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Success and failure mechanisms of public private partnerships (PPPs) in developing countries
Insights from the Lebanese context
Dima Jamali
Suliman S. Olayan School of Business, American University of Beirut, Beirut, Lebanon
Keywords Public sector organizations, Private sector organizations, Partnership, Telecommunications, Developing countries, Lebanon Abstract The concept of public private partnerships (PPPs) has attracted worldwide attention and acquired a new resonance in the context of developing countries. PPPs are increasingly heralded as an innovative policy tool for remedying the lack of dynamism in traditional public service delivery. However PPPs have also become mired in a muddle of conceptual ambiguities. This paper sheds light on the PPP concept and the rationale for invoking private participation in developing countries. It also identies critical success factors and policy requirements for successful PPP implementation. Finally, the paper presents a case study assessment of a post-war PPP initiative in the Lebanese telecommunications sector and draws out lessons for improving the effectiveness and viability of PPP projects in the context of developing countries.

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Introduction Following the end of the cold war and a global disillusionment with statist and socialist ideals, much of the developing world has been adopting principles of free markets and seeking participation in the world trade system. Growing appreciation of the importance of the market mechanism, coupled with the success of privatization in various countries have sharply increased interest in the continuously emerging public-private partnership (PPP) phenomenon. PPPs have become a rather popular institutional arrangement, as they are perceived to remedy a lack of dynamism in traditional public service delivery. Yet there has been no systematic evaluation of the policy requirements for successful PPP implementation. This is particularly true in developing countries that have only recently started to experiment with various practical applications of cooperation between the public and private sectors. Several factors help account for the increased interest and popularity of PPPs. The promise of efciency savings and a reduced burden on strained public resources has certainly struck a positive chord in countries operating under tight budgets. The appeal of PPPs can more generally be explained in terms of their expected benets, including access to private nance for expanding services, clearer objectives, new
The International Journal of Public Sector Management Vol. 17 No. 5, 2004 pp. 414-430 q Emerald Group Publishing Limited 0951-3558 DOI 10.1108/09513550410546598

The author would like to extend special thanks to individuals who contributed indirectly to this study by agreeing to be interviewed in particular: Mr Naji Indraous and Mr Ahmad Oeidat, Directors General at the Ministry of Post and Telecommunications, Mr Hussein Rifaii, Chairman and General Manager of Libancell, and Dr Kamal Shehadi, Regional Telecommunications Expert/Advisor to the Minister of Economy.

ideas, exibility, better planning, improved incentives for competitive tendering and greater value for money for public projects (Spackman, 2002; Nijkamp et al., 2002). There is also the added pressure in the context of developing countries from international nancial institutions such as the World Bank and the International Monetary Fund to shift to an efcient and facilitative role of government and adopt principles of market liberalization and privatization. Financial assistance is often linked to changing the focus and orientation of government from direct involvement and intervention to a role revolving around partnership and facilitation (Hughes, 1998). Along with the concepts of economic adjustment, privatization and deregulation, PPPs indeed evolved over the past decade as an important aspect of donor-country development thinking and a central component of foreign policy toward developing countries (Mitchell-Weaver and Manning, 1991). In this context, many developing countries have initiated PPPs in various sectors including infrastructure, manufacturing and services. Investment in infrastructure projects with private sector participation in developing countries by sector is depicted in Figure 1 (Roger, 1999). Evidently, the telecommunications and energy sectors have led the growth in private activity in the 1990s. Although private sector participation is increasingly invoked in the context of developing countries, the success or failure of PPP projects has not been systematically assessed (Roseneau, 1999). The PPP debate is still conducted in the terms public bad, private good, on the basis of selective evidence (Spackman, 2002; Broadbent and Laughlin, 2003). This is particularly the case in developing countries, where distrust of government prevails. This paper presents a case study assessment of a recent PPP initiative in the telecommunications sector of Lebanon a developing economy and draws out lessons for improving the viability and effectiveness of PPP projects in the context of developing countries. First, the research sheds light on the PPP concept and the rationale for invoking private participation. Based on the literature, critical success factors and policy requirements for successful PPP implementation are identied. The

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Figure 1. Investment in infrastructure projects with private sector participation in developing countries by sector, 1990-1998

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research methodology is then presented and the record of the aforementioned PPP project examined. Lessons and relevant policy recommendations are delineated in light of the ndings.

