The revolution should not be privatised

“What do we want? Public-private partnerships! When do we want them? Now!” – Don’t remember hearing this chant during the Arab Spring protests? Nor do I.

Countries in the southern and eastern Mediterranean region, Egypt in particular, have had painful experiences with privatisation and corruption, resulting among other things in the loss of jobs and incomes for many.

After the Arab Spring saw regime changes in Egypt and Tunisia early in 2011, the EBRD, along with the European Investment Bank was quick to pledge its financial support to further the process of democratisation in the southern Mediterranean.

As part of its preparations to commence larger lending projects in Egypt, the EBRD will hold a consultation meeting with civil society on June 18 about its future operations there. (Meetings in Jordan and Morocco have already taken place, while the meeting in Tunisia had to be postponed).

Sadly, those meetings take place after the EBRD’s shareholders have already approved the creation of a special fund that would allow the bank to invest there. But this is not entirely surprising, considering that both the EBRD’s and the EIB’s competence in supporting democracy in the southern Mediterranean has fundamentally been called into question (and not only by Bankwatch (pdf)).

One aspect I find particularly disturbing in both the EIB’s and the EBRD’s approaches is their (somewhat predictable) emphasis on public-private partnerships (PPPs):

The EBRD’s technical assessment for Egypt (pdf) outlines its intentions to provide technical assistance for PPP legislation and project preparation as well as transport and municipal infrastructure PPP projects.

The EIB has commissioned a study on PPPs in the southern Mediterranean and co-organised a conference on the topic in May 2011, at which the bank and its partners committed to, among other things:

“Continue providing technical support to help increase the PPP legal and financial readiness of the Partner Mediterranean Countries including PPP policy framework formulation, legal reform, institutional strengthening, and increased capital availability for infrastructure development.” (emphasis added)

So why is this disturbing?

Apart from the fact that these statements were prepared long before civil society groups in those countries were asked for their opinion, and from the problematic results of the past twenty years of privatisation policies, particularly in Egypt, the problem is that public-private partnerships have not proven to be a successful tool for developing public infrastructure – rather the opposite.

A new website that we have prepared in Bankwatch offers a score of analyses and examples for the controversies and even failures that PPPs have come to signify in various countries in the past 20 years.

The reason PPPs looked attractive to European governments a few years ago was mostly due to their promise of ‘build now, pay later’, meaning that governments could initiate lots of new construction projects (and earn public recognition for it), while their unfortunate heirs have to pay the fee to the private companies for the next three decades.

Today, in some countries hit hard by the crisis, the problems with the cumulative burden of PPPs became inescapable:

• In Hungary, where around 100 PPP projects had been undertaken, the government announced a moratorium on new PPPs and review of existing ones. In Portugal, the same.
• In the UK, although the coalition government has not yet taken a particular line on the future of PPPs, it has slashed the Building Schools for the Future PPP programme due to its poor value for money, and is undertaking a review on PPPs. Bad publicity from other PPP schemes has not helped the cause either – the collapse of the London Underground PPP, the revelation that the M25 widening had been very poor value for money, the GBP 148 fish and chips from the Treasury canteen and the GBP 900 Christmas tree are just a few examples.

Coming back to the Mediterranean, one of the main demands of civil society groups in the region is that the western countries write off the massive debts clocked up by the former regimes in order to help get the countries back on their feet again. Apparently though, the approach being taken instead is to help the countries – some of which still have illegitimate governments – to clock up new debts, and this time hidden ones that don’t appear on the government balance sheet.

Given the support that PPPs still enjoy in important institutions, our website Overpriced and underwritten – The hidden costs of public-private partnerships explains in more detail what PPPs are and what’s the problem with them. The aim is to help activists, journalists, NGOs and researchers from across Europe and beyond to stimulate a more honest debate about this financing model.

Find the website here.