PHM-Exch> PPPs’ Private Gain at Public Expense
Claudio Schuftan
cschuftan at phmovement.org
Wed Jan 24 01:22:12 PST 2024
From: Jomo from Challenging Development+ <jomodevplus at substack.com>
At high cost and with dubious efficiency, public-private partnerships
(PPPs) have increased private profits at the public expense. PPPs have
proved costly in financing public projects.
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PPPs’ Private Gain at Public Expense
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high cost and with dubious efficiency, public-private partnerships (PPPs)
have increased private profits at the public expense. PPPs have proved
costly in financing public projects.
Jomo
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Jan 24
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*PPPs’ Private Gain at Public Expense*
By Jomo Kwame Sundaram
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KUALA LUMPUR, Malaysia, Jan 24 2024 (IPS) - At high cost and with dubious
efficiency, public-private partnerships (PPPs) have increased private
profits at the public expense. PPPs have proved costly in financing public
projects.
*PPPs’ high costs*
Eurodad has shown
<https://substack.com/redirect/92b68fce-dd83-4e1a-ac4c-e91c3723890f?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
high
PPP costs mainly due to private partners’ high-profit expectations. Complex
PPP contracts typically involve high transaction costs. Worse, contracts
are often renegotiated to favour the private partners.
They also take advantage of lower government borrowing costs compared to
private borrowers. Most PPP debt costs are ultimately borne by host
governments but are often obscured by the secrecy of contracts.
PPPs are often not on official government books or accountable to
legislatures. PPPs thus often avoid transparency and accountability,
invoking the excuse of private commercial confidentiality.
Such ‘off-budget’ government-guaranteed liabilities often make a mockery of
supposed government debt limits. Investors generally expect much higher
returns from developing countries than developed economies, supposedly due
to the greater risks involved.
These ‘fiscal illusions’ obscure transparency and undermine government
accountability, generating huge, but little-known public liabilities. High
and rising interest rates threaten new government debt crises as economic
stagnation spreads.
*High fiscal risks*
The high costs and fiscal risks
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of
PPPs drain government resources, resulting in public spending and fiscal
resource cuts. With growing demands for fiscal austerity, from the IMF and
markets, PPPs’ high costs threaten government spending, especially for
social services.
A 2018 IMF Staff Note warned PPPs reduce fiscal policy space: “while
spending on traditional public investments can be scaled back if needed,
spending on PPPs cannot. PPPs thus make it harder for governments to absorb
fiscal shocks, in much the same way that government debt does.”
But such warnings have not deterred the Fund and World Bank from promoting
PPPs. Worse, austerity measures rarely significantly increase budgetary
resources, forcing governments to rely even more on PPP financing.
*PPPs the problem, not solution*
Growing reliance on PPP financing to address climate change is new, but no
less problematic. This purported PPP solution has worsened financial
vulnerabilities in developing countries, also undermining sustainable
development and climate justice.
The 27th UN climate Conference of Parties’ outcome statement
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urged
multilateral development banks to “define a new vision and commensurate
operational model, channels and instruments that are fit for the purpose of
adequately addressing the global climate emergency”.
But historical experience and recent trends show PPPs cannot be the
solution. Advocates claim PPPs deliver better “value for money”, but
evidence of efficiency gains is inconclusive at best.
An African Forum and Network on Debt and Development (Afrodad) study
<https://substack.com/redirect/97cbdbdf-9d65-48d6-8f69-5de298135c85?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
found
Ghana’s Sankofa gas project failing. Much touted efficiency gains were all
very context-specific, relying on project design, scale, regulation and
governance.
Efficiency gains were typically very costly, mainly due to insufficient
private investments and other such cost savings. Profits were also
increased by cutting jobs and hiring cheaper, insufficiently trained and
qualified staff.
*Human costs*
The public should be wary and sceptical of growing reliance on PPPs to
provide infrastructure and public services. Unsurprisingly, such PPPs
prioritise commercial profitability, not the public interest.
Corporations are accountable to shareholders, not citizens. Worse,
regulating and monitoring private partners are difficult for fiscally
constrained governments with modest capacities, vulnerable to political and
corporate capture.
Unsurprisingly, PPPs have typically imposed higher costs on citizens.
Public services provided by PPPs usually charge user fees, or payments for
services. This means access to services and infrastructure depends on
capacity to pay.
Thus, PPPs maximise private profits, not the public interest, undermining
public welfare and the UN Sustainable Development Goals (SDGs), worsening
inequalities. PPPs’ high fiscal costs worsen fiscal austerity measures,
reducing other public services, often needed by the most vulnerable.
Inevitably, PPPs prioritise more profitable services and those
easier-to-serve. Public healthcare is especially vulnerable as profit and
insurance imperatives compromise service delivery. There is no evidence
PPPs can better address the health challenges most developing countries
face.
Health PPPs worsen public access to essential services, subverting progress
towards ‘health for all’ and ‘universal health care’. Private provisioning,
including PPPs, has never ensured equitable access to decent healthcare for
everyone. Pretending or insisting otherwise is simply wishful thinking.
During the COVID-19 pandemic, countries relying more on private healthcare
provision generally fared worse. Those without means cannot afford private
charges, especially by providers who face few constraints to raising their
charges.
*U-Turn?*
After a critical report by its Independent Evaluation Group, the World Bank
– long a leading promoter of private financing of education – had to change
its earlier approach to financing public education.
The International Finance Corporation, the Bank’s private sector lending
arm, has also worsened educational access, quality and equity. It had to
stop investing in pre-tertiary (kindergarten to grade 12) private schools
from mid-2022.
Despite overwhelming evidence that the Bank should stop abusing public
funds to promote PPPs, the new Bank leadership has still not abandoned this
financing strategy thus far. Instead, the SDGs and the urgent need for more
effective climate action have been invoked to give it a new lease of life.
*Related IPS Articles*
· World Bank Enables Private Capture of Profits, Public
Resources
<https://substack.com/redirect/7ff6694c-c20e-43dd-904d-18a9bdcbce8a?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
· PPPs Fiscal Hoax Is a Blank Financial Silver Bullet
<https://substack.com/redirect/7a894ff0-f393-494d-92bc-7903aa5ef071?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
· Don’t Count on PPP Solutions
<https://substack.com/redirect/ddf96a92-1833-4ae8-b667-c4070576de46?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
· Public-Private Partnerships Fad Fails
<https://substack.com/redirect/27d84c26-6cde-40fc-a40c-3a48d1929567?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
· Hospital PPPs Undermine Healthcare
<https://substack.com/redirect/23541441-79de-438b-8012-5705f8e9cf77?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
· Blending Finance Not SDG Financing Silver Bullet
<https://substack.com/redirect/9a7f0785-9d13-47eb-8f4d-f27fac13d5bb?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
· PPPs Likely to Undermine Public Health Commitments
<https://substack.com/redirect/16cb40f2-dba3-4de4-b63b-ec535759f7c0?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
· Strengthening Governments to Cope with PPPs
<https://substack.com/redirect/1d56fa3a-9468-4323-8639-39299a14e08f?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
· Beware Public Private Partnerships
<https://substack.com/redirect/936b4617-3e7f-4a3b-a023-f2f2134c2032?j=eyJ1IjoiMWEwZ2lqIn0.PS59_znKHzlOwVUkakEgDIZc_vNuaWsHL-9LkCsoC2Q>
https://www.ipsnews.net/2024/01/ppps-private-gain-public-expense/
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T
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