Public-Private Service Delivery Arrangements and Incentive Schemes in Developing Asia

Abstract

In many countries, public agencies or private firms are gradually moving away from being exclusive providers of goods and services that traditionally were assigned to the state or markets, respectively. Instead, state agencies, both at the national and the local level, and private organizations, both for-profit firms and nongovernment organizations (NGOs), increasingly coordinate, collaborate, or partner to finance, produce, or provide public services. This paper attempts to identify the factors that account for the successes or failures of such public-private service delivery arrangements, with a focus on the role of monetary and nonmonetary incentives used in selected case studies in developing Asia. It finds that such arrangements are a viable service delivery mechanism where there is a state or market failure. While governments now increasingly enter into such partnerships, they appear to do so more with for-profit firms than with NGOs. A key lesson is to mobilize potential private sector partners, match the partner’s mission with the appropriate type or level of service provision, and then motivate them with the right incentives but also monitor them for performance accordingly.

Keywords: public-private partnerships, NGOs, incentives, public service delivery, Asia

JEL Classification: H39, H49, L31, L33