STATEMENT
SOUNDING THE ALARM ON
DANGEROUS PUBLIC-PRIVATE PARTNERSHIPS (PPPs)
We, [number of signatory
organisations] national, regional and international civil society
organisations, trade unions and citizens’ organisations from X [add in total
number] countries, are increasingly alarmed by the growing use of PPPs around
the world.
What is a ‘Public Private Partnership?’
PPPs are
essentially long-term contracts, underwritten by government guarantees, under
which the private sector builds (and sometimes runs) major infrastructure
projects or services traditionally provided by the state, such as hospitals,
schools, roads, railways, water, sanitation and energy.
PPPs are
promoted by many G20 governments, and some public development banks – such as
the World Bank – as the solution to the shortfall in financing needed to
achieve the Sustainable Development Goals. Since the late 1990s, some
countries including the United Kingdom, Portugal and Hungary have embraced
PPPs ranging from healthcare and education to transport – with troubling
consequences. They have been less common in the global South - but that is
changing rapidly, with many countries in Latin America, Asia, and Africa now
passing enabling legislation and initiating PPP projects.
The
experience of PPPs has been overwhelmingly negative and very few PPPs have
delivered results in the public interest. Common problems include:
THE THREAT TO PUBLIC
FINANCES
PPPs are often
expensive and high risk
PPPs are, in
most cases, the most expensive method of financing. They cost governments -
and hence citizens - significantly more in the long run than if the projects
had been directly financed through government borrowing. Yet, they are
attractive because they can be hidden ‘off balance sheet’ so they don't show
up in the budget and government debt figures, giving the illusion of ‘free
money’. Also, despite claims to the contrary, PPPs are often riskier for
governments than for the private companies involved, as the government may be
required to step in and assume the costs if things go wrong. For example:
·
A PPP hospital in Lesotho costs three times
more than the public hospital it replaced – US$67 million per year – eating
up more than half the public health budget.
·
The St Bartholomew’s Hospitals PPP in the UK
involved initial investment by the private sector of £1.149 billion, but has
left the public sector having to pay six times more – £7.194 billion –
between 2007 and 2048. These very high costs have necessitated cuts in health
services and quality of care provided by the local health authorities.
THE THREAT TO EQUALITY
PPPs generally fail to
address the gender gap
or the
increasing divide between rich and poor
PPPs risk
fostering inequality by profiting those who are already wealthy – i.e. asset
holders who invest in and profit from PPP projects – whilst simultaneously
extracting wealth from those who are already poor and vulnerable, including
women. The more governments pay to private firms, the less they can spend on
essential and gender responsive social services, such as universal social
protection, which are vital to realise women’s rights. Furthermore, PPPs
often come with new or increased fees for users of services. For example:
·
The PPP for tertiary care rolled out in Karnataka,
southwest India, suffered from poor governance, accountability and grievance
redressal mechanisms, with rapidly declining access to services for patients
below the poverty line.
THE THREAT TO DEMOCRACY
PPPs increase risks of
corruption and reduce the capacity of governments to regulate in the public
interest
PPP
contracts are extremely complex. Negotiations are covered by commercial confidentiality,
making it hard for civil society and parliamentarians to scrutinise them.
This lack of transparency significantly increases the risk of corruption and
undermines democratic accountability. For example:
·
In
Australia, an Independent Commission against Corruption
found that politicians unlawfully influenced a decision on a water PPP so
that AUS$60m of state money was siphoned off to a minister, his family, and
associates;
·
The Brazilian construction company Odebrecht paid
bribes to government officials in a dozen Latin American countries. The cost
of a PPP road linking Brazil and Peru rose from US$800m to US$2.3bn through
corruptly secured renegotiation processes.
In addition,
PPP contracts often undermine the right and obligation of the state to
regulate in the public interest. PPPs can limit the capacity of governments
to enact new policies – for example strengthened environmental or social
regulations – that might affect particular projects. In addition, PPPs further
threaten national democracy because PPP contracts tend to favour opaque and
unaccountable international adjudication rather than local or national
courts, without considering the drawbacks of these investor-state dispute
settlement (ISDS) systems. Under World Bank-proposed PPP contracts, the state
can even be liable for costs from strikes by workers.
In Manila,
after private water operator Manila Water Company (MWC) raised water rates by
845 percent, the public regulator rejected yet another rate hike. The MWC
took the public regulator to arbitration at the International Chamber of
Commerce. The arbitration panel rejected MWC's rate hike and the MWC is now seeking US$1.79 billion in compensation
from the government for projected revenue losses. Despite this, the World
Bank has promoted the project as a success.
THE THREAT TO FUNDAMENTAL
RIGHTS
PPPs can result in the
abuse of human,
social and
environmental rights
PPPs are now
a popular way to finance ‘mega-infrastructure projects’, but dams, highways,
large-scale plantations, pipelines and carbon-intensive energy infrastructure
can wreck habitats, displace communities and destroy natural resources such
as lakes and rivers. PPPs have also led to forced displacement, repression
and other abuses of protestors, local communities and Indigenous Peoples.
For
example: the Bujagali Dam – a US$860m PPP project in
Uganda jointly financed by the African Development Bank, the European
Investment Bank and the World Bank – has damaged Lake Victoria and the
livelihoods of local people.
There are
also growing numbers of dirty energy PPPs, involving oil, gas, coal and waste
to energy incineration, all of which contribute to climate change. And social
and environmental legislation is increasingly being weakened in order to
create ‘competitive’ business environment for PPPs.
What are we calling for?
We urge the
World Bank, the International Monetary Fund and other public development
banks, together with the governments of wealthy countries, to:
·
Halt the
aggressive promotion and incentivising of PPPs for social and economic
infrastructure financing, and publicly recognise the financial and other
significant risks that PPP entail.
·
Support
countries in finding the best financing method for public services in
infrastructure, which are responsible, transparent, environmentally and
fiscally sustainable, and in line with their human rights obligations.
·
Prioritise
domestic resources to provide efficient and accountable public services,
whilst augmenting them with long-term concessional and non-concessional
finance.
·
Ensure that
high transparency standards apply, particularly with regard to accounting of
public funds, and disclosure of contracts and performance reports of social
and economic infrastructure projects.
Finally, we
urge all those concerned with justice, equality, sustainability and human
rights to resist the encroachment of PPPs and to push instead for
high-quality, publicly-funded, democratically-controlled, accountable public
services. The well-being of our communities and societies depends on it.
Initial
signatories:
·
European
Network on Debt and Development (Eurodad)
·
Public
Service International
·
The Bretton
Woods Project
·
Jubilee Debt
Campaign
·
Society for
International Development
·
Latin
American Network on Debt, Development and Rights (Latindadd)
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