A merging of the public and private rivers of development

By Deepa

In class, we discussed whether there were guidelines for purely private or public deals. The professor’s response was that, from the public side, the government was interested in policies that would not break their limited budgets, but which would be able to bring jobs and vibrancy to their countries. Governments have the ability to decide zoning and floor area ratio to help determine density. They can also provide the essential infrastructure that attracts businesses, such as electricity, water and transit (many of these can be in the form of PPPs or private entities regulated by the government).

However, there seemed to be a sense that the primary role of government is to promote business investment. It is important to remember that while development is an important goal, the main role of government is, arguably, to promote the interests of citizens. In our discussion on Friday, we seemed overlook this. The question, “Was It Worth It [for the promoters to make the long term investment in HCMC]?” came back as a negative in the long term because the government eventually caused problems for the promoters. It surprises me to hear this sense of unfairness and betrayal when governments no longer extend the benefits they had previously extended. Their economies are maturing and the situation evolves. The government’s concern should be to represent the people and to do what is best for its citizens. At times this is to focus on economic development and easing the private sector entry, and at other times this role is to put into place a system that ensures a smoother transition from aid to trade. Just as shareholders expect a return on their investment and risk appetite, citizens expect a return on government policies and GDP growth.

There is no question that there are corrupt governments who want to pocket profit without providing for their country, and there is no question that sometimes government funds may not be used the way the private sector desires. Nevertheless, the role of government is portrayed in an interesting way in cases in our course – it is either a forward-thinking beneficiary giving up land to businesses in the name of development, or investors are facing “numerous issues with the government that impeded progress…[which] prevented the Group from repatriating profits back to [the foreign investor’s home country].” When a company has been investing for the past 20 years in a country in part due to extremely generous benefits it received such as free land and licensing rights, one can understand the government’s motivation in keeping profits in its own country to further the development of Vietnam. This should not come as a surprise to foreign investors. There are of course high levels of political risk if a company is profitable in a developing country. This is tied to the point in class that was made regarding the scalability of such ventures being limited by specific country experience.

While governments are best positioned in theory to handle the increasing need for sustainable growth, this course focuses on the opportunities to “make a buck and do good” through the private sector. However, it is clear from all the cases we have studied that the government needs to be in on the “making a buck and do good” portion. Without tax waivers, land permits and government support, it is unclear how feasible any of these projects would be. Private corporations and entrepreneurs often need to work with governments to shape policy to help businesses, with the government making sure this development is not at the expense of citizens.

Even while we are waiting for government to respond directly to the immense problems facing us in the future, we still need government to take thoughtful steps (even if short of writing a big check) so that we may collectively move forward.

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2 thoughts on “A merging of the public and private rivers of development

  1. Pingback: How can we best talk about people in a finance course? | Sustainable Cities: Urbanization, Infrastructure, and Finance

  2. By John Macomber

    In my view, this post is an example of the positive power of using a class blog for us to share thoughts and analysis after class. This argument has a clear point of view, is well reasoned, and is logical. It’s appropriately anchored in the reading and in the discussion and builds from there. The author was willing to criticize me and the discussants, and she did so on the merits. I will look forward to reading further responses.

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