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MODULE D: ENTERPRISE MANAGEMENT AND PRIVATE SECTOR PARTICIPATION

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MODULE D: ENTERPRISE MANAGEMENT AND PRIVATE SECTOR PARTICIPATION Role of the public sector and conditions for private sector involvement in ISP? – PowerPoint PPT presentation

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Title: MODULE D: ENTERPRISE MANAGEMENT AND PRIVATE SECTOR PARTICIPATION


1
MODULE D ENTERPRISE MANAGEMENT AND PRIVATE
SECTOR PARTICIPATION
  • Role of the public sector and conditions for
    private sector involvement in ISP?
  • How can private sector involvement be achieved?
  • Improved management in public sector enterprises
  • What does better enterprise management mean for
    different levels of government?

2
Session-1 Role of the public sector and
conditions for private sector involvement in ISP?
  • Define the role of the state
  • Give reasons for private sector development
  • Suggest different ways of involving the private
    sector
  • Give examples and an exercise

3
The role of the public sector
  • Establishing a foundation of law
  • Maintaining a non distortionary policy
    environment, including macroeconomic stability
  • Investing in basic social services and
    infrastructure
  • Protecting the vulnerable
  • Protecting the environment

4
Reasons for private sector involvement
  • Limited efficiency of govern. organization
  • Financial reasons loss-making leading to
    government budget deficits
  • Lack of quality or products are too expensive
  • Lack of regular supply
  • Political interference in public sector enterp.

5
Conditions for successful private sector
involvement in ISP
  • National levelenabling policy environment
  • meso levelsectorial policies encouraging private
    sector involvement
  • micro leveltransparent and accountable firm

6
Conditions for project finance
  • A supportive policy environment
  • A sound and stable economic base
  • A business environment in which
  • - business dealings are transparent
  • - contracts are respected
  • - a framework exists for resolving conflicts
  • A legal and judicial framework conducive to
    private contractual activity

7
Barriers to private sector involvement in ISP
  • Lack of policy and regulatory framework
  • Weak domestic capital markets
  • High transaction and bidding costs

8
Example 1 Public water supply
  • Indicators of good public service provision
  • Indicators of government failure
  • Factors explaining failure of water utilities
  • Factors explaining the success of water companies
  • What is the situation in your country?

9
Case 1 Innovation promotion for SME is private
sector developm.
  • Innovation is crucial to keep competitive edge
  • Innovation requires technology transfer and
    building local technological capability
  • Need for macro policies
  • Activities at the meso level
  • Enterprise level initiatives

10
Exercise 1 Reasons for poor electricity supply in
your country
  • What are the reasons for rationing or irregular
    supply?
  • What can be said about the price?
  • How much subsidies are provided?
  • What could be done to solve the situation?
  • Why/how could private sector involvement
    contribute to the solution?
  • Under what conditions and in what form?

11
Summary Session-1
  • We described core roles of the public sector
  • Discussed an example of public water supply with
    private sector support
  • Considered basic conditions for private sector
    involvement
  • Examined conditions for project finance
  • Looked at certain barriers to private sector
    involvement
  • Made a case for supporting innovation of SME
  • Examined possible reasons poor electricity supply

12
Session-2 How can private sector participation
in ISP be achieved?
  • Private sector participation and privatization
  • Ways to involve the private sector
  • Exercise advantages/disadvantages privatization

13
Ways to involve the private sectorin ISP
  • Outsourcing or subcontracting (maintenance)
  • Lease and operate contracts (BOT)
  • Provide a concession (water supply)
  • Private sector finance (housing infrastructure)

14
Ways to involve private sector (cont.)
  • Service contracts (solid waste collection)
  • A management contract (to run a bus company)
  • Socio-economic development funds (employment)
  • A PPP for urban renovation (Agetip)
  • A PPcP for waste collection (waste collection)
  • Privatization (telecommunication company)

15
Lessons from experiences with socio-economic
development funds
  • Private sector involvement has substantial direct
    and indirect employment effects
  • To reach labour intensive enterprises jobs need
    to be cut up in smaller portions
  • Small projects should also be welcomed
  • Appraisal of projects need to be transparent
  • Entrepreneurs need money after finishing
  • Tendering procedures have to be simplified

16
Different financial instruments for private
sector involvement in ISP
  • Loans
  • Direct foreign investments
  • Buying bonds
  • Portfolio investment
  • Project finance

17
Strong points of the public sector and the
private sector in PPPs
  • Public sector
  • Idealistic striving for general good
  • Pay attention to legal security lawfulness
  • Used to weighing of interests
  • Political responsibility
  • Private sector
  • Provides continuity and profitability
  • Willing to take challenges
  • Efficient
  • Large degree of freedom in organizational
    structure

18
An example of public services through a
PPcPartnership
  • An agreement between the municipality and a local
    non-governmental organization
  • Young people collect waste in certain
    neighborhoods for a fee
  • They use donkey carts as an appropriate
    technology for this purpose
  • This is called a Public-Private-Community
    partnership PPcP and exists in Bamako Mali

19
How to choose between the different options
  • Past experience with private sector
  • Nature of project or activity
  • Seriousness of the issue
  • Legal framework
  • Degree of development of local capital market

20
Exercise advantages disadvantages of
privatization
  • Advantages
  • Disadvantages
  • What would you recommend for the power sector1.
    Restructuring2. Private sector involvement3.
    Full fledged privatization?

