Thursday, April 10, 2008

Thinking Big: Scale, Ownership & Results

Shyam Ponappa / October 06, 2005

We'd do well to borrow from the Dutch model of public-private partnership

If we look at infrastructure systems, we find there are different ways to achieve good results. Today’s mantra is that privatisation makes for good outcomes. Do we really think privatisation can cure all our ills? Or is it just a management and/or financial fad? Let us consider some examples to see the effects of scale and ownership associated with good results.

Their experience suggests that the urge to privatise per se may be misplaced. Their focus is on integrated aims and objectives, with organisation and systems to keep people on track and deliver results, unfettered by ideologies such as private or public ownership, or the curse of fragmented efforts. Holding back in scale is like regressing to the licence-permit raj.

Consider two very different examples, China and the Netherlands. The common features we find are that:

1. Scale is essential for results.

2. Ownership is less relevant than a combination of aims, organisation, and result-oriented execution.

3. Integrated, well-managed systems that reflect reality have good outcomes. Economics, technology and management (organisation, finance, project management) combine to drive results. There is no wishful thinking such as giving away free electricity, which misuses resources and undercuts good economics.

Scale & Effectiveness

For a variety of reasons, we do even large projects in a fragmented way. The national roads project/s, for instance, is awarded in tiny pieces. When the building of the Bangalore-Mysore Highway was announced in the 1990s, the head of a major US engineering-and-construction company in India asked to see the area, as their strengths included highway construction.

His conclusion was that the projects awarded would have to be far larger to justify his company’s participation. The reason: it would cost too much to bring in the heavy equipment required, and then move the machines around for small contracts, idling them between jobs.

China: For scale, ownership, and effectiveness, look at divergent ways the Chinese and the Dutch go about it. China, with its top-down approach and public ownership, has manifest proof of performance in infrastructure. Enough said.

The Dutch experience: What of the Netherlands? Here is a small nation (pop: 16 million), with monumental projects—their dykes and surge barriers, such as the 32-km Afsluitdijk in the north (see and the Delta Project in the south (, are truly noteworthy; they also have excellent infrastructure.

Schiphol airport got 42 million passengers in 2004; Rotterdam port handles over 50 per cent of EU imports. For years, Schiphol has been considered among the best airports, with highly rated facilities. While it does not quite exude the Asian luxe flair of Singapore’s Changi, nor the sleek elegance of Copenhagen’s Kastrup, it is highly functional in a forthright way.

This, combined with Dutch enterprise in running the airline hub for KLM, explains those 42 million passengers who went through Schiphol last year, compared with 30 million for Changi, 37 million for Hong Kong, 38 million for Bangkok, or 37 million for New York’s JFK.

Conclusion I—Ownership is irrelevant

The Schiphol group owns a number of airports in the country and abroad. It is owned by the Dutch government (75.8 per cent), the City of Amsterdam (21.8 per cent), and the City of Rotterdam (2.4 per cent). State ownership has been an oft-debated-but-not-yet-resolved feature since the 1990s.

Conclusion II—Grassroots collaboration around water

The Netherlands is impressive for its sheer collaborative organisation, quite different from a top-down approach. This began almost a thousand years ago, with their water management. Their district water boards are like local councils. Dating from the 12th century, they are among the world’s oldest-functioning democratic entities.

The Dutch treat water management as a complex issue, recognising that many aspects of life have an inseparable water component. Therefore, public and private collaboration enables people to live with water, rather than to fight it. By building a system with zero tolerance, issues are resolved within the system without the risk of personality (or “caste”, however you describe it, or whatever other label you substitute for it) conflicts.

Conclusion III—Unitary organisation

A single ministry of transport, public works, and water management covers shipping, rail, civil aviation, as well as roads and all aspects of water usage: drinking water, irrigation, inland waterways and ports. Another surprising fact: there were 2,700 water boards in 1940; these have been streamlined down to 37.

Their pragmatism helps. Accepting that people will look for free rides on collective goods, this bastion of individual freedom uses systems with tough penalties to ensure a public-private partnership to sustain collective goods, and resolve issues in the public interest.

Works Councils—‘The Reformation’ for Employees

Their unique concept of “works councils” is the collaborative approach extended to employee organisations. The legislation from the 1970s is a prime example of their ability to build institutions to suit evolving needs.

The works council is a body open to all employees in a company. It must be consulted by the board before significant decisions, and it can go to court. Resolution and convergence are aided by the practice of open debate and consensus before decision making, known as the Polder Model (a polder being a piece of reclaimed land surrounded by water and protected by dykes, and all residents being stakeholders).

The Dutch themselves sometimes deride their slow processes, but from a management perspective, this is an organiser’s heaven. Their institutions help people agree on aims, commit themselves to agreements, and maintain and adapt the rules over time and to changing circumstances.

Summing up—Organise for Results

The fact is that in both China (despite its power shortages) and the Netherlands, different forms of effective organisation with public ownership or public-private partnerships operate on a scale that produces the bijli-sadak-pani paradise we seek.

We cannot transplant Polder Politics to India any more than we can transplant China’s monolithic pursuit of infrastructure. But we can learn from them, just as others have applied elements of our successes (e.g. handicrafts organisations in Bangladesh and Thailand, or Air-India’s early training to Singapore Airlines).

Of particular relevance to us is scale independent of ownership, with systematic organisation, including public-private partnerships. This should help us build systems that work and endure, bringing order to our higgledy-piggledy progression.

It comes down to the quality of results, i.e. like Deng Xiaoping’s cat, it must catch mice.

Shyam Ponappa

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