448. THE CURRENT OVERRELIANCE ON PRIVATE SECTOR INVESTMENT AS A KEY INSTRUMENT FOR DEVELOPMENT WITHOUT ADEQUATE SAFEGUARDS AND HUMAN RIGHTS ACCOUNTABILITY MECHANISMS IS MISPLACED AND RIGHTFULLY GENERATES DISTRUST. (Carlos Lopez) [Part 1 of 2]

“I am deeply wary of CEOs who claim to be guided by a moral compass, because they ultimately only navigate waters their shareholders chart”. (Selvanathan 2015).

Very few PPPs have delivered results in the public interest (Jomo Sundaram)

-Civil society organizations (CSOs) and academics have repeatedly questioned the current bias in the promotion of the PPP model, and have compiled convincing evidence of its problems (Oxfam 2014; Romero 2015; Jubilee Debt Campaign 2015; Hall 2015; Jomo et al. 2016).

1. Public Private Partnerships (PPPs) are promoted by many OECD governments, by consultants and by multilateral development banks, especially the World Bank. These actors consider them as the solution to the shortfall in financing needed to achieve development including the goals of Agenda 2030 (the SDGs). As a matter of fact, the recent period has seen tremendous enthusiasm for PPPs.* PPPs have been less common in the poorest counties in the global South, but that is changing rapidly.
*: A common form of public-private partnership pertains to a contract between a government and a private company under which: A private company finances, builds, and/or operates some element of a public service; and the private company gets paid over a number of years, either through charges paid by users, or by payments from the public authority, or a combination of both.

2. Let us get right to the basic criticisms of PPPs: (from J. Sundaram and Eurodad)
• PPPs often come with new or increased fees for users of services.
• PPPs generally fail to address the gender gap, or the increasing divide between rich and poor.
• PPPs have also led to forced displacement, repression and other abuses of protesters, local communities and indigenous peoples.
• PPP contracts often undermine consumers’ and citizens’ human rights (HR), as well as undermining the state’s obligation to regulate in the public interest. When disputes arise, they also tend to favor opaque and unaccountable international legal adjudication courts rather than local or national courts.
• PPPs can and do limit governments’ capacity to enact new policies, partuicularly strengthened social and environmental regulations. Typically, social and environmental legislation is weakened to create attractive business environments for PPPs.
• In many cases, PPPs are the most expensive financing option, and hardly cost-effective compared to good government procurement.
• PPPs cost governments (and citizens) significantly more in the long run than if the projects had been directly financed with government borrowing.
• PPPs are attractive because they can be hidden ‘off balance sheet’ so they do not show up in budget and government debt figures, giving the illusion of ‘free money’.
• PPP negotiations are subject to commercial confidentiality, making it hard for parliamentarians, let alone civil society, to scrutinize them. This lack of transparency significantly increases the likelihood of corruption and undermines democratic accountability.
• PPPs tend to exacerbate inequality by enriching the wealthy who invest-in and profit from PPP projects, thus accumulating even more wealth at the expense of others, especially the poor and the vulnerable. The more governments pay to private firms, the less they can spend on essential social services, such as universal social protection and healthcare.
• PPPs often cost more in the long run than conventional public funding; they expose governments to financial risk, and can have a disproportionally negative impact on women and children, and undermine democracy, as well as human and environmental rights. This dangerous trend means the very countries which are already most vulnerable to debt and most in need of development aid are saddled with expensive, high risk, undemocratic and unaccountable projects.
• 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.
• PPPs are not an incremental change; they are a transformational change. Concessions that are evitable are being made to the private partner in the name of “being too rigid leads to failure”.
• Sensing the new opportunity for mega profits, the private sector has embraced the SDGs by vying to enter into PPPs. However, PPPs have a long and checkered history, especially in terms of ensuring greater access and equity, typically undermining the SDG’s overarching principles.
• Misleading claims regarding benefits and costs have been invoked to justify PPPs.
• PPPs-incurred debt and risk are generally higher than for government borrowing and procurement.
• While PPPs can mobilize private finance, this can also be achieved at lower cost through government borrowing.
• Most claimed benefits of health PPPs do not stand up to critical scrutiny; they are often further incompatible with national health strategies and can even redirect national health policies to better serve commercial interests and considerations.
• Health PPPs also hamper government negotiating positions vis-à-vis powerful pharmaceutical and other healthcare service companies from donor countries.
• By diverting domestic resources from national priorities, health PPPs undermine public health. Such redirection of investment exacerbates health disparities, e.g., health workers often preferring to work for better funded foreign programs, undermining the public sector.