21
Summary Session-2
  • Difference between privatization and private
    sector participation
  • Ways of involving the private sector in ISP
  • Examples of various public-private arrangements
  • Guidance for choosing between various options
  • Arguments for the private supply of sanitation
  • An exercise concerning advantages and
    disadvantages of privatization

22
Session-3 Improved management in public sector
enterprises
  • Different options
  • Elements of restructuring
  • Strategies for privatization
  • Example Management issues water sector
  • Performance indicators water supply
  • Case contribution of management science
  • Exercise the cost of issuing bonds versus
    taking a loan

23
Improved management different options
  • Restructuring state-owned enterprises
  • Privatization
  • Bringing in private sector elements- in
    management- in finance- through outsourcing
    or- out contracting

24
Elements of restructuring
  • Enterprise level changes, such as
  • - Changing the product mix
  • - Introducing different technologies
  • - Change the location, or- The plant
    configuration
  • Changes in the context in which public sector
    enterprise functions more competition, more
    autonomy, a recession or a new opportunity for
    export
  • Changes in personnel change in management and or
    reduction of employment

25
Strategies for privatization
  • Public offering of shares
  • Private sale of shares
  • New private investment in the enterprise
  • Sale of government assets
  • Reorganisation into component parts
  • Management employee buyout
  • Lease and management contract
  • Combination of the above methods

26
Example 3 Issues in water sector, insufficient
water because of
  • Lack of repair and maintenance activities
  • No participation of the population in the
    preparation, or implementation of the project
  • No good cost recovery system
  • No capacity to manage water supply at the
    municipal level
  • No private sector involvement

27
Performance indicators water
  • Solvency ratio (equity capital to total capital)
  • Yield to assets
  • Efficiency as connections per personnel
  • Price of 150 m3
  • Operating revenue as of operating costs
  • Unaccounted for water
  • Collection efficiency
  • Coverage
  • Service to poor people/neighbourhoods
  • Productivity

28
Case capacity building through MBA or short
courses
  • Strategic management, which helps defining where
    we want to go with an organization
  • Change management helping organisation and its
    staff to go from one way of doing things to
    another way of achieving fixed targets.
  • Project management makes project successful
  • Financial management techniques assuring
    positive financial results of enterprises
    activities
  • Operational management
  • Integration how can such modules help to analyse
    a problem and result solutions?

29
Exercise 3 The cost of issuing a bond versus
taking a loan?
  • Which factors should be taken into account when
    calculating the cost of issuing a bond versus
    taking a loan?Think about the need- to involve
    investment bank- to get a credit rating- to
    look for guarantees or insurances- how much can
    be obtained from one source?

30
Summary Session-3
  • Different options for improving public sector
    enterprise management examined
  • Elements of restructuring process listed
  • Strategies for privatisation were presented
  • Management issues in water sector used as
    illustration, with performance indicators
  • Case need for capacity building including
    contribution of management science and short
    courses
  • Exercise the cost of issuing bonds versus taking
    a loan

31
Session-4 What does better enterprise management
mean for different levels of government?
  • What different levels of government can do to
    improve public enterprise management
  • Government policies to support effective private
    sector involvement in ISP
  • Cases water supply in South Africa and solid
    waste management in Zambia
  • Exercise design an enterprise friendly
    environment
  • Summary

32
What different levels of government can do to
develop economic activities
  • National level create policy environment and
    macroeconomic conditions
  • Regional level make the region attractive for
    investors
  • Local government level- land- infrastructure-
    consultation stakeholders

33
General government policies to improve
enterprise management
  • Macro-economic policies
  • Technology development policies
  • Physical planning policies

34
Regional / District government policies
  • Develop a vision and strategy on ISP
  • Provide co-ordination between different levels of
    government
  • Stimulate private sector involvement
  • Discuss with organisations of private sector
    enterprises

35
Local government policies
  • Provide space and infrastructure
  • Provide incentives for private sector development
    and involvement
  • Attract foreign investment
  • Provide information on ISP
  • Promote link with local knowledge resources

36
Lusaka, Zambia private sector involvement in
waste collection
  • Private waste collectors are licensed by the
    Lusaka City Council and the Environmental Council
    of Zambia to collect and dispose of waste
    (usually septic tank waste and solid waste).
  • Operators charge their customers and in turn pay
    the Lusaka Water and Sewerage Company for
    disposal of the sanitary wastes into the latters
    facilities

37
South Africa water supply through a partnership
  • Private sector and NGO involvement is envisaged
  • The local authority remains responsible
  • ensuring that the services are provided to the
    residents and communities
  • regulating the provision of services at local
    level
  • monitoring the implementation of agreements with
    service providers

38
Exercise design an enterprise friendly
environment
  • Design an enterprise friendly environment for
    your country
  • Specify the role of different levels of
    government- local- regional/city
    level-national
  • What could the private sector itself contribute?
  • Who would you involve (which stakeholders)?

39
Summary Session-4
  • Role of governments to improve public enterprise
    management
  • Government policies to support effective private
    sector involvement in ISP
  • Cases
  • - water supply in South Africa- solid waste
    management in Lusaka, Zambia
  • Exercise design an environment that is conducive
    to private sector involvement in ISP
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