The Importance of Implementing Good Governance Principles in Public-Private Partnerships in Serbia
The Importance of Implementing Good Governance Principles in Public-Private Partnerships in Serbia
The Importance of Implementing Good Governance Principles in Public-Private Partnerships in Serbia
Introduction
In contemporary society and within most economies, the public sector holds significant sway.
Its expenditure constitutes a noteworthy portion of a nation's gross domestic product (GDP),
while public sector entities serve as substantial employers and wield influence in capital
markets. Through a typically political process, the public sector delineates its desired
outcomes and employs various forms of intervention to achieve them. These interventions
encompass the enactment of legislation or regulations, provision of goods and services,
income redistribution via mechanisms like taxation or social security disbursements, and
ownership of assets or entities, such as state-owned enterprises.
Within the public sector context, good governance signifies the implementation of effective
frameworks to ensure that desired outcomes for stakeholders across political, economic,
social, environmental, administrative, legal, and other domains. Such governance fosters
enhanced decision-making processes, optimal resource utilization, and heightened
accountability regarding resource stewardship. The purpose of this approach is to shift or
distribute risk from the public to the private sector while ensuring the availability of requisite
skills and knowledge for service provision. In contrast, a public-private partnership
amalgamates the strengths of both sectors: the private sector brings forth resources,
managerial expertise, and technological advancements, while the public sector undertakes
regulatory measures and safeguards public interests. This harmonized approach holds
particular significance in the realm of public service delivery in Republic of Serbia, where
policymakers increasingly turn to PPPs to enhance investment in infrastructure services and
elevate service provision standards. By the end of March 2024, there were 284 approved
project proposals of PPPs.
This article seeks to offer insights into good governance concerning PPPs, while the emphasis
is placed on aspects such as affordability, value-for-money propositions, financial dynamics,
and risk allocation. The article culminates with recommendations on how PPPs can leverage
good governance, with specific attention to establishing robust governance frameworks that
empower PPPs and facilitate public sector reform.
The concept of good governance has garnered significant attention and has become a
prominent subject of policy discussions and scholarly investigations across numerous nations.
This concept covers a set of principles that pertain to the effectiveness, transparency,
accountability, participation, responsiveness, fairness, and adherence to the rule of law within
governance systems [1]. The underlying objectives of these principles are to enhance the
quality of public services, mitigate instances of corruption, and foster heightened confidence
among the people in governmental institutions [2]. There is a widespread agreement among
scholars and experts that effective governance has the capacity to exert a significant impact
on the quality of decision-making within the realm of public administration. To assess its
influence accurately and comprehensively, it is important to do research that thoroughly
investigates the correlation between good governance and the efficiency of public-private
partnerships.
Several studies have investigated the relationship between good governance and the quality
of public-private partnerships in various contexts, including both developed and developing
countries [3]. The results of these studies show that good governance has a positive impact on
the efficiency of public-private partnerships in various contexts. Main good governance
principles, such as public participation, transparency, accountability, and fairness, play an
important role in implementation of public-private partnerships, as well as in sustainability.
When government institutions apply these principles well, the resulting decisions tend to be
more rational, effective, and responsive to people's needs [4].
This article is anticipated to yield both theoretical and practical advancements in the realm of
public-private partnerships and good governance. The findings can provide a foundation for
governmental bodies and affiliated organizations to formulate enhanced policies and
strategies aimed at enhancing the efficiency of public-private partnerships in Serbia.
Additionally, these results can also serve to promote the implementation of good governance
concepts across different tiers of government. The findings are anticipated to offer valuable
insights for decision-makers in the public sector. This, in turn, is projected to yield more
substantial advantages for society and contribute to the promotion of sustainable
development.
1. Methodology
This article aims to analyze the impact of good governance on public-private partnerships. In
this article, researchers conducted literature research so that they did not need to go directly
to the field during the data collection process, but instead examined various reference sources
that supported this research. The literature was obtained from online media and databases
from journal portals that are in accordance with the keywords related to this discussion,
namely the impact of good governance on the public-private partnerships. The search for
journals, articles and publications was mostly in the range of articles published between 1999
and 2023. Not all articles, journals and publications that appear in the search results will be
used, but only those related to the impact of good governance principles on the public-private
partnerships.
