IFC advises Yemeni government on Public-Private Partnerships (PPP) in priority sectors
7 March 2008
Public-Private Partnerships (PPP) presents investment opportunities that could hurt the poor, who have already been hit by increasing food prices.
On February 25, 2008, the World Bank’s private sector lending arm, the International Financial Corporation (IFC), signed a memorandum of understanding with Yemen’s Ministry of Planning and International Cooperation to advise the government on public-private partnerships (PPP) projects in priority sectors such as transport and power. The plan to introduce private sector involvement in these basic public services, which would amount to a partial privatization, will provide investment opportunities to private companies and potential clients and partners of the IFC.
While the IFC promotes PPP as a means of improving efficiency, private sector participation in the provision of basic services has proven a highly contentious issue in many countries, as it has often led to higher prices and reduced access for the poor. It is not clear whether the initiative will invite private sector investment in existing government agencies, or whether it will be limited to new infrastructure.
Meanwhile, new World Bank research on increasing food prices highlights Yemen as among the countries that are the worst hit by a recent global spike in food prices. It estimates that a doubling in the cost of wheat over the past year could increase poverty by 6 percent. With 42 percent of its population living in poverty and households spending more than ever on food, it is important for the IFC and the government to consider whether PPP initiatives could lead to higher costs. This is especially true in Yemen, which has a long history of unrest associated with increases in the price of basic services.
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