Public
Goods From Private Sector
Though
Nepal still has many examples of the government producing and selling
the private goods, the effort, at least at the policy level, is to
withdraw the government from as many such instances as possible. While
the public sector units involved in providing the private goods are
being privatized, this has also given rise to the concept of
public-private partnership for the provision of public goods. And this
concept has become a buzzword across the business community as well.
Particularly the chambers seem to be more attracted to it than
individual investors.
But
as in every other field, Nepal is still at the formative stage in this
respect. Therefore, while the traditional role of the public sector is
being gradually abandoned, the vacuum so created is not filled up by the
private sector. This has been one of the major causes why the general
people (sometimes led by the NGOs who claim to be working for the
benefit of the general public) frequently express the nostalgia about
the good old days when many of the services were available for free or
at a very low price thanks to the government's involvement in the
industries that provided those goods and services.
|
Public-Private
Partnership
Case Example 2 |
Lalitpur
CCI
Project
Development of
Khokana & Bungmati
Components
of the project
-
Development
of Khokana and Bungmati as Craft Villages
-
Setting
up a Craft Museum in the middle of the two villages
-
Promotion of off season vegetable farming
-
Promotion of Khona Chikan (the name of
the mustard oil peculiar to Khokana)
Developments
so far
|
Public-Private
Partnership
Case Example 3 |
Lekhnath
CCI
Project:
Auditorium building
Cost:
Rs. 8 million
Capacity:
500 seat in the ground floor and 80 seats in the
first floor
Other
facilities:
First
floor: Business information centre, library,
reception, store and guard room
Second
Floor: Goods display area, office room, secretariat
and the chamber for the President
Contribution
Lekhanath
Municipality contributed land free of cost and Rs. 50,000 cash
Kaski District
Development Committee contributed Rs. 25,000 cash
Process
For Project Idea
Observation tour of various Chamber auditoriums. The one at
Krishnanagar Chamber of Commerce and Industry was liked the most
by the delegates. Then the technical team visited Krishnanagar
for details.
For
fund collection
-
Increased
the membership fee
-
Held
a religious program (Yagya)
-
Help
mobilised from the FNCCI and Nepal Chamber of Commerce
-
Service
fee collection in cooperation with Pokhara Chamber of
Commerce and Industry
-
Grants
& loans from various individuals & firms
|
|
Public-Private
Partnership
Case Example 1
|
Bhaktapur
CCI
Project: Bhaktapur
Handicraft Village (proposed)
Developments
so far
-
Concept
Paper prepared with support from ZDH Partnership 1998
-
The
concept of the craft village included in the national budget
of the government in 2001-02, but nothing done due to the
lack of fund
-
The
concept included in the national budget of the government
also in 2002-03
-
The
Chamber presented the formal proposal with annual plan of
action
-
The
Chamber and the District Office of The Department of Cottage
Industries sign the final agreement to implement the project
in April 2003
Objective
of the Craft Village
-
To
promote the small and medium scale craftsmen
-
To
develop new handicraft products
-
To
promote the market for the handicraft products of Bhaktapur
within and outside the country
-
To
keep alive the handicraft skills and technologies of
Bhaktapur
Proposed
site: Bhaktapur Industrial District
Style
of Organisation: A public limited company (already
registered)
Ownership
Pattern
Bhaktapur
Chamber of Commerce
and
20% shares
Industry
as the main promoter
Executive
members of Bhaktapur 60%
shares
Chamber
and other interested persons
Craftsmen
and general
public
20% shares
Board
of Directors
Five persons with the
Officer of the District Cottage and Small Industry Office as the
ex-officio director
Capital
and Budget
Supporting
organisations
SEQUA
Chamber Support Program
Bhaktapur
District Development Committee
Bhaktapur
and Madhyapur Thimi Municipalities
National
Productivity and Economic Development Centre Ltd.
Employment Promotion
Commission
Activities
to be included in the first phase of the project
|
This
sentiment is reinforced on such occasions as the recent Bandh (general
strike) when the public sector undertakings Sajha Yatayat and Trolley
Bus Service helped the commuters to a great extent while all the private
sector transport operators stayed off the street. In this situation, the
private sector in Nepal has the challenge to prove itself more effective
than the public sector in delivering the public goods.
