Local Private Sector Involvement in Public–Private Partnerships for Sustainable Water and Sanitation in Asia

Monika Febiola, Intern, Asian Development Bank Institute and Graduate Student, University of TokyoNatia Parekhelashvili, Capacity Building and Training Associate, Asian Development Bank InstituteYu Namba, Professor, Toyo UniversityBurcu Basar, Senior Staff, Toyo University KE Seetha Ram, Senior Consulting Specialist for Capacity Building and Training Projects, Asian Development Bank Institute; Visiting Professor, The University of TokyoLocal Private Sector Involvement in Public–Private Partnerships for Sustainable Water and Sanitation in AsiabriefpolicyKey Points • Public–private partnerships (PPPs) are vital in water and sanitation sector projects, bridging the financial gap and addressing inefficiencies in public service provision.• PPP is a method, not a purpose itself. They should only operate if the local context is sufficiently prepared and if they are guaranteed to improve service delivery. • Success varies; not all local or municipal governments are equipped or interested in water and sanitation PPP projects, even in Japan. • Projects in developing Asia show the need for effective private sector collaboration and criteria development, given challenges such as inadequate regulatory frameworks and operating environments that impede long-term private investment.• This policy brief highlights the defining features of PPPs as an alternative to traditional public infrastructure procurement, improving the provision of local water and sanitation services across Asia.No. 2024-11 (June)© 2024 Asian Development Bank InstituteISSN 2411-6734DOI: https://doi.org/10.56506/OOWF2834This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.This policy brief reflects the discussions from the ADBI–Toyo University Workshop titled Utilizing Private Sector Involvement at the Local Level Through Public–Private Partnerships to Enhance the Delivery of Sustainable Water and Sanitation Services in Asia on 25 March 2024.The authors are indebted for the support of the workshop and for the critical review of this policy brief from Adrian Torres, Director, Special Initiatives and Funds, Office of Markets Development and Public-Private Partnership, Asian Development Bank.1. Understanding Public–Private Partnerships Definition, Types, and ModelsPublic–private partnerships (PPPs) have become an important procurement method for the provision of public infrastructure and services across a vast number of economies, with a globally estimated number of more than 6.4 million in 2020 and an annual average of $79 billion channeled to developing countries during 2007–2011 (IMF n.d.; World Bank 2015). Despite their salience, there is no shared definition of PPPs. Overall, they cover a variety of arrangements between public actors (government entities) and private actors in infrastructure and other services. To avoid conflation with private sector participation and privatization, the definition of PPPs emphasizes the engagement of the private sector while acknowledging the government’s role in fulfilling their social obligations and aiming at the achievement of successful sector reforms and public investments (ADB 2008). Newman (2017) defines PPPs as a mode of alternative service delivery arrangement in which the government or public sector and private corporations agree to a long-term contractual relationship for the provision of public services. PPP models differ in their level of responsibility and risk transfer to the private sector. The basic PPP contract types are service contracts, management ADBI Policy Brief No. 2024-11 (June)2Table 1: Broader Concept of Public–Private Partnerships PPPsPublic/State UndertakingPPP Type 1: Public Service ProvisionPPP Type 2:Public AssetUtilizationPPP Type 3: Regulation/DeregulationPPP Type 4:Sharing EconomyPrivate BusinessAsset ownershipPublicPublicPublicPrivatePublicPrivatePrivateProvided servicesPublicPublicPrivatePrivatePublicPrivatePrivateService providerPublicPrivatePrivatePrivatePublic and PrivatePrivateBOT/BTO, design-build, build-lease-operate, design-build-finance-operate, and PFISale/lease of public assets (land, buildings, and other rights)Revitalization of local economy, welcome enterprises, tourism promotion, and urban developmentSharing of assets (equipment, space, and personnel) when not in use Soft PPsBOT = build, operate, transfer; BTO = build, transfer, operate; PFI = private finance initiative; PPP = public–private partnership. Source: Reprinted from Namba (2024a). contracts, affermage1 or lease contracts, build–operate–transfer (BOT) and similar arrangements, concessions, and joint ventures (ADB 2008). Table 1 showcases a variety o