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PPPs: denition and rationale The recent ascendancy of ideals of free market economy in developing countries whether willingly or under the impetus of subtle persuasion has invited a revisiting of the respective roles of the state and the private sector. The traditional neat assignment of roles and functions between the sectors has been challenged, with the interdependencies of the free market economy often necessitating new forms of partnerships and collaboration across organizational boundaries. Pongsiri (2002) writes of a blurring of activities and responsibilities and the public sector moving towards a diffuse force eld in which public and private interests have to be reconciled. These new dynamics, among others, have acted as a catalyst in many countries to seek a new modus operandi with the private sector. In consequence, PPPs have evolved as a popular institutional arrangement. A PPP is an institutionalized form of cooperation of public and private actors, which, on the basis of their own indigenous objectives, work together towards a joint target (Nijkamp et al., 2002). While PPPs were originally treated as a derivative of the privatization movement, there is a growing consensus today that PPPs do not simply mean the introduction of market mechanisms or the privatization of public services. PPPs rather imply a sort of collaboration to pursue common goals, while leveraging joint resources and capitalizing on the respective competences and strengths of the public and private partners (Widdus, 2001; Pongsiri, 2002; Nijkamp et al., 2002). Unfortunately, the term PPP has been abused and become mired in a muddle of conceptual ambiguities. The PPP concept is indeed commonly used to describe a spectrum of possible relationships between public and private actors for the cooperative provision of services (Figure 2). Admitting that there is no single PPP model and that a diversity of arrangements may be distinguished, varying with regard to legal status, governance, management, policy-setting prerogatives, contributions and operational roles, it should be emphasized that actual partnering involves collaboration in the pursuit of a common objective. A relationship qualies as a partnership if it involves the joint denition of specic goals, and a clear assignment of responsibilities and areas of competence between the partners in the pursuit of a common endeavor. Most supposed PPPs in third world development do not seem to meet this criterion. Donor agencies often promote privatization and government subsidies to private entrepreneurs in the name of building PPPs. However, privatization and subsidies should not be confused with PPPs (Mitchell-Weaver and Manning, 1991). Some conceive PPPs as representing a middle path between state capitalism and privatization (Leitch and Motion, 2003). General disillusionment with privatization has led to explicit attempts to engage with the private sector in a different way. Privatization indeed did not result in massive reductions in national debts, nor did the private sector demonstrate the universal superiority in running businesses that had provided the philosophical underpinnings of the privatization process (Broadbent and Laughlin, 2003; Leitch and Motion, 2003). PPPs were therefore seen as a way of

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Figure 2. The spectrum of public-private partnerships

involving the private sector in projects of national importance, while avoiding the problems associated with the extensive privatizations that occurred in the 1980s. In the context of developing countries, the recent proliferation of PPPs has been attributed to several explicitly stated reasons, including: the desire to improve the performance of the public sector by employing innovative operation and maintenance methods; reducing and stabilizing costs of providing services; improving environmental protection by ensuring compliance with environmental requirements; reinforcing competition; and reducing government budgetary constraints by accessing private capital for infrastructure investments (Miller, 2000; Savas, 2000). The latent reasons for contemplating a PPP lie in the inherent differences between the public and private sectors, which are outlined in Figure 3. These differences imply that PPPs can, under the right conditions, provide an effective mechanism for capitalizing on the peculiarities and strengths of each sector in the pursuit of common objectives. Public agencies and private organizations can indeed seek mutual advantages in developing a PPP, particularly when the latter is characterized by trust, openness, fairness and mutual respect. For the public agency, the main rewards from partnering with the private sector are improvement of program performance, cost-efciencies, better service provisions and appropriate allocation of risks and responsibilities (Pongsiri, 2002). The good faith approach indeed takes as proven that private participation results in a combination of lower cost and less risk for the public sector (Miller, 2000; Leitch and Motion, 2003). The private sector on the other hand expects to have a better investment potential, to make a reasonable prot, and to have more opportunities to expand its business interests. A good return on investment is denitely an essential consideration from the private partner perspective (Scharle, 2002).

