THE ROLE OF AND POTENTIAL FOR PUBLIC-PRIVATE COOPERATION IN ARMENIA

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THE ROLE OF AND POTENTIAL FOR PUBLIC-PRIVATE
COOPERATION IN ARMENIA
Richard Beilock AIPRG and University of Florida David A. Grigorian AIPRG and International Monetary Fund
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Structure of the Paper

• Introduction
• Rationales and Organizational Alternatives for
  PPCs
• Potential Applications for PPCs in Armenia
• Special Interests

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Introduction

• Karl Marx vs. Adam Smith is there generally a
  role for governments to play?
• How is the reality shaping for Armenia
  transition vs. Armenia-specific issues?
• We assert that
• Dirrefences would encourage PPCs
• Declining returns to PPCs would benefit
  developing countries more
• The range of possible alternative arrangements
  for PPCs is wide

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Needed for All Viable Partnerships
Surplus additional value possible together over
sum of individual efforts
Mutual Advantage
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Difference, the Soul of Partnership
Without differences, no potential for SURPLUS, no
potential for viable partnerships

Assets Knowledge Talents Rights/Powers
Different types and relative endowments of
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Public-Private Differences

• Always considerable
• Particularly large in Armenia owing to
• Inadequate means and capacity of the government
• Emerging, but not fully developed, domestic
  private sector
• Involvement (and potential) of the Diaspora,
  NGOs, and multilaterals

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PPC Organizational Alternatives

• Non-Invasive Coop (NIC)
• Your org. does this and mine does that.
• Management Contract (MC)
• Your org. runs these parts of my org. for
• these incentives.
• Concession (CONC)
• Your org. runs these parts of my org. for
• these incentivesAND you make investments
• Joint Onwership-based Coop (JOC)
• Our org.s jointly own this venture.

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PPC Alternatives
Type Strengths Weaknesses
NIC Easy est. end Few turf battles Limited use of comparative adv.s
MC Contract flexible Easy getting bidders Contractor retains control Possible incentive problems, esp. toward end of contract
CONC Fewer incentive problems Contract flexible Harder to attract bidders End of contract incentives
JOC Liquidity, ease of altering ownership structure JOC, connotes ownership structure, but not cooperative system
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PPC SURPLUS SOURCES

• Improving Public Sector Performance
• Improving Private Sector Performance

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Public Sector Improving

• Efficiency of Core Functions
• Tourism, Research (CRO), Environment (ATP)
• Law- and (Executive) Decision-making
• Diaspora Agency, Anti-Corruption Agency, and
• Deregulation Agency
• Management of Inherently Private, but
  Publicly-owned Assets
• Armenian Railways

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Private Sector

• Reducing the Knowledge and Information Gaps
• Development Associates
• Credit Rating Agency
• Business Incubators
• Correcting Inefficiencies Related to Collective
  Action Problems
• Wine
• Housing
• Fisheries

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Private Sector (contd.)

• Reducing Problems Related to Small Size and Thin
  Markets
• Tourism Concessions
• Ensuring Quality and Adherence to Standards
• Tourism
• Food
• Medicine

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SPECIAL INTERESTS

• Special Interests (SIs)
• Ind./groups working to further their goals
• Core Functions
• Well-defined set of objectives
• Territoriality
• Actions to enhance prestige and gain control
  beyond necessary to perform core functions
• Shirkers Bad Guys

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STRATEGIES OF DEALING WITH SIs

• Suppress/Destroy
• When the harm is considerable, and tolerating it
  exacerbates the costs
• Ignore
• Power/harm is not considerable, and costs of
  dealing exceeds potential gains
• Buy off
• The SI faces costs, and would rather see itself
  legalized, which would result in net benefit for
  both
• Make Part of the System
• Interests of both sides are consistent, and it is
  possible to develop rewards to make them more
  consistent

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STRATEGY OF DEALING WITH SIs

• Which method do I apply?

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STRATEGY OF DEALING WITH SIs

• Shirkers Bad
  Guys

• Make part
  Destroy
• of the system (Zero
  tolerance)

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CONCLUSIONS

• Potential for PPCs in Armenia is great
• PPCs could be used to
• Improve efficiency of the Public Sector
• Improve efficiency of the Private Sector
• Treat Special Interests to
• Reduce the costs associated with their actions
• Generate positive returns from their involvement