for bridging organizational/interpersonal differences and nurturing
communication and coordination. Deploying adequate time and staff helps ensure
that both partners’ resources are tapped and that both have their goals and needs
adequately represented.
15. IJPSM Lessons learned, moreover, suggest that PPPs must begin with careful groundwork
17,5 and preparation, including a comprehensive feasibility study and economic evaluation
for each potential partnership project. In this respect, developing country governments
need to build their legal and regulatory capacity to effectively foster and participate in
PPPs. The concept of partnership is indeed founded on the assumptions of
interdependence and individual excellence (i.e. complementary assets and skills).
428 These pre-requisites cannot be compromised in the pursuit of quick fixes and efficiency
gains. Unequal qualifications and contributions of expertise are recipes for failing
PPPs (Hagen, 2002).
Hence, while PPPs can bring added value to the public and private sector partners, a
sound legal and regulatory framework and complete transparency particularly with
regards to financial accountability are essential elements. Also important is the
presence of strong structure at the level of central administration to steer and guide
policy implementation. PPPs indeed often falter because of hastily prepared tender
documents and contracts and the negotiations taking place between unequally
qualified and experienced professionals, mainly to the disadvantage of the
representative from the public sector (Zouggari, 2003).
Finally, while PPPs may offer opportunities for exploiting the comparative
advantages of both the private sector – dynamism, access to finance, knowledge of
technologies, managerial efficiency, and entrepreneurial spirit, with the social
responsibility, environmental awareness, and job generation concerns of the public
sector – they should not be treated as a panacea. PPP projects should be evaluated on
their merits, on a case-by-case basis, and contemplated when the ingredients of
effective collaboration (e.g. commitment, interdependence, individual excellence,
communication and integrity) are found or can be safely nurtured along the way.
References
Baker, R.C. (2003), “Investigating Enron as a public private partnership”, Accounting, Auditing
& Accountability Journal, Vol. 16 No. 3, pp. 446-66.
Broadbent, J. and Laughlin, R. (2003), “Public private partnerships: an introduction”, Accounting,
Auditing & Accountability Journal, Vol. 16 No. 3, pp. 332-41.
Budde Communications (2002), “Telecommunications and information highways in the Middle
East”, available at: www.budde.com.au/mideast.html (accessed 2 June 2003).
Di Lodovico, A.M. (1998), “Privatization and investment under weak regulatory commitment”,
PhD dissertation, University of California, Berkeley, CA.
Executive (2000), 17 September.
France Telecom Mobile Liban (FTML) (2000), Tariffs Brochure, FTML, Beirut, May.
Gidman, P., Blore, I., Lorentzen, J. and Schuttenbelt, P. (1995), Public Private Partnerships in
Urban Infrastructure Services, UMP Working Paper Series No. 4, UNDP/Habitat/World
Bank, Nairobi, pp. 1-11.
Hagen, R. (2002), “Globalization, university transformation and economic regeneration: a UK
case study of public/private sector partnership”, The International Journal of Public Sector
Management, Vol. 15 No. 3, pp. 204-18.
Hughes, O. (1998), Public Management and Administration, St Martin’s Press, New York, NY.
16. International Telecommunications Union (ITU) (2002), “ICT free statistics home page: mobile Success and
cellular subscribers per 100 people by country”, available at: www.itu.int/ITU-T/ (accessed
5 March 2004). failure of PPPs
Kanter, R.M. (1994), “Collaborative advantage: the art of alliances”, Harvard Business Review,
July-August, pp. 96-108.
Lebanon Opportunities (2000), May.
Leitch, S. and Motion, J. (2003), “Public private partnerships: consultation, cooperation and 429
collusion”, Journal of Public Affairs, Vol. 3 No. 3, pp. 273-8.
LibanCell (2000), Tariffs Brochure, LibanCell, Beirut.
Linder, S.H. (1999), “Coming to terms with the public private partnership”, American Behavioral
Scientist, Vol. 43 No. 1, pp. 35-51.