This research is a type of qualitative research. Data collection techniques include listening
and recording important information to conduct data analysis through data reduction, data
display, and conclusion drawing to obtain a picture of the conclusions regarding the literature
study that will be developed in this study. Data validation uses triangulation of data sources.
2. Good governance
Good governance refers to the methods and principles applied in the management and
implementation of government policies [5]. The concept of good governance emphasizes
efficiency, transparency, participation, accountability, responsiveness, applicable laws and
rules, and equality in the decision-making process and policy implementation [6].
Some of the main elements of good governance include:
Transparency: The concept of transparency entails that governments operate in a
manner that is open, accessible, and provides pertinent information to the public.
Transparency serves to deter corrupt behavior, facilitate public engagement in
decision-making, and enhance the accountability of governmental bodies.
Participation: Good governance fosters the active involvement of citizens in
decision-making processes and governance. Public participation enables the
expression of people's aspirations and interests, ensuring that resulting policies reflect
the needs and expectations of the population.
Accountability: The principle of accountability entails that government officials and
state institutions are held responsible for their actions and decisions. This
encompasses being answerable for the utilization of budgets, the execution of
programs, and the results of implemented policies.
Responsiveness: Good governance necessitates that governments be responsive to the
needs and challenges encountered by society. Responsiveness entails the
government's capacity to address complaints, deliver public services efficiently, and
adapt to environmental changes promptly.
Fairness: The principle of justice underscores the importance of impartial and fair
treatment for all citizens. Good governance strives to prevent discriminatory practices
or the favoring of specific groups, while also ensuring equal access to public
resources and services for everyone.
Law-oriented: This principle dictates that all government activities adhere to relevant
laws and regulations. This ensures legal certainty, prevents the abuse of power, and
fosters a stable and predictable environment.
Good governance holds paramount significance as it bolsters the effectiveness and efficiency
of government operations, curtails levels of corruption, fosters heightened public
engagement, and fortifies the trust and legitimacy of governmental institutions among the
populace. By adhering to the tenets of good governance, governments are anticipated to
formulate policies and programs of superior quality, promote sustainable development, and
enhance the overall quality of life for all citizens.
3. Public-private partnerships
According to the World Bank [7], there is no single, internationally accepted definition of a
PPP and therefore suggests a broad description of a PPP, as a “long-term contract between a
private party and a government agency, for providing a public asset or service, in which the
private party bears significant risk and management responsibility”. This definition covers
PPPs that provide new assets and services, and ones that work with existing assets and
services. It can include PPPs in which a private party is paid entirely by service users, and
ones in which a government agency makes some or all the payments. The definition
encompasses contracts in many sectors and for many services, if there is public interest in the
provision of the service, and that significant risk and management responsibility have been
transferred to a private party.
PPPs aim at financing, designing, implementing, and operating public sector facilities and
services [8]. Their key characteristics include long-term service provision, the transfer of risk
to the private sector, and different forms of long-term contracts drawn up between legal
entities and public authorities. PPPs refer to innovative methods used by the public sector to
contract with the private sector, which contributes its capital and its ability to deliver projects
on time and to budget, while the public sector retains the responsibility to provide these
services to the public in a way that benefits the public and delivers economic development
and improves quality of life. Figure 1 is an illustration of the concept of PPPs, it highlights
risk transfer, and the shift from pure public initiatives to complete privatization as the
opposite to pure public initiatives. PPPs are positioned in the middle, as a contract between
government institutions and private parties.
