History RePPPeated II -
Why Public-Private Partnerships are not the solution
This is the second in a series of reports providing an in-depth analysis of various kinds of PPP projects through seven case studies across different sectors, such as education, health, transport and water, and in countries like India, Liberia, Mexico, Nepal, Peru, Scotland and Spain. It also analyses emerging trends, particularly in light of the Covid-19 pandemic and the multiple crises facing the world.
Since the publication of our first report in the History RePPPeated series, the context for the continued promotion of PPPs has become even more complex and uncertain. In early 2020, the arrival of the Covid-19 pandemic highlighted how market-based models cannot be relied upon to deliver on human rights such as health, education and water provision, and the fight against inequalities. In 2022, the upsurge in the cost of living, the energy crisis and the climate crisis have further highlighted the failures of the current economic model and the urgent need to build a different one.
However, calls for an increasing role for the private sector in the financing of infrastructure and public services, and for PPPs in particular, continue to grow.
Currently, PPPs are being promoted through a vast array of tools and by a wide range of institutions, including bilateral donor agencies, United Nations agencies and multilateral development banks (MDBs). The World Bank Group continues to be at the forefront of the promotion of PPPs, and of the use of private finance in development more generally.
The rationale is that PPPs may help overcome challenges in the financing, implementation and delivery of infrastructure and public services, based on the assumption that the private sector brings additional finance, and that private companies are inherently more efficient than the public sector in delivering high-quality public services. This overlooks evidence that points to the contrary and the fact that decades of structural adjustment programmes and austerity policies have left public services underfunded.
About this report
In the seven case studies in this report, we find that PPPs have failed on many different levels, with serious negative impacts on the citizens of countries from Spain to Nepal. These impacts have risked compromising the fulfilment of fundamental rights, and undermining the fight against inequalities and climate change.
At a very general level, our findings illustrate some of the most common problems PPPs are associated with. They illustrate the complexity of the PPP phenomenon, as part of the increasing financialisation of infrastructure and public service provision. This evidence raises serious red flags about the capacity of PPPs to deliver results in the public interest and calls for active civil society engagement in demanding a change of course.
A call to action
This joint CSO report raises a call to action to all concerned with justice, equality and sustainability. In the wake of multiple and interconnected crises, the promotion of PPPs is a false solution that needs to be challenged with a strong call for public services.
The following policy recommendations align with civil society and trade union demands aimed at national governments and development finance institutions. They seek to influence discussions on the financing of infrastructure and public services at the national, regional and global levels.
• Halt the aggressive promotion and incentivising of PPPs. We call on UN Member States and the shareholders of the World Bank, the IMF, regional development banks and all development finance institutions (DFIs) to ensure that these institutions halt the aggressive promotion and incentivising of PPPs, with a particular emphasis on PPPs in social services – the right to health, education and water and sanitation cannot be subject to market practices, nor to people’s capacity to pay.
• Public recognition of the fiscal and other significant risks that PPPs entail is essential and long overdue. We invite all United Nations Member States to recognise the poor developmental outcomes of PPPs, and we call on them to refrain from engaging in these financing arrangements. We also invite governments of developed countries – which are often overrepresented in the aforementioned international economic institutions – to ensure that these institutions effectively support the ownership of democratically-driven national plans in a way that is conducive to sustainable development. This means supporting countries to find the best financing method to deliver infrastructure and public services that are responsible, transparent, gender-sensitive, environmentally and fiscally sustainable and in line with countries’ human rights obligations and climate-related commitments.
• Informed public consultations and broad civil society participation, including by local communities, trade unions and other stakeholders should always be pursued before any PPP in infrastructure and public service provision is agreed. This includes upholding the right to free, prior and informed consent, and ensuring the right to redress for any affected communities.
• Apply rigorous government regulation of private actors and high transparency standards, especially in relation to accounting for public funds, the contract value of a PPP and its long-term fiscal implications for national accounts and project impacts. The public interest must be placed ahead of commercial interests. Contracts and performance reports of social and economic infrastructure projects should be proactively disclosed, and DFIs should not provide support to any projects unless transparency is guaranteed.
It is vital to resist the increasing use of PPPs as a preferred financing tool to deliver infrastructure and public services. Instead, we call for the promotion of high-quality, publicly funded, democratically-controlled, gender-sensitive and accountable public services, based on the fulfillment of human rights and the protection of the environment. The future of our societies depends on it.