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Figure 3. Main distinctions between the public and private sectors

The respective roles of the private and the public partner are therefore neither antagonistic nor identical, but complementary. The public sector controls several key legal and regulatory assets to implement a project within the context of an overall development program. The private sector brings outside capital, technical expertise and an incentive structure. The essence is the cooperative and mutually supporting nature of the relationship. Actual partnering therefore involves collaboration and leveraging the strengths of both the private sector (more competitive and efcient in economic terms) and the public sector (more responsible and accountable to society). PPPs may therefore, under the right conditions, bring the discipline of the market into public administration and promote a synergistic combination of the strengths, resources and expertise of the different sectors. The question then arises as to under what conditions do PPPs create win-win situations as a result of mutual benets or socio-economic symbiosis. This question will be addressed in the next section. Critical success factors While PPPs can provide a mechanism for exploiting the comparative advantages of public and private sectors in mutually supportive ways, several issues are salient and deserve careful consideration when contemplating a PPP. To start with, the government needs to maintain its involvement, whether in its capacity as partner or regulator. This is especially true where accountability is critical, cost-shifting presents problems, the timeframe is long, or societal normative choices are more important than costs (Spackman, 2002). PPPs should not be expected to substitute for action nor responsibilities that properly rest elsewhere. In particular, the public sector should continue to set standards and monitor product safety, efcacy and quality and establish systems whereby citizens have adequate access to the products and services they need. In other words, PPPs do not imply less government but a different governmental role. Because of the stronger position of the private partner, more skilled government participation is often needed (Scharle, 2002). Pongsiri (2002) emphasizes the establishment of a transparent and sound regulatory framework as a necessary precursor to private sector participation in a PPP. Regulation provides assurance to the private partner that the regulatory system includes protection from expropriation, arbitration of commercial disputes, respect for contract agreements, and legitimate recovery of costs and prot proportional to the risks undertaken. A sound regulatory framework can also increase benets to the government by ensuring that essential partnerships operate efciently and optimizing the resources available to them in line with broader policy objectives (Di Lodovico, 1998; Zouggari, 2003). Baker (2003) similarly demonstrates that the nature of regulation and control are crucial in decisions about PPPs, outlining that PPPs generally necessitate a more direct control relationship between the public and private sector than would be achieved by a simple (legally-protected) market-based and arms-length purchase. Samii et al. (2002) highlight the key formation requirements of effective PPPs, including resource dependency, commitment symmetry, common goal symmetry, intensive communication, alignment of cooperation learning capability, and converging working cultures while Kanter (1994) emphasizes individual excellence, importance, interdependence, investment, information, integration, institutionalization, and integrity as the key ingredients of effective collaboration (Table I). Both the appeal

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Based on Samii et al. (2002)

Requirement Resource dependency Commitment symmetry Common goal symmetry Intensive communication Alignment of cooperation working capability Converging working cultures

Description Recognition by the partners that what can be achieved together can not be achieved alone Equal commitment from partners conrmed through the allocation of time and resources Individual goals as an output or a subset of the overall program objectives Regular communication through different channels/means The sharing of knowledge across organizational boundaries to alleviate problems of information asymmetry and ensure convergence in learning skills and speed The joint development of a set of working practices and procedures to level out differences in working style/culture

420

Kanter (1994)

Individual excellence

Table I. PPP key formation requirements

Both partners are strong and have something of value to contribute to the relationship. Their motives for entering into the relationship are positive (to pursue future opportunities), not negative (to mask weaknesses or escape a difcult situation) Importance The relationship ts major strategic objectives of partners so they want to make it work. Partners have long-term goals in which the relationship plays a key role Interdependence The partners need each other. They have complementary assets and skills. Neither can accomplish alone what they both can together Investment The partners invest in each other (e.g. equity swaps or mutual board service) to demonstrate their respective stakes in the relationship and each other Information Communication is reasonably open. Partners share information required to make the relationship work, including their objectives/goals, technical data/knowledge of conicts, trouble spots or changing situations Integration The partners develop linkages and shared ways of operation so they can work together smoothly Institutionalization The relationship is given a formal status, with clear responsibilities and decision-making processes Integrity Partners behave toward each other in honorable ways that enhance mutual trust without abusing the information they gain, nor undermining each other

and the challenge inherent in PPP arrangements arise from the notion of building new relationships between actors that have drastically different constituencies/interests, along with divergent strategic and operational realities. Alliance research similarly suggests that the failure of many alliances can be traced to the partner selection and planning stages and identies the four Cs of compatibility, capability, commitment and control as critical for successful pre-selection of alliance

