Private Gains, Public Costs: Public-Private Partnership (PPP) as the New Face of Privatization

Defining Public-Private Partnership (PPP)→ World Bank Institute (WBI): often referred to as Private Sector

Participation (PSP) in which private sector resources – technical, managerial, and financial – are mobilized to deliver essential public services such as infrastructure, health and education

→ Asian Development Bank (ADB): PPPs present a framework that – while engaging the private sector – acknowledges and structures the role for government in ensuring that social obligations are met and successful sector reforms and public investments achieved. Private sector entities engaged in PPPs aim to profit from their capacity and experience in the business and will seek appropriate returns for their investment.

Evolution of PPP from earlier privatization schemes

→ Policy of privatization implemented across the world since 1980s, together with other neoliberal structural reforms, as part of Structural Adjustment Programs (SAPs) imposed by international financial institutions (IFIs) on developing countries

→ Target of privatization has broadened from public services and assets to the institutions and processes of government itself. As such, the state’s primary responsibility has been redefined as enabling private capital to expand and profit.

→privatization programs and policies found to be too bitter a pill to swallow for many developing countries

→PPP a useful phrase because “it avoids the inflammatory effect of privatization” and is “a less contentious term”

→According to the ADB, PPPs have become increasingly attractive to governments throughout the world in the past twenty years because PPPs can help governments do more with less and can contribute to enhanced efficiency in delivering services.

PPP: ‘what it claims to be’ vis-à-vis ‘what it is’

“If the PPP is structured to let the private sector operators pursue its goal to maximize profits, the efficiency of the infrastructure services will likely be enhanced. Improving the efficiency of services and operations also increases the chances that those services are economically sustainable and provided at affordable rates – even after satisfying the profit requirements of the private operators.”

→Actual experience from past PPP initiatives does not support such claim.

The Case of the Philippines

NoyNoy Aquino: “We have so many needs: from education, infrastructure, health, military, police and more. Our funds will not be enough to meet them… Our solution: public-private partnerships”

→Sectors covered by PPP include: power generation and distribution, water and sanitation, transport systems, etc

How are the people affected by PPPs?

Power debts and rate hikes→Filipino taxpayers and consumers are now confronted with a

power debt that is more than P203 billion larger than before→Government ended up more indebted and bankrupt, while the

people oppressed thrice over – by servicing the debt through taxes, and by paying exorbitant monthly electricity bills to cover debt payments

Increase in rail transit fares →The burden of privatized rail transit systems will be shouldered by

commuters and will be felt most by those who hardly earn enough for a decent living.

Toll hikes

Displacement→The absence of a comprehensive and sustainable mass housing

program, including acceptable and economically viable relocation sites, means that the poor who become victims of forcible eviction are left with no option but to squat somewhere else and suffer from insecurity in housing.

Who really benefits from PPPs?→Private investors participate in infrastructure development with the

clear goal of making and maximizing profits. The job of the government, as a consequence, has been reduced from ensuring that the infrastructure needs of the people and of the economy are met to ensuring the most favorable investment climate for the private sector.

→Creating an environment conducive to private and foreign capital, based on the country’s experience from past PPP initiatives, entails government assurance that investors will make handsome profits through guaranteed return of investment and incentives, and ultimately of showing bias against the poor that these PPP initiatives are supposed to benefit.

→This heavy focus on profitability makes infrastructure projects pursued through PPP ultimately anti-development and anti-people.

PPPs as the new face of privatization→In such situations where public service becomes privatized and thus

profit-driven, the poor are always the most vulnerable. With their lack of paying capacity, combined with government’s default in ensuring safety nets, the poor ends up marginalized from basic social services that now increasingly “come with a price”.

→All the same, PPP at its core is still privatization notwithstanding claims by proponents that the public sector still plays an important role as the private business, i.e. as regulator.

→Experience in the last three decades indicates that privatization and other neoliberal structural reforms have failed to achieve their stated objectives and merely resulted in severe economic dislocation of the poor and marginalized sectors.

APRN’s Collaborative Research on PPPs

A People’s Assessment of PPPs: Examining the Impacts of PPPs on the People

→ Because of the mixed outcomes of PPP projects, many studies assessing the impact of PPPs have been undertaken in different country contexts and regions. However, an impact assessment of PPPs that genuinely focus on the people is found lacking. Two crucial questions have to be raised in light of this: Whose interests are served by undertaking such impact assessments? Whose voices and concerns are incorporated in these methodologies?

→ If PPPs are claimed to be drivers of development with the people as its direct beneficiary, then there is a need to ensure peoples’ participation in the planning, administration and evaluation of such projects. It should be the objective of PPPs, as a means to development, to “create an enabling environment for people” by allowing them greater access to knowledge and a sense of participation in community activities. However, impact studies on PPPs mostly continue to exclude people’s voices. → Thus, a more participatory approach to PPP impact assessment, focusing on the views of the intended beneficiaries who are in the best possible situation to determine whether the PPP project has benefitted them or not, is needed. This entails paying greater attention and careful documentation of the voices, concerns, and issues of people in affected sectors and communities often overlooked in PPP impact studies.

Asia-Pacific Research Network

Website: www.aprnet.org

Email:secretariat@aprnet.orglpano@aprnet.orgepalomares@aprnet.orgmpamintuan@aprnet.or

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Thank you all kindly.