alexa Exercise caution when pursuing public-private partnership deals - Daily Nation

Exercise caution when pursuing public-private partnership deals

Tuesday July 16 2019

housing

Construction of civil servants' houses in Kisumu County. Affordable housing is part of President Uhuru Kenyatta's Big Four development agenda. PHOTO | FILE | NATION MEDIA GROUP 

KENNEDY CHESOLI
By KENNEDY CHESOLI
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President Uhuru Kenyatta sees public-private partnerships (PPPs) as central to his ‘Big Four Agenda’ success. While innocuous, the international community is unconvinced that PPPs are ideal for promoting sustainable development, especially in institutionally weak countries.

Rich countries and international financial institutions, led by the World Bank, are the main advocates of the PPP agenda. However, the UN and major civil society organisations (CSOs) say a lot needs to happen before the model can be fronted to advance the SDGs. Harsher critics perceive PPPs as a reincarnation of the discredited neoliberal policies of privatisation, liberalisation and deregulation.

There is no agreed definition of PPP but we can understand them as arrangements where private companies assume the traditional responsibility of the government, like provision of public goods and services.

PUBLIC FUNDS

Yet giving public funds to a profit-seeking enterprise to provide a public good such as healthcare and education can be both controversial and challenging.

Proponents claim PPPs leverage private investment through risk-sharing between the public and private sectors. They also bring capital, technology and expertise to projects, resulting in efficient service delivery and lower costs. Development banks have positioned PPPs as a central pillar for boosting development finance in support of the SDGs, from “billions to trillions”.

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During the third Conference on Financing for development, the UN called for a cautious approach to the use of blended finance instruments in sustainable development, including PPPs. It underlined that PPP projects should share risks and reward fairly, follow clear accountability mechanisms and meet social and environmental standards.

The UN has since made strong indictments against PPPs. It has flagged accountability and transparency challenges and stated that PPPs largely fail to meet basic social and environmental standards.

The 2017 report of the Inter-Taskforce on Financing for Development found many PPPs less efficient than traditional public procurement — across developed and developing countries and across sectors.

The same taskforce warned in its 2019 report that the prevalence of PPPs was worsening debt difficulties in developing countries. This is because contingent liabilities built into PPP contracts are rarely recorded despite their potential to generate public debt in the event the projects fail.

CAPACITY BUILDING

The UN has stressed capacity building among developing countries in the complex areas of planning, contract negotiation, management, accounting and budgeting for contingent liabilities. Indeed, we need meaningful safeguards, such as strong transparency and accountability mechanisms to ensure fiscal sustainability of projects, preservation of public interests and a guaranteed access to public services by the poor. The UN continues to convene discussions on PPP guidelines in the global South.

CSOs consider the PPP model dangerous for it privatises gains and socialises risks and losses.

It also diverts government attention from addressing social concerns and destroys public sector ethos, which has historically underpinned effective service delivery. Rather than outright privatisation, the Philippines-based IBON warns that PPPs are privatisation with added benefits such as guaranteed flow of public resources into private hands.

Others have found PPPs to be deceitful. London-based University of Greenwich concluded that claims such as PPPs were more efficient, allocate risk better and represent better value for money were misleading. It warned that the World Bank and other global players were likely to push governments towards bankable projects instead of initiatives that truly respond to social development objectives.

On the Big Four and SDGs, stakeholder groups must remain vigilant, protect public interests and guard against the excesses of profit-seeking enterprises in sectors with a direct impact on the poor — like urban housing and food security.

Mr Chesoli is a New York-based development economist and global policy expert. [email protected] @kenchesoli

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