partners (Hagen, 2002). Particularly important are the notions of compatibility, which entails identifying complementary strengths and weaknesses and commitment as reected in the formalized commitment of necessary time energy and resources. This stream of literature generally points out that partnerships are high-risk strategies, particularly at the level of implementation, but that the advantages/mutual benets in case of success by far outweigh the risks involved. Some of the traditional constraints in the way of a successful realization of a PPP conguration include: the long-term planning horizon; the complexity of various projects; the institutionalized competition rules for public projects; the hold-up problem caused by a change in the position of partners; a technocratic implementation; reductionist measures instilling competitive norms instead of cooperative ones; and cultural differences between private and public partners (Nijkamp et al., 2002; Scharle, 2002). For Spackman (2002), a key characteristic of a successful PPP project is a trusting relationship between the parties based on a shared vision. Partnerships appear to be most justied where: traditional ways of working independently have a limited impact on a problem; the specic desired goals can be agreed on by potential collaborators; there is relevant complementary expertise in both sectors; the long-term interests of each sector are fullled; and the contributions of expertise of the different sectors are reasonably balanced (Linder, 1999). Generally, the public sectors concerns for transparency and accountability need to be accommodated, and the private sector needs reassurance about safety and return on investments. The challenge therefore is to ensure that the multiple interests of key participants are skillfully negotiated and packaged. In addition, experience with PPP suggests that there are several principles and guidelines worth applying during project preparation. Some have to do with the quality of the participants and the relationships among them. Others are more important during the phase when the nancing and implementation are negotiated. Such considerations include but are not limited to (Wallin, 1997; Savas, 2000; Roseneau, 2000; Widdus, 2001; Nijkamp et al., 2002; Spackman, 2002; Scharle, 2002; Sussex, 2003; Zouggari, 2003): . a careful consideration and precise articulation of the purposes of the partnership; . a clear delineation of targets and goals; . a timely and transparent mapping of all costs, revenues and protability aspects of a PPP; . a clear insight into the planning of projects parts, the risk proles involved and the ways in which various partners are involved; . clear boundaries, measurable output performance and transparency; . specic reporting and record keeping requirements; . a strong central structure at the level of central administration, using private sector expertise to promote and guide policy implementation; . provisions for contract re-negotiation and for adjusting contractual terms particularly in countries where administrative capacity is weak; . an appropriately designed legal framework; . a consideration of environmental, safety, and health responsibilities; and . control over and close monitoring of monopolistic situations.

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PPP in Lebanon The Lebanese economy has traditionally been dominated by the private sector. After nearly two decades of civil unrest, the performance of the public sector deteriorated due to physical damage, lack of government supervision, and scarcity of resources. Repeated pledges for administrative reforms did not materialize and the performance of the public sector did not improve. The government considered restructuring and reforming public enterprises, which required signicant nancial resources that were lacking. Considering the cumulative negative effects of operational, nancial, institutional, and environmental problems, PPPs were proposed as a possible solution to leverage needed technical and managerial expertise, secure capital injections and greater efciency. PPPs were thus initiated in several sectors including telecommunications, post and solid waste management. In an attempt to assess the extent to which the PPP experience has been effective and sustainable, the record of one of the earliest post-war PPP initiatives is examined. The case was specically selected because it represents a failing PPP initiative in a vital infrastructure sector and very few PPP failures have been openly reported in the literature. Research methodology An in-depth investigation of one post-war PPP initiative in the telecommunications sector has been conducted combining eldwork and review of relevant literature and data. The assessment has drawn on multiple sources of data (e.g. documentation, archival records, interviews with key sector informants) to develop converging lines of inquiry through a process of cross validation or multiple triangulation. Success of the PPP initiative was gauged based on a quantitative and qualitative assessment of typical performance indicators of PPP effectiveness (Table II). Given that most information acquired from eld interviews and literature searches is non-numerical, a quantitative comparative assessment was provided when practically feasible. Nevertheless, the analysis provides interesting insights and, where possible, a quantitative assessment of the effectiveness of the PPP in question. Case example: a post-war PPP initiative in the telecommunications sector Background information. Prior to the war (1975-1991), the telecommunications system in Lebanon was among the most advanced in the Middle East region. Both the local and international networks, however, incurred substantial damage throughout the 16 years of civil unrest. Therefore, in view of the deteriorated state of the xed line network in the wake of the war, the Lebanese Government initiated in 1994 a PPP in the mobile segment by awarding two Global System for Mobile (GSM) communication concessions to private companies. Accordingly, in 1994, two cellular operators were granted ten-year GSM concessions under a build operate and transfer (BOT) contract (with a possible extension of two years) and subjected to an escalating revenue sharing scheme. The two operators are France Telecom Mobile Liban (FTML), commercially known as Cellis, a joint venture between France Telecom (66.6 percent) and local investors (33.3 percent) and Libancell, a joint venture between Telecom Finland (14 percent) and local investors (86 percent). The BOT agreements stipulated an eight-year exclusivity period and a ten-year operating license. The agreement included a 20 percent gross revenue share in the rst eight years, rising to 40 percent in the nal two years and 50