PPPs are not equal to privatization – the public sector remains accountable for the delivery of
the public service, whereas under privatization, the accountability is transferred to the private
sector (the public sector may retain some regulatory price control). Under PPPs, there is no
transfer of ownership, and the public sector remains accountable. PPPs enable the public
sector to harness the expertise and efficiencies that the private sector can bring to the delivery
of certain facilities and services which are traditionally procured and delivered by the public
sector. A PPP is structured so that the public sector body that wishes to make a capital
investment does not incur any borrowing. From the public sector’s perspective, a PPP is an
off-balance sheet method of financing the delivery of new or refurbished public sector assets.
PPPs present a severe organizational and institutional challenge for the public sector. They
are complex, require different types of skills and new enabling institutions, and lead to
changes in the status of public sector jobs. To work well, they require institutions that
function well, as well as transparent, efficient procedures, and accountable and competent
public and private sectors – thus, good governance.
The concept of governance is not new – it is as old as civilization. It refers to “the process of
decision-making and the process by which decisions are implemented (or not implemented)”
[9]. The term governance should be distinguished from government – governance is what a
government does. This may refer to a geo-political government (nation-state), a corporate
government (business entity), a socio-political government (e.g., tribe or family), or any
number of different kinds of government. Governance is the kinetic exercise of management
power and policy, while a government is the instrument (usually, a collective) that exercises
this management power and policy. The concept of governance also encompasses two main
approaches, one that sees governance as concerned with the rules of conducting public
affairs, and another that regards governance as an activity of managing and controlling public
affairs [10]. The concept of governance has been explored in many academic fields, including
political science, public administration, policymaking, planning, and sociology [11]. Good
governance was seen to be signaled by the presence of a multiparty democracy, rule of law
and a free press that keeps political leaders accountable in view of the risky fusion of the
domains of politics and administration [12].
The concept of governance transcends the conventional boundaries of public administration.
Public administration is concerned with the formal institutions of government, whereas
governance focuses on wider processes through which public policy is affected [13].
Governance refers to the development and implementation of public policy through a broader
range of private and public agencies than those traditionally associated with government.
Government is increasingly characterized by diversity, power interdependence and policy
networks, whereas governance stresses the complexity of policymaking, implementation, and
accountability relationships between a variety of state and societal actors at various levels,
globally and regionally, and at national government level, as well as in local administrations.
In governance theory, the relationships between state and non-state actors have become less
hierarchical and more interactive. Thus, governance denotes a highly fluid institutional and
policy matrix in which the powers and responsibilities of different actors and tiers of
government are in flux [14].
Upon reconsideration, it appears that effective governance encompasses both performance
and conformance. Performance pertains to the extent and way an institution leverages its
governance structures to enhance its overall effectiveness and the delivery of goods and
services. Conformance involves the institution's use of these governance frameworks to
comply with legal, regulatory, and established standards, as well as to fulfill the public's
expectations of integrity, accountability, and transparency. This implies that, daily,
governance is typically about the way in which public servants take decisions and implement
policies and help governments to play a critical role in the process and involve citizens and
other stakeholders [15]. Applying the characteristics of good governance to PPPs, one might
argue that good governance objectives in PPPs refer to a fair and transparent selection
process by which governments develop partnerships, and the assurance that value for money
is obtained. It also encompasses the improvement of essential public services, especially for
socially disadvantaged members of society, and adequate training for those to be involved in
the new partnerships. It supports a commitment to fair incentives for all parties and fair
returns for risk-takers, combined with the achievement of commercial success. It implies
sensible negotiation of disputes to ensure the continuation of services and prevents the
collapse of projects and consequent public waste. Finally, it provides for enhanced security in
the face of possible threats and for a general improvement in the safety of services provided
under PPP arrangements.
From an economic perspective, good governance in PPPs supports an effective procurement
regime that empowers government institutions to buy goods and services of a higher quality
at lower prices. It supports mechanisms that secure well-governed projects that elevate the
support of society for PPPs and give policymakers the confidence they need to provide the
necessary political support for the PPP process. The result of good governance practices is
well-planned projects which are based on the full agreement of all the parties involved, which
follow proper and on-going consultation, and which have less chance of unravelling, thereby
avoiding costly litigation. A public administration that conducts its purchasing in an open
manner contributes to increased confidence among suppliers regarding the reliability of the
administration as a business partner. Finally, good governance and efficient institutions are
strongly linked to increased competitiveness and higher rates of economic growth and
development [16].
