Recalibrating PPP Projects in Developed Economies due to Demographic Changes

Different SDG Needs

In January at the annual Istanbul PPP Week, hosted by the Istanbul PPP COE, there was considerable discussion on how PPPs should be used, not only a procurement method, but also as a tool for countries to achieve their sustainable development goals (SDGs).  There was also a frank recognition that every country has its unique sustainable development goals and that sustainability means different things for different countries. The differences between the SDG needs of emerged versus emerging economies is increasingly becoming a concern when it comes to evolving approaches for implementing PPPs. The approach in developed economies that are experiencing negative population demographic growth (i.e., China and Italy for example) needs to be recalibrated as population decline is going to have serious implications for emerged economies future economic growth projections, but also on downsizing of development infrastructure metrics due to decreasing demand.  Economic health should not be solely determined by the expansion of economic activity, but also by healthy economic activity that adapts to country contextual determinants. 

The emerging downward demographic trend in developed  countries does not mean that the need for infrastructure PPPs will decline in these countries.  What is means is that infrastructure planning will have to accommodate shrinkage and follow a new sustainable paradigm that focuses on delivering projects that meet the needs of aging communities and shrinking populations.  This is where private sector innovation will play an important role in the recalibration of growth factors that keep these communities dynamic and relevant, even if their overall contribution to the global economy declines.  Big is not always better.  Small can be even better if it implements future proofing best practices that result in infrastructure that can be operationally maintained for as long as it is needed. 

So, if less new infrastructure is to be built, how can the PPP market in developed economies survive?

I believe that this can be achieved by investing in “smart technology efforts” and mobilizing innovative “impact investment” in projects that are designed to be regenerative in nature.  Why should we build projects with limited lifetimes, when we have the technology to design and build infrastructure projects that can have almost “infinite” lifetimes as long as they are needed. The Romans did it  - think of the Pantheon in Rome completed in AD 125; as did the Byzantines  - the Hagia Sophia - 360 AD. These projects still stand today in all their splendor and are still used daily.  This historic precedent could be replicated in new generation PPPs that limit the need to incessantly build “new” infrastructure in countries that are going to face a population decline. Additionally, we should find ways to build infrastructure that could be repurposed should its original use become obsolete. 

This is where ground-breaking PPPs could harness the innovations of the private sector to “future proof” and repurpose developed economy’s critical infrastructure against the negative forces of demographic decline.

The following traits should drive the recalibration of PPP initiatives in developed economies:

• Better fit for purpose - where infrastructure project deliverables are configured to meeting changing objectives or service levels through responsive and flexible  suitable design specifications, implementation, control, and maintenance.
• Dynamic Right-Sizing - where projects are continuously restructured (intentionally) to meet new objectives, uses, and increase efficiencies. This should not be confused with downsizing which is often a kneejerk reaction to economic adversity

Introducing better “fit for purpose” and “dynamic right-sizing” considerations as a response to demographic change will require considerable changes in the way we determine “value for money” in PPP projects as part of a goal setting exercise for delivering sustainable development.  

Visionary Sustainable Best Practices

The following visionary best practices should be considered:

• Performing comprehensive evaluations initiatives for changing development objectives
• Involving stakeholders (both public and private sector) in evaluations so that societal needs are met
• Pinpointing challenge gaps and learn what resources are needed to move forward sustainably
• Identifying critical empowered and accountable roles for the architects and implementers of sustainable strategies
• Determining objectively clearly operational requirements of the new approach
• Creating project management practices that are adaptable and flexible to ongoing and unforeseen challenges
• Adopting open-loop and circular economic models that allow reusing, repairing, refurbishing and recycling of the building blocks of infrastructure as long and as economically feasible as possible
• Tackling domestic and global challenges head-on that increase the sustainability of declining consumption and improve resource efficiency
• Building more autonomous projects that are in tune with available environmental resources and not held hostage by politics
• Designing new dynamic and responsive processes and solutions for the optimization of resources that lead to regenerative projects
• Preventing disingenuous greenwashing of projects
• Requiring the adoption of ESG principles in the design of projects

Time to act is now

Many will say that recalibrating best practices will be costly and cannot be realized.  I disagree.  Think how many time the Pantheon and Hagia Sophia have covered their initial construction costs in the last 2,000 years. Innovators should be listened to. It is time to act now.  Additionally, adopting better practices in developed economies will release resources for investment in emerging economy's PPPs which would be beneficial for the global economy as a whole.