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经济学assignment
公私伙伴关系是政府和私营部门之间的协调，基础设施和基础服务是由私营部门提供给政府。这种结合对政府和私营部门双方都具吸引力，私营部门更多的资金加入到改善基础设施和良好的管理艺术。这节省了政府债务和借款的金融机构，也增加了用户收入，但是给私营部门带来了显著风险。反过来导致了创新和更好的品质以及高性价比的服务。因此，建立在经济上的显著影响，我们将分析公共和私营部门伙伴关系基础上的经济影响。
影响经济突出特点：
公共职能转移到私人部门对政府和市民的潜在好处。
公共和私营合作伙伴提供服务系蓬勃发展，私营部门和更低的成本交付之间的竞争效率的影响。
它允许能够胜任管理它的组织的最高级风险。私营部门通常有比CAN公共机构更有效的方式来管理供应链，财务，采购，服务和分销。
Public private partnership is a co-ordination between the government and private sectors, where the infrastructures based service is provided to government by private sectors. This kind of conjunction is attractive to both government and private sectors, additional financing by private sectors add to improved infrastructure and good managerial skills. This saves government from debt and borrowing from financial institutes, this also adds to revenue from users, transferring all the significant risks to private sector. This in turn results in innovative and better quality, cost effective service. Hence creating significant impact on economy; we will analyze the components of the economic impact by public and private partnership.
Salient features impacting economy:
Transfer of public functions to private sector has potential benefits for both government and citizens.
Public and private partnership has burgeoning impact on efficiency in service provision, competition between the private sectors and reduced cost delivery.
It allows superlative risk distribution to the organization that can competently manage it. The private sector usually is competent to manage the supply chain, finances, procurement, service and distribution more efficacious way than can public agencies. The public agency can avoid the expenses of design and speciation of private assets.
Government organization can benefit from attractive incentives from private sectors for low cost operation.
The outsourcing can avoid bureaucratic problems and delays, again adding to cost and time.
Private sectors can invest in sophisticated technologies for rapid international trade, which with changing time become obsolete.
The co-operation between the government agency and the private sector can reduce the fiscal pressure on government. This is effective way to mobilize the private and foreign investment, there by increased productivity and economic output. The scarce capital is accelerated in effective way and there is lot of space for developing and growth of private sector.
Analytical approach
The issues concerning economy in public and private partnership are as follows:
Ownership and Contracting
The private ownership is suited where there are competitive market prices, for instance the private sector is motivated by the goods price in the market. The marketing strategy should involve the price and quality assured services that are acceptable to the consumers and who are willing to pay and private sectors earning profits at the same time. Various market failure can be attributed to the government failure, like influence of external components, monopoly etc. In this scenario the private sector is preferred due to the fact that, there is no political bias, the government strength and private sector services will serve the market failure. There by reducing the risk of government downfall.
The analytical justification for public private partnership is provided in the following lines, a trade facing the government to provide a particular kind of service between quality and efficiency. Government is strong enough to provide the service and achieve desired quality but it is difficult to do so due to high cost. Therefore it is necessary for the private sector to step in, for its superior managerial skills and low cost operation by sheer competition, innovation and diligence in providing services.
The public private partnership is suitable if the government has a well-designed contract for the private sector, because there can be liabilities for the government in future, for example if there is public private partnership in a construction of a monumental building or government building like military bases or rail services etc, the private sector compromises on the quality of the material or some other mistake which can be seen at the moment. This results in serious flaws in functioning of building which may come forth later, which causes liabilities and renovation cost on the government. This again fails to deliver the advantage of public private partnership, therefore the ownership and contracting is very important aspect for economic advantage for public private partnership.
Risk Analysis
Public private partnership involves various risks, these are listed below:
Construction risk, involving building cost overruns, design problem, technology, building operation cost and delay in project.
Financial risk, involving high interest rates, variations in exchange rates and other factors affecting the financing costs.
Availability risk, involving continuity and quality of service provision.
Demand risk, involves the demand for services.
Residual value risk, which includes the value of asset in future.