Based on the above objectives, a principle-based framework that promotes good governance
in PPPs is essential. The need for a coherent PPP policy in strong enabling institutions, with a
legal framework that emphasizes an approach of fewer, better, simpler is critical. The
framework must provide for a culture of cooperative risk sharing and mutual support, putting
people first, with transparency in the partner section, and aiming at achieving sustainable
development.
The subject of good governance has garnered significant interest within the realm of public
administration. The notion has multiple dimensions, which encompass transparency, public
participation, accountability, and adherence to the rule of law. This narrative aims to examine
the favorable influence of effective governance on the quality of public-private partnerships.
Increased transparency is a significant consequence of effective governance which facilitates
the enhancement of openness and accessibility in all phases of the PPPs for all stakeholders
[17]. The provision of transparent and readily accessible information serves as a deterrent
against corrupt practices and the misuse of authority [18]. Decisions that are characterized by
transparency have the potential to be more effectively scrutinized and evaluated by
stakeholders [19]. Furthermore, the promotion of good governance also serves to foster
increased engagement of the public in the PPPs pertaining to public management. Increased
public participation offers a valuable platform for the expression of a wide range of views
and viewpoints. When individuals actively participate in the different phases of PPPs
(planning, designing, monitoring) the result in developing policies and procedures which are
more inclined to accurately address the genuine requirements and ambitions of the
community. This implies that the judgements made possess enhanced legitimacy and are
more adept at addressing the challenges encountered by the society.
Accountability is a fundamental principle within the realm of good governance, which exerts
a beneficial influence on the quality of PPPs. In the field of public management,
accountability refers to the principle that government leaders and officials bear the
responsibility for their actions and decisions. Government personnel are mandated to fulfil
their responsibilities in alignment with the public interest and efficiently administer the
resources at their disposal, thanks to the implementation of robust accountability procedures
[20]. If the judgements made are deemed incorrect or if corruption is detected, officials can
face prosecution and sanctions in accordance with the relevant legislation [21].
In addition, good governance places significant emphasis on the principle of upholding the
rule of law. This implies that it is imperative for the law to be maintained and administered in
a just and unbiased manner. Stakeholders possess a sense of assurance that decisions are
grounded in legal principles and remain impervious to the sway of personal or collective
interests. Consequently, such PPPs are more inclined to yield equitable and impartial
consequences for the entirety of society. Furthermore, the promotion of good governance also
serves to foster professionalism within the realm of public administration [22]. It is
imperative that government leaders and officials possess a high level of skill, expertise, and
integrity in the execution of their responsibilities. Effective and efficient policies can be
achieved through decisions that are grounded on reliable assessments and data and are
comprehensively understood by leaders. Furthermore, the promotion of good governance also
fosters the utilization of technology and innovation within the realm of public administration.
In the current era characterized by rapid advancements in information technology, the
adoption and integration of technology can enhance administrative efficiency and bolster
public engagement. By effectively implementing technology, the retrieval of data can be
expedited and enhanced in terms of accuracy, thereby leading to the enhancement of public
services. The adoption of good governance in public management has a substantial and
favorable influence on the quality of public-private partnerships [23]. The incorporation of
transparency, public engagement, accountability, rule of law, professionalism, and utilization
of technology constitutes fundamental components that contribute to enhanced decision-
making processes and the formulation of more efficient policies. Furthermore, it is worth
noting that good governance plays a pivotal role in enhancing public confidence in
governmental institutions, fostering an environment that is conducive to long-term and
sustainable growth, and ultimately enhancing the overall well-being of society. Hence, it may
be argued that good governance is not merely an abstract notion, but rather a fundamental
principle that should underpin the implementation of public administration, with a focus on
the well-being and interests of the community.
