Friday, February 08, 2008

Public private partnerships

No right turn highlights some failed public private partnerships overseas.
He has a good point that we should keep in mind.
If public private partnerships are about the private sector taking some of the risk we need to be confident that either
1) the private company has huge resources that are exposed (i.e. not protected in some sort of a shell that could declare bankruptcy)
2) that the government will be OK with just walking away if the contract fails

Otherwise the state is really taking all the risk. In most cases (2) will be false and (1) will provide only limited cover. Now it is possible that a private company will do it more efficiently when they will get more of hte profits than if they were doing it just as a contract - maybe - but the risk sharing argument appears to be flawed.


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