3. As is now common, donor agencies are hurriedly providing subsidized public finance specifically for setting up PPPs. Countries subject to IMF regimes are actually being subjected to political pressures and marketing campaigns to accept PPPs. But experience over the last 15 years shows that PPPs are an expensive and inefficient way of financing infrastructure and services and divert government spending away from other recognized priority public services. They conceal public borrowing, while providing long-term state guarantees for profits to private companies. We need to be aware that, by definition, PPPs create financial and/or other economic dependencies of public institutions on private sector actors. PPPs will thus create an economic, a social and an institutional incentive for public institutions to align their policies with the commercial interests of private sector actors. Such an alignment will always compromise the objectivity and independence of public institutions. (Simone Lovera)

There are partnerships and partnerships (Jens Martens)

4. It is problematic to use the term ‘partnership’ to characterize the relationship between state and non-state actors, because what the term suggests is an equal status of the actors involved. This is worrisome. It relativizes both the special higher political status of governmental institutions under international law plus the democratic legitimacy of public institutions –that the private sector does not have. For this reason, the use of the term ‘partnership’ is not just a stylistic question; it has eminently political significance. It implicitly downgrades the role of governments and intergovernmental organizations and it upgrades the (political) status of private actors, in particular that of the TNCs involved in these purportedly ‘cooperation’ models.**
**: Mind you, WHO is an enabler-of and a participant-in, PPPs and in emerging platforms of ‘multi-stakeholder health governance’. (Judith Richter) The reader must be aware that the multi-stakeholder model violates the basic principle of ‘no one should be the judge of his own cause’. It is like inviting the fox to build a chicken coop. (IBFAN) (see below)

5. The difference between partnerships and partnerships is not just semantic sophistry then, but reflects two fundamentally different views of the role of the State: on the one hand as a duty-bearer (particularly with respect to HR), as well as a central provider of public goods and services and, on the other hand, as a moderator and facilitator of actions of various public and private actors. The trend towards partnerships with the private sector is based on a number of false assumptions, not least the belief that global problems are too big and the public sector too weak to solve them alone. It has become clear that privatization, PPPs and the rise of corporate power affect all areas and goals of the 2030 Agenda.***
***: The debate around how to finance the 2030 Agenda for Sustainable Development opens a window of opportunity for HR activists to discuss and agree on needed stronger regulation and guidelines for financial, social and environmental accountability of publicly-supported private finance and, also crucially, for private finance in general. (Maria Jose Romero)

With PPPs, governments have the illusion that they have more fiscal space than they actually do

6. The private sector is in no way a monolithic bloc. Firms in the social and solidarity economy, social impact investors and small and medium-sized businesses are already making a positive difference. Putting an end to partnerships between inherently unequal partners is the fundamental necessary change of course being called for. In particular, governments must reverse their stands towards voluntary, non-core and earmarked contributions and the increasing reliance on (non-innocent) philanthropic funding.

7. One way of summing up the approach to development used by philanthrocapitalism is to conceptualize it as a new kind of anti-politics machine. It is an anti-politics that remains profoundly political as it cultivates new forms of entrepreneurialism. Different grant recipients continue to be nurtured and connected to the hegemonic system and are being pushed towards PPPs and multistakeholder platforms. (see below)

8. These philanthropies target and recruit national market-visible subjects using a cost-effectiveness metrics in their selection. Despite the egalitarian appeals this may have, the underlying neoliberal premise of enticing locally targeted subjects into new rounds of global competition undermines the prospects of equitable long-term protection of HR. The challenge thus is to re-politicize what has been depoliticized.

9. But, beware, this ‘millennial philanthropy’ is only sustainable as long as there is grant money to fund it. Therefore, as a result, all their targeted investments in health and education tend to lead to sporadic and spatially selective, often vertical interventions that remain distinctly non-participatory and exclusionary. This creates spaces of only short-term protection for some amidst widening systemic crises and suffering for many many others. In short, it is producing an archipelago of targeted local interventions in a rising sea of global challenges.

10. Of course, wherever merely palliative measures are enacted, many philanthropies make sure it is their market ties that make the projects sustainable in their eyes amidst the wider context of market-led globalization. It is also their very ‘market readiness’ that is supposed to ensure a brighter future for the recipients of this millennial philanthropy. Yet, by persistently postponing engagement with the long-term structural violence produced by the prevailing global capitalism more generally, their initiatives are destined to endlessly revisit the ruination out of which global capitalism emerged. (the above from Katharyne Mitchell and Matthew Sparke)

Claudio Schuftan, Ho Chi Minh City
Your comments are welcome at schuftan@gmail.com
www.claudioschuftan.com

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