Quantitative indicators The amount of resources used in delivering the service Measurable units of the services that are delivered in a given time frame Investment; personnel; equipment

Description

Example from telecommunications

Inputs

Outputs

Cellular penetration or the number of lines per 100 inhabitants

Effectiveness The cost per unit of output

Indicators that reect timeliness, compliance or satisfaction Error rates (e.g. faults per line and call completion rates) with services delivered Volume of complaints Revenues per line (RPM) and revenues per employee (RPE)

Efciency

Regulatory framework

A stable and trusted system of enforceable laws designed to A system of enforceable laws concerning property rights, contracts, disputes and liabilities protect collective welfare, ensure open competition and promote the advantages of market discipline Unbundling of policy-making, operation and regulation Clear assignment of areas of competence and expertise, division of roles and functions, and delineation of areas for functions Demonstrated commitment and stake in the relationship cooperation Communication through different channels regarding goal-related progress, technical data, trouble spots or changing situations Regular meetings and exchange of relevant information; development of linkages/shared ways of operation Specic reporting and record-keeping requirements

Division of labor and commitment symmetry

Communication and integration

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Table II. Typical performance indicators of PPP effectiveness

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percent should the two companies opt for a further two-year license. These revenues are collected by the Ministry of Post and Telecommunications (MPT), which maintained a regulatory function in the mobile telephone and the data and Internet services, while continuing to operate the xed telephone service both locally and internationally. The partnership was therefore conceived as one in which the private partner would be responsible for building and operating the network and the public sector would be responsible for regulation. The cellular market consists of 759,300 subscribers (June 2001). The networks of the two operators cover more than 80 percent of Lebanon and the GSM penetration rate is around 22 percent, almost equally shared between the two operators. The operators have also increased their international coverage. Roaming arrangements have reached 67 countries and more than 75 operators for Cellis and 80 live networks in 55 countries for Libancell (Middle East Communications, 1999). Tariffs for cellular services are set by the government that xed a tariff ceiling of US$0.05 per minute for all domestic calls, to which is added a 10 percent municipal tax. The end-user price for a minute is therefore US$0.0779, which is one of the lowest in the world. This low price made the service very affordable and resulted in a high average use of 750 minutes per subscriber per month. The government also sets an annual 5 percent cap on increases in tariffs and fees, as well as on connection and rental charges. The operators are free, however, to set the rates for all other value-added services. Table III highlights some key current market data for this segment. The table indicates that subscription prices are high (US$25 per month) but usage charges are low (US7.79 cents per minute). Despite the success of the Lebanese cellular segment, the future of the GSM networks is far from decided. The massive take-up in GSM subscription levels has prompted a recent dispute between the government and the private cellular operators causing the government to limit each operators subscriber totals to 125,000. With Lebanons tremendous cellular growth, the two operators had reached that mark by late 1998, resulting in the current stagnation in GSM market growth. Both operators deny the ceiling constraint and defend their obligation, under contractual terms, to fulll market demand. They maintain that the decision to cap subscriptions is counterproductive because it deprives the government of additional revenues. While the initial dispute between the cellular companies and the government revolved around the 250,000 subscriber ceiling in their contracts, the conict has acquired new dimensions in recent years, as the MPT unilaterally raised taxes on mobile calls by 4 cents per minute in April 1999. Matters came to a head in June 1999, when the State Audit Department produced a report accusing the two cellular companies of systematically violating the terms of their contracts and imposing on
Number of subscribers Consumption (airtime minutes per month) Installation fee (US$) Monthly subscription Price per minute (US$) Average revenue from value added services (US$/month/subscriber) Estimated average revenue per user (US$) Estimated gross yearly revenues (US$ millions) Sources: FTML (2000) and LibanCell (2000) 700,000 750 500 25 0.079 10 90 486