Some of the risks present in the public private partnership need to be transferred to private sector, in order for government to get full benefit from inflow of capital and change in management. The government should transfer the risk on financing cost and risk pricing to address the potential risk involved.
Risk Transfer and financing cost
A project in public private partnership should be independent of whether the project is financed by public agency or public sector. The cost of project depends overall on the potential risk involved, the cost of the project should not be affected by the risk transfer on private sector. Project risk depends upon how well is the risk can be distributed or widely spread; government can spread the risk on taxpayers. Private sector can also spread the risk on financial markets, by doing this they are not at significant loss and moreover private sector risk managers may be more skilled at it than government officials. Thus the project risk is lower in private sector. This is an added advantage of public private partnership in terms of economy.
Another important aspect in borrowing the capital from institutions is that the private borrowing is expensive than the government borrowing. If private sector borrows money for a project then the rate of interest may be high however, government borrowing may be cheaper and the financial investors are ready to lend the money to government due to the fact that it has tax powers. The investors trust government body because it can give returns with interest, even if it is risky project, investors are interested to invest. Now here the government is efficient in borrowing at lower interest rates than private sectors.
While comparing the cost the government should consider the public investment and the services provided by the government in public private partnership. In order to get high efficiency and performance by the private sector risk transfer is the key factor to effectively deal with it. The governments relieve itself from the risk by transferring it to the private sector, which it believes private sector is more efficient in dealing with it. The government can achieve the transfer of risk and achievement of efficiency from private sector is by paying the attractive price which private sector willing agrees to it. There are two kinds of risks project specific risk and market risk. Project specific risks are very diversified risk, for example, risks involved in construction of road or highway are material supply, labor supply, transportation of goods, weather conditions etc. Project risks may change according to situation and type of project.
The market risks are not diversified, they are underlying economic developments and therefore they are to be properly priced. The government and private sectors have different approach for market risk pricing, the government may adopt some risk free rate for future cash flow while appraising project. Unlike government agency the private sectors include risk premium in discount rate. Taking this difference into account the government may reject the public private sectors and favor public investors which may create bias. If there are lower pricing of risks then, private sector may end up employing cheap designs simply because the risk involved is not much and the private sector might not turn up due underpricing the risks. Finally if the government compensate for underpricing by extending the guarantees then it is going to cost a lot to government in long run. The private sectors use Capital Asset Pricing Model which measure the income on assets and risk free rate of return plus risk premium.#p#分页标题#e#
Competition, Efficiency and Regulation:
The success of public private partnership depends upon the efficiency of the private sector. In order to get the productivity from the private sector is awarding the contract to public private partnership on competition basis, to make sure that there is no monopoly or even if exists at least it is competent enough. The activity undertaken by the public private partnership is limited because they tend to undervalue infrastructure assets, and single use asset may create monopoly. Competition is crucial to realize the maximum benefits of public private partnership, improve management and innovation.
Incentive based regulation for the maximum output of public private partnership is necessary. However the challenge lies in tailored regulation which brings increased output, lower prices minimizes monopoly and at same time preserve incentive for private sectors to be efficient and cost friendly. Finally profit sharing between private and government sector is the effective way of regulating the incentives.
Inference for economic impact
The public private partnership holds good in many ways, it is effective way of mobilizing the private funds in order to increase the economy of the country, by providing service in return of revenue at low cost operation prices. The role of private sector in managing the task, distribution of risk, increased productivity by skilled workers and financial investment are all attributed to the economic impact of the country. The public private partnership also reduces the fiscal pressure on the government as it mobilizes the private and foreign funds.
However for any public private partnership to be successful, the potential risk area of the project should be assessed. Ownership, contracting to get efficient output should be considered, risk analysis, risk transfer and financing cost should be taken into account in order to make it economical.
Political process for Public Private Partnership (Zeeshan Ali, Muhammad)
Public Private Partnerships, design and its application between the purely public and private task accomplishment in public service is, in practice and subject to political involvements and processes. The participants who are involved in the making of decision and rules of political processes have greater influence on whether, in what areas and form of public private partnership are recognized. What role does the political process contribute in the actual design, realization and performance of Public Private Partnerships? Here we will analyze the chances of success of Public Private Partnership have given the essential encouragements and existing decision making setup to the participants and how political involvement will be brought to bear in the first place. The political science characteristics are also considered in Public Private Partnership field.
