International lenders ‘should help countries find alternatives to PPPs’

8 Oct 18

Private public partnerships drain the public purse and international lenders should support countries to find other ways of financing public services, an umbrella group has warned.

Ahead of the annual meetings of the World Bank and the International Monetary Fund this week, the European Network on Debt and Development said PPP projects ultimately cost the public cost more and were more risky.

The organisation has produced a report looking at the impact of 10 PPP projects around the world. It has concluded that in all cases, the partnerships came with “a high cost for the public purse [and] an excessive level of risk for the public sector”.

Maria Jose Romero, one of the report authors and policy and advocacy manager at Eurodad, said: “It is time for the World Bank Group, IMF and other institutions to stop repeating past mistakes and instead support countries to find the best financing method for public services.

“These solutions should be transparent, environmentally and fiscally sustainable, and in line with human rights obligations. The future of many communities depends on this.”

The report authors found all the projects were riskier for the state than the private companies involved because the public sector would have to step in and cover the costs if anything did not go as planned. 

It added that nine out of 10 of the projects lacked transparency and called for “rigorous” transparency standards be applied to PPPs.

Because the negotiation process of the contracts were complex and required special skills, which many governments lack, Eurodad highlighted that good governance needs to be in place before a country takes on large-scale infrastructure and service development.

Eurodad’s report recommended that the lenders and governments from wealthy countries work to “halt the aggressive promotion” of PPPs.

The projects examined for the report were in Colombia, France, India, Indonesia, Lesotho, Liberia, Peru, Spain and Sweden. Two were in India. 

The sectors included education, health, water and sanitation, energy and infrastructure.

The World Bank has been criticised in the past for promoting PPPs for social and economic infrastructure financing.

Last October, Eurodad launched a campaign to stop the promotion of PPPs and said they were too expensive, high risk and “encourage corruption and bad decision-making”, with the backing of more than 150 organisations. 

Earlier this year, the network called on the World Bank specifically to stop funding and promoting the partnerships, in an open letter with 84 signatories addressed to Word Bank executive directors.

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