Over the last few decades, governments have transferred many of their activities to the private sector, through either the complete privatization of public enterprises, public-private partnerships (PPPs), or contractual arrangements with private service providers. One of the consequences of privatization or contracting out is that it may eliminate cross-subsidies, thereby improving economic efficiency. The Ministry of Education is currently considering public-private partnership as a means of improving educational infrastructure in the rural areas. The Ministry intends to use Public-Private Partnership to construct and manage modern libraries in rural areas to increase access to quality reading materials in a serene environment. The project would be fully financed by the private sector and will be built on lands secured by government from the chiefs of the communities. The private sector requires government guarantee to borrow externally to execute the project. Currently, public library services are free, however the new project when executed through Public-Private Partnership would be on "user-pay" basis. The average fees payable per user is estimated at KES 20 per week and it will be subject to an upward review from time to time. In order to stimulate private sector interest in the project, the Ministry intend to immune the private sector against risks associated with the project. Meanwhile, the Ministry would insist that local materials and skills are employed in the construction and management of the library project. The project is also environmentally friendly as there will be no or little destruction of the forest vegetation. The project when completed will be of great benefit to the country as a whole.

Required:

a)Based on FOUR guiding principles of Public-Private Partnership under the national Public-Private Partnership policy, explain the feasibility or otherwise of the proposed library project by the Ministry of Education. (6 marks)

b)Explain TWO sources of risks associated with the library project that should be allocated between the public sector and the private sector in the Public-Private Partnership arrangement.(4 marks)

c)Compare and contrast PPP arrangements referred to as leases from those referred to as concessions, based on the following characteristics:(10 Marks)

(i)Ownership

(ii)Involvement of operator

(iii) Duration of operator property rights

(iv) Level of delegation