The political process has greater role in the design, implementation, formation and performance of public private partnership solutions:
At the beginning a decision is made on the institutional framework within which public as well as private sector provision of goods must be organized. In the mean while framework establish the level to which public private partnerships make it probable to aid individual interests.
The political system will be more beneficial to public private partnership solutions if their arrangement deals with the specific interests of political decision makers comparatively better than typical public services a political suction effect will arise.
In the last the application of the political system points to expectations of very specific result, outcomes and arrangements from the realization of permitted Public Private Partnerships.
Political Drivers:
The new aspect is seen in the Public Private Partnership dialogue is not as much similar as the long cooperation between private and public participants but also next to institutionalization of public private partnerships, for political mechanism increased public demand. This increased demand is unlikely to be attributable to the objective superiority of Public Private Partnerships, especially since empirical and theoretical studies would suggest that they are highly controversial.
Political possibility of the mixed forms of task fulfillment of public private is a result of following two points:
Controlling the current challenged of public sector by only the political problem solving aptitude of Public Private Partnership.
The exceptional allocation of specific benefits of the decision makers involved in the political process.
Challenges of Public Sector:
Success of public private partnerships in meeting the current challenges of public sector are.
For the improvement of public administration the importance of Public Private Partnerships is: The public sector is straightaway opposed with the new management procedures with the use of Public Private Partnerships. Variation in the approach of public managements from formerly governmental setup to management ideas as a new public management is the basic requirement of joint performance tasks.
The character of Public Private Partnerships is growing international competition as a surviving instrument and specifically in the European Union competition model. Then it means that the traditional public task zones that formerly comes in the services of overall interest with controlling supply organizations are expose to competition. For example it includes the following fields’ energy, telecommunications, and public transport as well as other task areas currently under discussion like water supply. Mostly at municipal level the usual providers of supply and disposal services have to adjust to this competition with completely new approaches.
The situation of Public Private Partnerships against the conditions of important change in public administration understands of its function and role: we are discussing the conversion to a guaranteeing state. Now the public and the state will not be themselves responsible for the provision and production of public facilities but they will be only responsible for the tasks performance.
So Improvements are politically effective when policy maker will make a user friendly proposal that grip existing schemes.
Public Private Partnership participants interests
The solution in PPP in the decision making helps in getting significant individual interests. The individuals are as follows:
The private sector
Political entrepreneur
Voters
Bureaucrats and management
Private interests, public welfare and third party detrimental contracts
The socio-political dimension
From the economics of Public Private Partnerships, political decisions and involvement has a key role in the socio political dimension. This will lead to the need of change of Political decision making setup and this relates on the one hand to changes in the political decision making setup and preferences resulting from the practice of Public Private Partnerships. Within the scope of Public Private Partnerships it is connected with the lawful matter of the input of public assets. Also it is not possible to make assumption that public service in Public Private Partnership can be directed, controlled and organized in the similar manner as in an organizational unit which is in Public possession. So it is essential to carry out a difference in lawful matters and control options for various different kinds of Public Private Partnerships.