Table III. The Lebanese cellular segment: key current market data

them over US$1 billion in penalties and nes. The alleged violations primarily relate to surpassing the 125,000 subscriber limit specied in each contract, unpaid fees and taxes especially for microwave links, and insufcient geographic and network coverage (Lebanon Opportunities, 2000, pp. 53-5). The government has even threatened to cancel the contracts and seize the two companies assets if an agreement is not reached through negotiation. Both companies have reacted deantly to the MPT and the governments accusations and nes. Cellis and Libancell maintain that arbitration should be conducted under Lebanese Law with an arbitrator appointed by the International Chamber of Commerce in Paris as stipulated in their contracts. But even the international law rm Booz Allen and Hamilton, which was called upon to mediate and interpret the contract concluded that there could be two legal interpretations of the same clause. Excerpts from their report indeed conrm that in certain respects, the terms of the contracts are not transparent and the impact of supervening law, documentation and discussions not clear (Executive, 2000). PPP effectiveness: an assessment of quantitative indicators. By all quantitative measures, the PPP experience has been a success. The cellular market peaked at 759,300 subscribers in June 2001, an increase from 267,350 in July 1997 (Table IV). The Lebanese mobile segment has indeed reached high penetration levels even by regional standards. Figure 4 reveals that Lebanon had in 2002 a ratio of cellular subscribers per capita higher than Egypt, Morocco, Jordan, Saudi Arabia and Oman. Other quantitative measures similarly suggest that the PPP experience has been successful. Table V illustrates the consistent growth in the revenues of both operators from 1995 to 2001. Mobile operators produced revenues of US$3,095 million in 2001 of

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Operator Cellis LibanCell Total

System GSM GSM

Launch 1994 1994

Subscribers 384,335 375,000 759,335

Annual growth (%) 8.14 9.91 9.01

Source: Budde Communications (2002)

Table IV. Mobile subscribers: June 2001

Figure 4. Cellular penetration rates (subscribers per 100 inhabitants)

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Year 1995 1996 1997 1998 1999 2000 2001 Total

Cellis 55 113 184 241 303 363 374 1,633

Revenues Libancell 52 92 155 219 282 316 346 1,462

State revenuesa Cellis Libancell 24 44 74 104 136 170 169 721 21 42 75 115 188 211 211 863

Cellis 1 14 31 37 41 57 60 241

Net prot Libancell 5 13 26 45 52 54 82 277

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Table V. Mobile sector revenues in US$ millions

Note: a State revenues include all taxes and international communications Source: MPT (2003)

which US$1,584 million went to the treasury. The call success (or call completion) rate is close to 96 percent and revenues per line reached US$900 in 2001. PPP effectiveness: an assessment of qualitative indicators. It is on the qualitative aspects/dimensions that the PPP experience has faltered. In general, little attention was accorded in Lebanon to building the institutional framework for a functioning competitive domestic market. Noting that regulatory capacity builds slowly, the creation of a separate regulatory authority prior to the initiation of the PPP initiative was not accorded enough attention. The MPT was assigned the regulation function, although, as confessed by Ministry senior ofcials, MPT had neither the staff nor the technical expertise to exercise adequate regulation and assume an active and constructive role in the newly initiated partnership. This in turn reected in limited regulatory oversight, the undermining of the original division of roles and functions between the partners, and the gradual build up of distrust and resentment, reecting in turn in poor patterns of communication and integration. Given the novelty of the PPP experience in the Lebanese context, there was also no systematic effort at mapping the costs, revenues and protability aspects of the new initiative. Government ofcials indeed openly admit that a major source of contention is that many of the services now provided by the cellular operators were not foreseen in the original contract. The introduction of prepaid cards in 1997 for example resulted in intense debate as to whether they should be subjected to the same revenue sharing scheme. Also, no provisions were made for contract re-negotiation or for adjusting contractual terms. Such observations conrm the critical importance in any PPP initiative of a strong structure at the level of central administration to promote and steer policy implementation. It often goes unrecognized, particularly in developing countries, that a PPP is an exercise in the implementation of a radically new and complex policy, and that a great deal of good-quality, updated central technical guidance is required. Finally, neither the public nor the private sector approached the new project in a spirit of true partnership. There was suspicion from the start in public circles about the inclination of the new operators to openly share and disclose information. On the other hand, the cellular companies did not have much faith in the technical competence of the public partner given the predominant perception of the Lebanese public sector as

