In 2001 a new regime came to power in Afghanistan, infrastructure development, local governance, and human rights are the significant areas that have been intensively transformed. However, it remains noteworthy that all the accomplishments during the last decade were achieved through foreign aid. In 2014, with the withdrawal of coalition forces from Afghanistan, the foreign aid has decreased significantly leading a drastic shrinking of the Afghan economy.

Despite 70% donor contribution to the national development budget, currently, the Afghan government is unable to provide high quality public services to the people. Reasons are many fold and include lack of financial resources, technical capacity, and state of the art technology. Hence, the Public-Private Partnership (PPP) is one of the best alternatives to state funded public services. PPP is also a vital tool for attracting investment into the country and enabling the government to finance government projects and provide public service to the people. PPP projects are highlighted as a potential source for infrastructure investment such as roads, bridges, hospitals, and power plants etc. These infrastructure projects need huge financial resources which are not possible through income tax revenue, thus government solicits private sector for long-term commitment.

The term “Public–Private Partnership” describes a range of long-term contracts among public and private entities in the context of infrastructure and other public services. A PPP project is designed to motivate the private sector to invest in government projects and obtain its investment along with profit at a given rate via charging a user fee or tariff for consumers in the long-term.

In early 1990, the PPP projects initially began in the United Kingdom as a comprehensive government program, which was tasked with state-owned enterprises. Under PPP, the public sector retained the role of a purchaser for services provided by an entrepreneur. During 21st century, PPP projects gained popularity all over the world due to budget constraints of governments. Indeed, most of the countries start financing government projects through PPPs in order to get more capital and provide high quality services at low cost to public.

On 1st September 2016, the PPP law was passed in the form of a Presidential Decree in Afghanistan. Under the PPP law, the Central Partnership Authority was established within the Ministry of Finance to regulate policies and provide technical assistance to public private partnership. The Central Partnership Authority has developed the PPP policy under which the government motivates private sector to invest in public projects through long-term contracts where the liability, risk, profit and/or loss are shared by both ‘partners’ on equitable basis and depending on the ability to manage the risk of each one of them.

From an economic point of view, PPP projects will evolve new paths for the private sector to invest in the public sector and sustain long-term turnover. These private investments would create jobs, build capacity of public sector employees, spur innovation, provide essential infrastructure and services, boost the economy and strengthen standards in public and corporate governance. Moreover, PPP projects will provide opportunities for financial institutions to invest their money/reserves in these projects thereby providing an opportunity of restricting the outflow of money from Afghanistan.

Afghanistan, as the poorest country in the world, has an immense potential for attracting the foreign and domestic investment. Currently, the Afghan government is keen to facilitate investment opportunities for both foreign and domestic investors to invest in the area of health, energy, agriculture, mining and telecommunication sectors on a PPP basis. If the Afghan government successfully materializes this potential opportunity and absorbs private investment through PPP projects; it will enhance the quality of public services and build trust between the masses and the government. Furthermore, PPP Projects will also play a key role in increasing the trade balance, GDP, and employment rate in the country.

Although PPP can be rewarding if handled cautiously, it can equally lead to very adverse consequences. Partnerships need balance from both parties as well as continuous maintenance. If entered into lightly, one can find its organization falling in various areas proving to be one of many partnership failures. The experienced of developing countries show that poor legal, financial, procurement and administrative system could cause PPP projects to fail.

Thus, the Afghan government can take lessons from developing countries and the need for structural reforms in public administration in order to mitigate the future potential risks. Particularly, building the capacity of civil servants in the area of project management, developing a stable legal framework for PPP projects, bring transparency in the procurement process; and avoid political intervention in PPP projects could lead the PPP projects towards successful direction.

In short, we can safely assert that PPP projects can positively influence the quality of public services, GDP, trade balance and employment rate in Afghanistan, however, they are not panaceas. Their impact on economic growth is wholly reliant on the number and volume of PPP projects in the country, the type of PPP contracts entered into, and the policy and institutional environment of the PPP regulators. Legislator and policymakers must carefully evaluate how these factors apply to their jurisdiction before initiating a PPP project. This means that policymakers must craft a wise strategy for infrastructure development and then ensure their actions—governed by established policies—can sustain the strategic goals. Foremost, a PPP-friendly environment is vital for attracting private investors, encourage public support, and ensuring a long-term partnership leading to success.

View expressed in this article are of the author’s own and do not necessarily reflect Pajhwok’s editorial policy.

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