A critical evaluation of a Public Private Partnership in a developing country using the Political Economy approach: a case study of the Aqaba Container Terminal in Jordan

Abstract

The spread of Public Private Partnerships (PPPs) over the last 30 years has been remarkable. The transformation of the mechanism from public procurement option to policy prerogative has been particularly seductive in developing countries where there is rapid population growth and public sector debt restricts productive investment in infrastructure. The multilaterals and international transaction advisors have been instrumental in transforming the narrative of PPPs to facilitate their uptake. The benefits claimed for the mechanism range from institutional fiscal alleviation and diffusion of risk to the private sector, project-level efficiency and value for money improvements, and governance enhancements leading to social welfare impacts. Yet the paradox is that the empirical evidence which supports such wide-ranging claims is contestable whilst the underlying assumption that PPPs are universally transposable is highly controversial. These problems did not prevent Jordan from becoming an early adopter of PPPs. In the government’s quest to manage a society in a state of flux and to re-calibrate a debt-laden economy buffeted by geopolitical tensions and exogenous influences, it developed a national vision predicated on the use of private sector finance and capacity. The agenda politically privileged the mechanism in key policy areas and the Aqaba Container Terminal (ACT) became the government’s showcase PPP. However, the inextricable fusion of socio-political, cultural and financial influences on institutional policies and structures complicates the definition, implementation and evaluation of the performance outcomes of PPPs. This complexity necessitates a wider conceptualisation of public value which goes beyond financial performance and incorporates a more inclusive stakeholder perspective. This study attempts to fill the theoretical gap by integrating social welfare outcomes and shifts in lifecycle risk into the public value equation. This research draws on a political economy (P-E) approach to critically evaluate the ACT PPP’s performance against its contractual promises and also to investigate how the exogenous factors influence the SPV’s governance structure and absorption of risk by stakeholders through time. The analysis has been framed within a case study methodology using a mixed-methods approach. The quantitative analysis demonstrates that the PPP’s throughput-revenue trajectory has tapered off. When this trend is extrapolated, the financial and operational promises will not be delivered. Qualitative insight gleaned from 40 interviews with key stakeholders suggests that weak institutional capacity and a lack of understanding about PPPs in Jordan led to the optimistic definition of contractual targets in a volatile market. These features could have been anticipated but cannot be countered by the partners’ capabilities or an inflation in the tariffs until the concession ends. Furthermore, the government’s bob and weave strategies exacerbate gaps in the national legal-regulatory framework which positioned the ACT SPV in a politically protected contractual-financial bubble. This enabled the commercial partner to insulate itself from the increasing costs-risks associated with its performance shortfall by transferring them to the project grantor, the government and, ultimately, to the taxpayers. This study provides a platform for advancing theoretical knowledge and practical understanding about how PPP policies can be defined, implemented and evaluated in Jordan. The multi-stakeholder perspective of the P-E theory illustrates the difficulties of localising PPPs given the myriad shifting influences whilst the case study approach captures rich insights into the drivers, fault lines and reasons for outcomes. The analysis can be used to develop recommendations that improve the public value of Jordan’s forward PPP programme, by bolstering its governance systems, increasing social voice and the distributive equity

Date of Award	31 Dec 2019
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Karel Williams (Supervisor) & Adam Leaver (Supervisor)