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IDB report outlines potential for public–private partnership growth

Guardian Business Reporter

Published: Jun 19, 2017

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A recent Inter-American Development Bank (IDB) report points out that there is significant potential for public–private partnership (PPPs) growth in the Caribbean, including The Bahamas, which has been successful with PPP operations in its water sub-sector.

The report, titled “Caribbean public-private partnerships (PPP) toolkit: developing infrastructure and improving service delivery”, lists a number of areas in which Caribbean governments are expanding PPPs such as energy, cruise ship terminals, roads and water and sanitation.

The report notes that in The Bahamas, the government signed a10-year contract with a private operator to reduce the high levels of non-revenue water (NRW).

"This 10-year project focuses on providing sustainable solutions to the local water distribution utility, to substantially reduce leakage of potable water, estimated at more than 50 percent, at the commencement of the contract," the report cites.

"As a result of this contract, the level of NRW in New Providence Island went down from 57.7 percent in January 2013, to 32.2 percent in September 2015."

The report continues that reduction projects have high economic and environmental returns.

The report states that governments have a “keen interest in using PPPs to deliver new public services, not only in the traditional

infrastructure sectors".

"Infrastructure services in electricity, transport and water and sanitation in most Caribbean countries need improvement in order to meet higher service standards, keep pace with population growth and support economic development."

The report explains why PPPs are a good move for improving structural problems faced by many Caribbean nations.

“Recurring problems throughout the Caribbean infrastructure sectors include: high electricity costs and intermittent supply; high port and transport costs; lack of broadband networks for large parts of the population; and the need for improvements to critical infrastructure assets such as airports, ports and road networks,” the report states.

“As of 2014, estimates indicate that to increase and improve the Caribbean region’s infrastructure to acceptable international standards, total investment of about US$21.4 billion is required over the next 10 years.”

The report also points out that Caribbean governments have been "struggling" to improve their infrastructure along with challenges such as high debt burdens, tight budgets, and poor economic conditions.

The report acknowledges the use of conventional public procurement to develop and improve infrastructure assets by many Caribbean countries.

"However, many of these public projects failed to deliver efficient solutions and sustainable quality," the report contends.

"The objective of both the government and the contractor under conventional procurement is to minimize the up-front capital costs of infrastructure delivery.

"However, this often leads to suboptimal design solutions from a long-term perspective, which in turn leads to higher ongoing maintenance and operating costs.

"The total effect is to increase the overall cost of service over the asset’s lifetime.

"Therefore, while saving money in the short run, poor construction is not cost-effective in the long-term, because assets will deteriorate before the end of their design life and have to be rebuilt."


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