As we are talking about the social political perspective here we have a question about the democratic theoretical nature in relation with Public Private Partnership. How come the political instrument application is democratically legitimated? So it is required to discuss legitimation as per the criteria of inclusivity, responsibility and consideration. They mention to the issues of legitimation, state power and political control. Within the limitation of Public Private Partnership solutions the private interest participants participate in decision making on Public tasks for example public budget s Since within the scope of PPP-solutions private interest groups participate in decision-making on public tasks, i.e. expenditure on spending of public budgets, important spreading effects are dreaded: A de privatization of interests that are weakly expressed or declared could go against important public task accomplishment aims. The energetic contribution and participation of private contractors for their personal profit interest can rise and increase the chances of a tendency towards de regulation because in actual regulation result with decrease for example less security, less environmental safety are the main points of fear. The forces Public Private Partnerships finally can come to play its role on the initiative of private contractors and as discussed project which cannot be implemented legitimately will actually be realized. A certain tendency towards self-service in the private business sector is the main concern here.#p#分页标题#e#
The political economy
Now to discuss about the weaknesses of the tax state is generally described and explained by using the political economy model just because of the following major factor which are the self-interests of the participant’s, the influential accuracies of the coordination procedure through voting markets, the political process of democratic decision-making is barely in a situation to secure the essential coupling of public services to citizens preferences. The outcome of the result will be effectively losses in state achievement. Other than this it can be observed that political economy can contribute to assessment the probabilities of political recognition of Public Private Partnership improvements which are dependent upon the user free financing and therefore they are contributing to converting the state revenue system. Here the Public Private Partnerships political gratitude touches on problems of the benefit principle for public incomes. All the public spending and the income are multiplied by means of user free financing, in this way it will destroys the relaxed economic impression in tax funded budgets and changes the political support for projects again irrespective of the financial benefits. The political awareness of user financed Public Private Partnership solution, now the major concern is that whether political business persons have interest in the loss of their optional room for movement and the potentials of distinct serving of spending wishes and confrontation to problem sharing as transfer brokers.
Inference for political process
Now to benefits, interests and the resources of the participants who contributed in the political decision making process and also they made the rules of the political process have a strong and influential effect on whether and in what form Public Private Partnerships are realized. Now the outcomes and solution and the goals and the distance between them can be categorized as political bias. Above all Public Private Partnerships with user financing are likely to be held up, on the other side the tax financed Public Private Partnerships give great political net benefits by avoiding outdated accounting debt and budget limits. The respectively selected budget rules and the form of enforcement control affect the political cost benefit calculation and thus the level and direction of the political bias. As long as inefficient Public Private Partnerships are realized for political reasons this can on the one hand be at the expense of the actual indicated public task fulfillment but also at the expense of efficient privatization going realized. Well now on the other side the political scientists, are interested in changes in statehood, particularly changes in the legitimation of decision-making about public tasks and the possibilities of democratic control. Political involvement has a significant encouragement on the extent, success, and design of Public Private Partnership solutions so it is important that influences of this type be included in the analysis. A broader perspective of the political and economic barriers that stand in the way of successful PPPs is now needed: A combining agenda that has yet to be developed might cope with public authorities (political) involvement in designing Public Private Partnership arrangements and could provide a more in-depth insight into political decision-making about public services.
Regional and national impact (Mohsen, Nazar)
There is a very big different between the private corporation and the privet corporation include stock own by the government the most important issue that the trust for the citizen.
There are many people believe that the corporation with stock own by the government has safe situation or has same balance for a while and they believe in this kind of company because it has a strong partnership.
This believes come from the bad and good experience in their life for such company.
The regional and national influence on the market
The regional and national impact is one of the important factors and it has directly influence when the things happened or something globally changed and this influence or the impact depend on the corporation situation if the corporation 100 present private will be big change in the strategy of the corporation through the deals or the trade or any other activity because their resistance against any Changes depend on the personal decision of the administration and any attempt to enhance their policy in a very critical situation need more fund or more other challenges.
In case the corporation with stock owns by the government the possibility make change easier and the decision can be made with a high confidence because the mentality of the people who works with the government sector differs or the way to think is differs.
The benefit of Public-Private partnership
Their think about the country and about the citizen then they think about the profit and they do their best to save the cooperation and this issue totally different if we camper it with the corporation with 100 present stock own by private people.
This condition makes this kind of cooperation more trustable and has acceptable for the regional and national and this is totally positive impact.
This kind of cooperation it can be more successful because the support that they get it from the government and it has low general risk.
The more institutions regional or international want to be relations with companies the most sedate and strong and these companies are companies that rely on the principle of partnership with governments. in the U.S.A was the best witness when he struck a disastrous financial crisis hit large companies own by the private corporation and stocks own by government. The government supports this corporation by the fund to return their balance again to keep them away from the bankruptcy.
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