Public Private Partnership in Colombia

Colombia has come a long way since 2000 when some economists and political analysts were saying that it was becoming a failed state. Ten years later, investor confidence is high, unemployment rates have dropped to a significant level and the economy has grown at an annual rate of 4.6 percent from 2005 to 2009 despite the 2008 global recession. This makes Colombia stand out compared to many other Latin American countries. So what’s the recipe?

According to Luis Andrade and Andres Cadena (in McKinsey Quarterly) the impressive performance of Colombia  is partly contributed by the “Productive Transformation Program”, a Public Private Partnership program that was launched in 2007.

A cornerstone of the program is closer collaboration between the government and the business community. Rather than choose winners, as some developing countries have, Colombia invited all sectors to participate in the program. Given the government’s limited resources, it organized a contest to decide which ones to work with first. The government based its selection on not only the potential of a sector but also the willingness of its leaders to commit money and people to the effort

It also set preconditions: subsidies or protection would not be granted. Any improvement in competitiveness would have to occur under market conditions. In exchange, the government agreed to work with private businesses to educate and train the workforce in pertinent skills, to improve the regulatory environment, to help promote industries in foreign markets, and to develop the required infrastructure.

There seems to be an important new working dynamic based on a shared and clear agenda between the public and the private sectors. To illustrate, here is an example of some steps already taken in the business-process-outsourcing sector:

• Developing human resource. The government has set up a national registry for people with certified proficiency in the English language.
• Taxation and regulation. The government gave them the same conditions that goods-exporting industries enjoyed by eliminating the value-added tax.
• Industry promotion. Executives in this sector have established a local chapter of the International Association of Outsourcing Professionals which will help managers stay connected to their peers abroad and to become up to date on global trends.
• Infrastructure. Local governments are developing two free-trade zones equipped with state-of-the-art infrastructure and services available to companies that settle there.

To date, the program has encouraging results, and although it’s too early to claim success, it may well be that Colombia is underway to establish a good practice in this area of Public Private Partnerships.

Read the full article on McKinsey Quarterly

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