Book Review: Public-private sector partnership in economic development

Editors: Prof. A.D.V.de S. Indraratna and Dr. Athula Ranasinghe

Reviewed by Prof. S.S. Colombage, The Open University of Sri Lanka

PUBLICATION: The Sri Lanka Economic Association, particularly the two editors of the book, Prof. Indraratna and Dr. Ranasinghe have made a tremendous contribution to the society by bringing out this timely publication.

A dynamic and effective partnership between public and private sectors is essential for economic development for a number of reasons. Firstly, it is widely accepted now that private sector is the "engine of growth", given the conducive environment in which it is allowed to operate.

Secondly, many actions taken by the public sector or the government often impinge positively or negatively on the private sector. Thirdly, actions taken by the public sector can act as important catalytic elements for the development of the private sector.

Such actions may improve or deteriorate the environment in which the private sector operates. Examples of such actions include education and infrastructure. Fourthly, activities undertaken by the private sector can be complementary to those by the public sector. Provision of telecommunication services by the private sector is a good example.

In this context, the new book provides insights into the experience and challenges with regard to public-private sector partnership in Sri Lanka. The book is divided into five sectors focusing on public-private partnership for economic growth, changing roles of the public and private sectors, economic infrastructure and development, reshaping agriculture for challenges ahead and SMEs and microfinance. The book contains 11 chapters, based on the five themes. Let me highlight some of the critical issues raised in each of these papers.

Prof. Indraratna, in his introductory chapter, focuses on the importance of the public-private sector partnership to foster economic growth. Things like poor governance, corruption and inefficiency have led to down-size the public sector rather than to promote its efficiency.

The author argues that an efficient and transparent government sector is essential in fostering economic growth. Bibek Debroy has put forward further arguments in favour of public-private partnership in accelerating economic growth.

He criticizes the conventional wisdom that the public sector should play a main role in the presence of externalities and public goods. He pinpoints new arguments favouring the profit-seeking private sector initiatives in supplying public goods and caring for externalities.

Dr. Anura Ekanayake emphasizes the primary role of the public sector as a facilitator and a moderator. He argues that there is no room for the government to further mobilize financial resources without adversely affecting private investment. According to him, political stability, regulatory reforms and transparent regulatory mechanisms are essential.

Franklyn Amarasinghe discusses the social responsibility of the private sector. He notes that the private sector has a responsibility with regard to things like use of resources, supply of quality products at reasonable prices and ensuring sustainability of the environment. Emphasizing the difficulty in enforcing laws, the author gives an interesting quotation of Benjamin Disraeli, "When men are pure, laws are useless - when men are corrupt, laws are broken".

Dr. Shelton Wanasinghe in his paper focuses on the role of the public sector with regard to corporate social responsibility. He points out that time has come for Sri Lanka to re-examine what the role of its public sector should be in the current context.

He says that the status-quo of the public sector is preserved by lobbying of vested interest groups. The author is of the view that the main social responsibility concerns of the public sector should include continuous articulation of public policy, provision of enabling environment to the private sector and continuous monitoring, regulation and evaluation of the delivery of public goods.

Chandrasena Maliyadde deals with the roles and challenges of the two sectors in the context of regional development. Given the economic and political repercussions of regional disparities, he emphasizes the role of the public sector in enhancing private sector opportunities in the periphery. Private sector, in turn, can widen access to information, knowledge, technology and market in the regions, according to Maliyadde.

The theme of Dr. Saman Kelegama's paper is private sector's role in infrastructure. He explains the range of possible private/public partnership in the introduction. Due to the budget constraints, the government encourages private sector to develop infrastructure/public utilities like telecommunications, power, roads, railways and water. But the record has been very poor.

The author analyses the high cost of electricity in Sri Lanka. Dr. Kelegama concludes by saying that the government should engage in an open dialogue with the stakeholders and civil society to enhance private/public partnership in infrastructure.

Prof. C.S. Weeraratna focuses on sustainable development of the plantation sector in his paper. The sector has many weaknesses including high cost of production, outdated technology and low value addition. He emphasizes that various measures are needed to overcome these problems, e.g. replanting, introduction of better crop varieties, and effective management. Soil degradation and conservation practices need to be considered for sustainability.

All these activities involve a high level of investment, according to the author. Dr. Nimal Sanderatna provides a comprehensive analysis of domestic agriculture and food security. He distinguishes food security from self-sufficiency in food.

At the national level, he notes, the country is food secure - but at the household level there is food insecurity. Improvement in agricultural productivity is essential, the author emphasizes. Food security can be achieved only by overall economic development. In this regard, the author concludes that economic diversification and producing high value-added exports are vital rather than relying on increased domestic food production.

In his paper on SME development, Kingsley Bernard stresses the need to change the mindset of both SME entrepreneurs and policy makers. In order to enhance the competitiveness of this sector, the author argues, attributes like ambition, creativity, resolve and persistence are needed.

The last Chapter is by Prof. S.M.P. Senanayake and Dr. Premaratne on microfinance for accelerated development. They point out that although microfinance is mooted as the panacea for economic ills, its success depends on the right balance between development and finance.

It is necessary to identify microfinance industry's contribution towards productivity, incomes, employment, technological progress and income distribution. The authors highlight three dimensions, namely outreach to the poor, institutional framework and integrations with the financial system.

Thus, the book covers a wide range of issues relating to public-private partnership. Apart from the main papers, comments on certain papers made by Asoka Gunawardena and W.G. Somaratne have enriched the book.

An important area that needs to be researched in greater detail is the public-private partnership in trade and investment promotion, which is vital for economic growth. In an outward-oriented growth setup that Sri Lanka has been enjoying throughout the last three decades, it is unfortunate that much progress has not been made in this arena. Despite the trade liberalization and innumerable investment incentives, our export sector has been sluggish while the foreign direct investment has been dismal.

Who is responsible for this plight? - Public sector or the private sector? How can we overcome the problems relating to trade and investment? These issues are critical in a debate on public-private partnership. Of course, as the editors noted in the back-cover of the book, one cannot expect a full coverage of all these critical issues in a volume of this nature, which is based on a one and half days' sessions.

The SLEA has made a remarkable contribution through this publication by urging the policy makers in the public sector and practitioners in the private sector to enhance the partnership so as to foster economic development. We sincerely hope that this will be an eye-opener to both sectors.

The editors, who carried out the most difficult task, deserve commendation for the professional outlook and reader-friendly format of the book. The index given at the end of the book is quite useful to the reader to refer to key words. Undoubtedly, this book will be a main reference to researchers, policy makers, practitioners, students and to the general public.