bloated and inefcient. Therefore aside from the contractual mandates and obligations, no systematic effort was expended at re-negotiating joint expectations, or developing the skills, mindsets and working practices to level out differences in working style/culture. While the partnership materialized in the context of high hopes and expectations (being the rst post-war PPP initiative in Lebanon), it gradually disintegrated into patterns of mutual distrust, threats and accusations. Gaps in the original BOT contracts were exploited and resulted in tension and contention over levels of protability, revenue sharing arrangements, and subscriber ceilings. The conict was allowed to escalate and several of the key requirements of successful PPPs were compromised along the way including commitment symmetry, integration, and regular, intense communication. For example, not a single coordination meeting was held between the partners since December 1998. The struggling partnership therefore managed to suppress conict and substitute compromise for consensus for a period of ve years (1994-1999). Although there were occasional tensions revolving around taxes, the conict erupted in June 1999, when the State Audit Department openly accused the two cellular companies of systematic violations of the terms of their contracts. Following the long running feud, the Lebanese government cancelled the two operators BOT contracts in late 2001, three years before the anticipated termination date. An agreement was reached in 2002 to continue to have Cellis and Libancell operate the nationwide GSM cellular network in return for a xed management fee of $7.6 million per month per operator. The partnership faltered, because from the start, it was not based on rm foundations to sustain the challenge of working across sectors with divergent strategic and operational realities. Concluding remarks The appeal of PPPs as a new policy alternative in the context of developing countries is growing. However, not only PPPs have become mired in a stream of conceptual ambiguity, but also the logistics and policy requirements for successful PPP implementation have not been systematically explored. This paper has attempted to shed light on this relatively new and complex policy, both from a conceptual and practical implementation perspectives. It has also presented a case study of a failing PPP initiative in the Lebanese context, and critically examined the possible reasons behind the failure. Generally, trust, openness and fairness are basic foundational underpinnings of successful PPPs. Partnering should be mutually viewed as representing an opportunity rather than a threat and loss of control. In this context, while recognizing the immense complexities in working across sectors with different strategic and operational realities, the focus should be on identifying common goals, delineating responsibilities, negotiating expectations and building bridges including common working practices and specic reporting and record keeping requirements. Attention needs to be accorded to developing mechanisms structures, processes and skills for bridging organizational/interpersonal differences and nurturing communication and coordination. Deploying adequate time and staff helps ensure that both partners resources are tapped and that both have their goals and needs adequately represented.

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Lessons learned, moreover, suggest that PPPs must begin with careful groundwork and preparation, including a comprehensive feasibility study and economic evaluation for each potential partnership project. In this respect, developing country governments need to build their legal and regulatory capacity to effectively foster and participate in PPPs. The concept of partnership is indeed founded on the assumptions of interdependence and individual excellence (i.e. complementary assets and skills). These pre-requisites cannot be compromised in the pursuit of quick xes and efciency gains. Unequal qualications and contributions of expertise are recipes for failing PPPs (Hagen, 2002). Hence, while PPPs can bring added value to the public and private sector partners, a sound legal and regulatory framework and complete transparency particularly with regards to nancial accountability are essential elements. Also important is the presence of strong structure at the level of central administration to steer and guide policy implementation. PPPs indeed often falter because of hastily prepared tender documents and contracts and the negotiations taking place between unequally qualied and experienced professionals, mainly to the disadvantage of the representative from the public sector (Zouggari, 2003). Finally, while PPPs may offer opportunities for exploiting the comparative advantages of both the private sector dynamism, access to nance, knowledge of technologies, managerial efciency, and entrepreneurial spirit, with the social responsibility, environmental awareness, and job generation concerns of the public sector they should not be treated as a panacea. PPP projects should be evaluated on their merits, on a case-by-case basis, and contemplated when the ingredients of effective collaboration (e.g. commitment, interdependence, individual excellence, communication and integrity) are found or can be safely nurtured along the way.

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