The
potential areas
The
Local Development Act 2055 ( 1998 AD) has provided some legal basis for
the local government bodies such as Village Development Committees (VDC),
District Development Committee (DDC) and Municipalities to carry out
several infrastructure development and income generating activities on
their own or in partnership with the private sector. This allows the
public-private partnership in various areas as diverse as developing
infrastructures to garbage collection and disposal, and cultural
preservation. Similarly, the law also allows partnership in collecting
various taxes and contracting the service delivery work of the local
government agency.
Though
no detailed compilation of the activities carried out under the concept
of public-private partnership are available as no single authority has
ventured into collecting such information, such activities so far may
belong to some six categories: Socio-economic Development,
Infrastructure Development, Advocacy/Lobbying, Tourism Promotion, tax
collection and Security (see box). This illustrates that this concept
has now quite matured as compared to early 1990s when it was generally
understood to mean maintaining some traffic islands by some private
sector firm.
|
Public
Private Partnership
Case Example 4 |
Butwal CCI
Project: Siddharth
Child and Maternity Hospital
Capacity: 53 beds
planned to be increased to 600 beds
Other Partners:
l AMDA Nepal
l AMDA Japan
l Butwal Municipality
Support received
l 10 bighas of land from
government
l Infrastructure such as
bridge, road, drains, drinking water, telephone and electricity
set up by Butwal Municipality which also provides Rs. 50,000 as
cash per month to meet the operating expenses
l A revolving fund set up
with Rs. 1.5 million by Butwal Chamber of Commerce and Industry.
The interest income from the fund to be used for the repairs and
maintenance of the hospital (The fund has now grown to Rs. 2.8
million)
l For the specialised human
resource, international institutions are to be requested if need
be
l Rs. 1 per student collected
per month from the schools of the area
Management
l AMDA Nepal has taken the
responsibility to run the hospital. In case AMDA does not continue
it, the remaining partners will manage it jointly or individually
l A 12 member Local
Management Committee headed by Mayor of Butwal Municipality is set
up (As the local government bodies stand dissolved now, the
president of Butwal Chamber assumes the presidentship of the
committee)
|
Public-Private
Partnership
Case Example 5 |
Joint Activities in
Pokhara
Partners
Pokhara CCI
Sajibika (an NGO)
Kaski District
Development Committee
Activities
1.
Group formation in villages for the development of commercial
agriculture, cottage industries and promotion of saving. Training
programs for the group members, provision of credit
2.
Pokhara Promotion Program
3.
Public-Private Partnership for Urban Environment (PPPUE)
4.
Shree Complex (P) Ltd.
5.
Pokhara Commercial Auto Park
6.
Bindhyabasini Hong Kong Bazaar
|
Public
Private Partnership
Case Example 6 |
Partner Chamber:
Siddharthnagar CCI
Project: Quality
Testing Laboratory
Operational since
2002 January
Facilities right now
for the quality testing of mustard oil, ghee, vegetable oils,
flours, tea, sugar, bakery products, spices etc.
Facilities proposed
for microbiological laboratory
|
As
can be seen from the examples, the chambers are selecting such projects
for the partnership which yield long-term benefits to the local economy.
This seems to be true for all cases of such partnerships. For example,
Bhaktapur CCI says that its focus on beautification of the area by
maintaining greenery along the highways and constructing such a traffic
island at the entrance to the city which is like a mini-Bhaktapur, is
meant to promote tourism in the city. Similarly, setting up of a quality
testing laboratory by Siddharthanagar CCI is said to be guided by the
phenomenon under which substandard mustard oil was coming to the area
from India and it was causing bad name to the locally produced good
quality oil. Likewise, the logic behind livestock development project by
Dolakha CCI is that if you want to boost up the economic activities in
your locality, you should help enhance the disposable income of the
local people. For that to happen in Dolakha, livestock development was
the easiest way as the people in this mountainous district are
traditionally dependent on livestock farming.
|
Public-Private
Partnership
A Failure Case |
Project:
Chitrawan Dairy Processing Ltd.