The integration of sound governance practices within the realm of public administration not
only yields the effects, but also serves to enhance the operational efficiency and overall
efficacy of governmental entities. Transparent, participatory, and accountable public-private
partnerships have been shown to effectively mitigate superfluous bureaucracy and enhance
government responsiveness to the requirements of the populace. Enhancements in
bureaucratic efficiency and decision-making procedures have the potential to yield resource
and budgetary economies, so enabling governments to enhance their efficacy in providing
public services and executing development initiatives.
Furthermore, it is worth noting that effective governance also exerts a favorable influence on
the process of economic development and progress. The presence of openness and
accountability in governmental operations instills a heightened sense of confidence among
investors and entrepreneurs, hence fostering an environment conducive to increased
investment in each country. This phenomenon fosters a favorable investment environment,
hence potentially leading to enhanced economic expansion, job creation, and alleviation of
poverty. Public management decisions that are grounded in the principles of good governance
have the potential to facilitate the formation of advantageous public-private partnerships,
hence enhancing infrastructure development and the provision of public services. In addition,
it is worth noting that good governance holds significant significance in the advancement of
sustainable development. In the field of public management, decisions that are oriented
towards good governance typically priorities the assessment of long-term implications and
the sustainability of policies and initiatives. These decisions aim to mitigate adverse effects
on the environment and society while striving to enhance the well-being of present and future
generations. Governments may effectively tackle pressing issues such as climate change,
environmental degradation, and the economic crisis by adhering to the principles of good
governance. One additional consequence of effective government is the establishment of
societal harmony and stability. Communities have a greater sense of empowerment and
respect when decision-making processes regarding the PPPs are characterized by fairness and
inclusivity, and when government leaders are held accountable for their actions. This has the
potential to mitigate conflict and alleviate social tension, as individuals perceive a sense of
value and acknowledgment for their respective interests. Moreover, the enhancement of trust
and legitimacy within a government can be facilitated by the transparent and accountable
exercise of governmental authority, so fostering political stability.
Nevertheless, the successful implementation of good governance in the realm of public
management often presents challenges. The successful implementation of these principles
necessitates a steadfast dedication and diligent effort on the part of government leaders and
officials, alongside the endorsement and backing of the broader population. Furthermore,
impediments like as corruption, unfairness, and power asymmetry can pose significant
barriers to the attainment of genuine good governance.
To attain a substantial and favorable outcome in the realm of good governance, it is
imperative to foster collaboration and engagement among diverse stakeholders,
encompassing governmental entities, private enterprises, civil society organizations, and the
media. The role of civil society in monitoring and overseeing government operations is
significant, as it ensures accountability and transparency. Similarly, the media plays a crucial
role in disseminating unbiased and evaluative information to the public. Over the course of
time, there will be a gradual rise in the recognition of the significance of effective governance
and its positive impacts on society. Consequently, an increasing number of nations will strive
to adopt such practices consistently and durably.
The deep and favorable impact of good governance on the quality of public-private
partnerships is evident. By incorporating principles such as transparency, public engagement,
accountability, the rule of law, professionalism, and the use of technology, decision-making
procedures regarding the PPPs have the potential to enhance their fairness, productivity, and
efficacy. The presence of good governance is known to have a positive impact on various
aspects, including economic growth, sustainable development, social stability, and the
enhancement of public faith in governmental institutions. Hence, the pursuit of good
governance in the realm of public management assumes paramount significance as it serves
as a crucial catalyst for the advancement and well-being of a nation, ultimately enhancing the
overall standard of living for its populace.
Conclusion
From the narrative described earlier, it can be concluded that good governance has a
significant positive impact on the quality of public-private partnerships. The implementation
of good governance principles brings various benefits, including increased transparency,
strengthened public participation, increased bureaucratic efficiency, improved quality of
public services, encouraging economic growth, and creating social peace and stability. Good
governance also contributes to sustainable development and increases public trust in
government.
Here are some suggestions to further strengthen the implementation of good governance in
public-private partnerships:
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