Middle East Communications (1999), Vol. 3 No. 4, May.
Miller, J.B. (2000), Principles of Public and Private Infrastructure Delivery, Kluwer Academic
Publishers, London.
Ministry of Post and Telecommunications (MPT) (2003), Annual Figures, MPT, Beirut.
Mitchell-Weaver, C. and Manning, B. (1991), “Public private partnerships in third world
development: a conceptual overview”, Studies in Comparative International Development,
Vol. 26 No. 4, pp. 45-67.
Nijkamp, P., Van der Burch, M. and Vidigni, G. (2002), “A comparative institutional evaluation of
public private partnerships in Dutch urban land-use and revitalization projects”, Urban
Studies, Vol. 39 No. 10, pp. 1865-80.
Pongsiri, N. (2002), “Regulation and public private partnerships”, The International Journal of
Public Sector Management, Vol. 15 No. 6, pp. 487-95.
Roger, N. (1999), Recent Trends in Private Participation in Infrastructure, Public Policy for the
Private Sector, Note No. 196, World Bank, Washington, DC.
Roseneau, P. (1999), “The strengths and weaknesses of public private policy partnerships”,
Behavioral Scientist, Vol. 43 No. 1, pp. 10-34.
Roseneau, P. (Ed.) (2000), Public Private Policy Partnerships, MIT Press, London.
Samii, R., Van Wassenhove, L.N. and Bhattacharya, S. (2002), “An innovative public private
partnership: new approach to development”, World Development, Vol. 30 No. 6, pp. 991-1008.
Savas, E.S. (2000), Privatization and Public Private Partnerships, Seven Bridges Press, New York,
NY.
Scharle, P. (2002), “Public private partnerships as a social game”, Innovation, Vol. 15 No. 3,
pp. 227-52.
Shafritz, J.M. and Hyde, A.C. (1997), Classics of Public Administration, 4th ed., Harcourt Brace
College Publishers, Orlando, FL.
Spackman, M. (2002), “Public-private partnerships: lessons from the British approach”, Economic
Systems, Vol. 26, pp. 283-301.
Sussex, J. (2003), “Public-private partnerships in hospital development: lessons from the UK’s
private finance initiative”, Research in Health-care Financial Management, Vol. 8 No. 1,
pp. 59-76.
Wallin, B.A. (1997), “The need for a privatization process: lessons from development and
implementation”, Public Administration Review, Vol. 57 No. 1, pp. 11-20.
Widdus, R. (2001), “Public private partnerships for health: their main targets, their diversity and
their future directions”, Bulletin of the World Health Organization, Vol. 79 No. 4, pp. 713-20.
17. IJPSM Zouggari, M. (2003), “Public private partnerships: major hindrances to the private sector’s
participation in the financing and management of public infrastructures”, Water
17,5 Resources Development, Vol. 19 No. 2, pp. 123-9.
Further reading
Middle East Communications (2000), Vol. 15 No. 6, June.
430 Pisitkasem, P. (1998), “Telecommunications, development, and privatization: a case study of six
countries”, PhD dissertation, University of Wisconsin-Milwaukee, Milwaukee, WI.
Rodal, A. and Mulder, N. (1997), “Partnerships, devolution and power-sharing: issues and
implications for management”, Optimum: The Journal of Public Sector Management,
Vol. 24, pp. 27-48.
Van De Walle, N. (1989), “Privatization in developing countries: a review of the issues”, World
Development, Vol. 17 No. 5, pp. 601-15.
Wilson, R.A., Songer, A.D. and Diekmann, J. (1995), “Partnering: more than a workshop, a
catalyst for change”, Journal of Management in Engineering, Vol. 11 No. 5, pp. 40-4.
World Bank (2000), Telecommunications Sector Review, Technical Report, No. 18455-LE,
Infrastructure Development Group, Middle East and North Africa Region, The World
Bank, Washington, DC.
Wortzel, H. and Wortzel, L. (1989), “Privatization: not the only answer”, World Development,
Vol. 17 No. 5, pp. 633-41.