Proposed
installed capacity: 100,000 litre/day (231 MT of
powdered milk/year)
Proposed
project Cost: Rs. 134 million
Expected
employment 89 persons
Fixed
Assets: Rs. 123 million
Working
Capital: 11 million
Sales:
Rs. 277 million
BEP:
45.5%
IRR:
21%
Proposed
Ownership
Narayangarh
CCI 50%
Milk
Producers' Cooperatives 25%
Chitwan
District Development Committee 10%
General
Public 15%
Other
Information
Support received by UNDP
Dairy
Development Board had provided Rs. 30 million as loan to the
members of the cooperatives to put in their equity
Reasons
for the failure
There
may be many, but one was the objection from the Department of
Forests that the project would pollute the Bishazari lake. The
project was initially promoted by cooperatives who later sought
the help from the chamber. But as the cost of production of milk
was calculated to be high, the chamber could not pursue it
further. Finally, it was taken over by a team of businessmen led
by garment entrepreneur Brij Gopal Inani who tried to bring in
some Indian investors. Nothing could be traced any further than
that.
|
|
Public
goods vs. private goods
|
Private
goods are those goods that can be appropriated by individuals for
private benefits and the entire benefits from such goods are
enjoyed by the individual who receive those goods. The examples
are consumer goods which are enjoyed by the individual who
purchases them. The cost of private goods are met through price
collected from the consumers who pay it voluntarily.
Public
goods are those which are open to use by all in the society and
the benefits are not limited to the only one who receives it. For
example, the immunization of the infants. Not only those which are
immunized will benefit from the drive, even those unimmunized will
have lesser chances of catching the disease.
Some
goods may be partly private and partly public. For example, the
education. The primary education is more of a public good and less
of a private good while the higher education is more of a private
good and less of a public good.
The
dichotomy is however, not so clear-cut. For example, electricity
and airline services are clearly private goods as the benefits are
appropriated by the person who pays the price for the power used
and the ticket purchased. However, stretching the electricity
supply line is very much a public good. Same is the case with the
national flag carrier connecting the country to more international
destinations. Such wide connection will help bring the tourists in
the country and the entire economy may benefit.
This
is the reason why the tour operators and hotels frequently raise
the voice demanding that the RNAC should be encouraged to fly as
many international destinations as possible even by subsidizing
the operation through government grants.
|
Public
goods vs. private goods
|
Private
goods are those goods that can be appropriated by individuals for
private benefits and the entire benefits from such goods are
enjoyed by the individual who receive those goods. The examples
are consumer goods which are enjoyed by the individual who
purchases them. The cost of private goods are met through price
collected from the consumers who pay it voluntarily.
Public
goods are those which are open to use by all in the society and
the benefits are not limited to the only one who receives it. For
example, the immunization of the infants. Not only those which are
immunized will benefit from the drive, even those unimmunized will
have lesser chances of catching the disease.
Some
goods may be partly private and partly public. For example, the
education. The primary education is more of a public good and less
of a private good while the higher education is more of a private
good and less of a public good.
The
dichotomy is however, not so clear-cut. For example, electricity
and airline services are clearly private goods as the benefits are
appropriated by the person who pays the price for the power used
and the ticket purchased. However, stretching the electricity
supply line is very much a public good. Same is the case with the
national flag carrier connecting the country to more international
destinations. Such wide connection will help bring the tourists in
the country and the entire economy may benefit.
This
is the reason why the tour operators and hotels frequently raise
the voice demanding that the RNAC should be encouraged to fly as
many international destinations as possible even by subsidizing
the operation through government grants.
|
|
Public
goods vs. private goods |
Private
goods are those goods that can be appropriated by individuals for
private benefits and the entire benefits from such goods are
enjoyed by the individual who receive those goods. The examples
are consumer goods which are enjoyed by the individual who
purchases them. The cost of private goods are met through price
collected from the consumers who pay it voluntarily.
Public
goods are those which are open to use by all in the society and
the benefits are not limited to the only one who receives it. For
example, the immunization of the infants. Not only those which are
immunized will benefit from the drive, even those unimmunized will
have lesser chances of catching the disease.
Some
goods may be partly private and partly public. For example, the
education. The primary education is more of a public good and less
of a private good while the higher education is more of a private
good and less of a public good.
The
dichotomy is however, not so clear-cut. For example, electricity
and airline services are clearly private goods as the benefits are
appropriated by the person who pays the price for the power used
and the ticket purchased. However, stretching the electricity
supply line is very much a public good. Same is the case with the
national flag carrier connecting the country to more international
destinations. Such wide connection will help bring the tourists in
the country and the entire economy may benefit.
This
is the reason why the tour operators and hotels frequently raise
the voice demanding that the RNAC should be encouraged to fly as
many international destinations as possible even by subsidizing
the operation through government grants.
|
|
Areas
of Public-Private Partnership
|
Socio-Economic
Development:
Activities
by Bhaktapur and Madhaypur Thimi Lalitpur
(Khokana and Bungmati)
Palpa
CCI
Pokhara CCI
Trade Fairs by Narayangarh CCI
Orange Expo by Lekhanath CCI
Ratnanagar Mahotsav by Ratnanagar CCI
Dairy Industry by Dolakha CCI
Lab by Siddharthnagar CCI
Infrastructure
Devt
City
Hall by Lekhanath CCI
Hospital by Butwal CCI
Transport service by Sankhuwasabha CCI
Laboratory by Siddharthnagar CCI
Advocacy/Lobbying
For
Tunnel Road by Makwanpur CCI
For Kanti Rajpath by Lalitpur CCI
Activities by Pokhara CCI
Tourism
Promotion
Sauraha
Barsha by Ratnagar CCI
Tourism Directory of Palpa by Palpa CCI
Bungmati Mahotsav by Lalitpur CCI
Rupa Tal Cooperative by Lekhanath CCI
Tax
Collection
Some
half a dozen CCIs including Makwanpur and Mahendranagar
Security
Industrial
Security Force by Birganj CCI
|
Process
followed
In
each case of the public-private partnership that we have selected as
examples here started with a seminar participated in by the
representatives from the government, the local government bodies and the
private sector entrepreneurs represented by the respective chamber of
commerce and industry (CCI). Donors such as UNDP and GTZ are the main
catalysts who help in developing the project proposals and arranging
partial fundings. The seminar results in the identification of potential
areas of partnership and formation of a joint task force to carry the
work further ahead. Such a task force develops the detailed concept
paper for each potential areas identified. The financial arrangements
are worked out and the proposal is circulated among the government and
non-government agencies including foreign donors for funding. Then the
management committee is formed for day-to-day management of the project.
Problems
Despite
the growing interest shown by the Nepali chambers for public-private
partnership, the process seems hindered due to various problems.
The
Local Development Act has provision for partnership with the private
sector, and the chambers have been making their project proposals on
this legal basis. But the law has no definition of the private sector.
Also lacking is the arrangement for financing public-private partnership
project. There is no provision to mortgage the property that is acquired
on lease for the partnership project. Equally important is the
reluctance of the local government bodies to change themselves to the
role of facilitator and regulator of the activities of supplying public
goods. They are reluctant to leave the previous role of controller,
donor and manager.
Next
is the lack of clear cut local level strategy for partnership and lack
of the culture of partnership. Similarly, there is no mechanism at the
local level for the promotion of partnership. Some of the problems are
such tricky one as the difficulty in conducting the meeting of the
management committee. Since the committee has representations from
diverse social groups and political factions, it is difficult to get the
members assembled on time and to make them agree on the agenda. It is
not practical to impose decisions simply by the strength of the majority
in such projects; consensus is a must. Then there is the difficulty in
getting the understandings implemented from the different parties
involved. This is because the local government agencies are involved in
the partnerships and there are frequent changes in the leadership of
those agencies. For example, the District Development Committee (DDC)
may have agreed to partner with the private sector in a certain project
when the DDC was led by one political party, but it may refuse to carry
on with the project later when another political party comes to lead the
DDC.
Lessons
Despite
all these problems, the experience in public-private partnerships led by
chambers has shown that funding would not be a problem for such
activities as long as the local people are convinced of the benefits of
such activities.
(This report is based
on information revealed during the National Conference of Public Private
Partnership hosted in Bhaktapur during may 13-14, 2003, by Bhaktapur
Chamber of Commerce and Industry.)
