Presentation on the UNECE Principles for PPPs

This is my presentation to the UNECE First session of the Working Party on Public-Private Partnerships on their draft paper on Principles for PPPs

I wanted to start by thanking UNECE for the opportunity to share my thoughts on this important work they have undertaken.

My engagement in the Public Private Partnerships (PPPs) discussion has been mostly through the Multi-Stakeholder Partnerships (MSP) window. There has been some confusion between the role that MSPs might play, PPPs should play and Voluntary Initiatives (VI) might contribute to the delivery of the SDGs.

My work on MSPs has been since their initial inception through the World Summit on Sustainable Development (WSSD) in 2002. I would share with you that the same conversation around the need for Principles and Guidelines is happening around the MSP discussions in New York as it is here in Geneva on PPPs. The recent academic research on the MSPs that were launched at WSSD or just afterwards is that around 70% of them failed either completely or in some significant ways. With the recognition at the UN that for partnerships the UN is engaged in there is a need for a more robust sort of accountability because if it fails it impacts on the UN brand.         

At the last discussion on MSPs in April this year a number of governments including Denmark and Switzerland suggested that only companies that are members of the Global Compact should be listed in partnerships on the UN web site. This is because the UNGC does have a form of due diligence. According to their Deputy Director Gavin Power the UNGC have delisted over 6000 companies who have not compiled with the UNGC listing requirements. Clearly, they should not have any recognition on a UN web site. On the issue of partnerships, the Secretary General will be making some recommendations in his report in December which is why the UN GA resolution on partnerships has been put off to next year.

I was also part of the CommunitasCoalition team that produced a set of Principles for PPP for the Habitat III process. I will draw on those in my comments. As I will from the recent CivilSociety Manifesto on PUBLIC-PRIVATE PARTNERSHIPS (PPPs) which was presented at the autumn World Bank meeting. The Communitas paper highlighted that PPPs “point to a number of potential risks/challenges for governments such as the distortion of the public agenda, loss of local control over critical infrastructure and services, and co-option of government or civil society partners, commoditization of commons, lack of strong legal/regulatory frameworks and the need for institutional capacity-building, lack of transparency and accountability  - including hidden or off the books accounting treatment  of PPP debt the need for improved monitoring and evaluation, inadequate investment in maintenance and the displacement of public employees.”

First, I would like to say that the UNECE document is right to point out that para 48 of the Addis Ababa Action Agenda does call for guiding principles for PPPs. There is a need for the Finance for Development Forum to develop some principles with all member states. This might be one of the recommendations that comes out of the Secretary General’s Sustainable Finance Summit to be held next September. The second general comment is that it is always problematic for UNECE lead the way on an issue. We saw this with the Aarhaus process on P10 where it took to Rio+20 for another region to follow suit. Perhaps if a global convention had been negotiated then those principles would be integrated into many more countries legal frameworks.

Third, it is clear that ODA which would amount to around $320 billion if every country gave what they should and domestic mobilization as it is at the moment cannot reach the figures required to implement the SDGs $3-$5 trillion so we will need private sector finance. The challenge is finding the best financing method for public services in infrastructure. Prioritizing domestic resources to provide efficient and accountable public services, with long-term concessional and non-concessional finance should perhaps be the first place to go.

Fourth, I believe that PPPs should result in improved outcomes for end users and citizens, through improved service quality, accessibility and PPPs should be consistent with and support long term sustainable development of the public. They should be in line with the sustainable development goals and human rights principles. Now looking at the UNECE draft principles.

Principle 1 People first PPPs

The paper – suggests that many PPPs are working well. The question would be for who. And even the World Bank would question that in private. Stakeholders are much more critical. The Civil Society Manifesto signed by 151 national, regional and international civil society organisations, trade unions and citizens’ organisations from 45 countries says: “The experience of PPPs has been overwhelmingly negative and very few PPPs have delivered results in the public interest.” This is a deep difference of opinion which this process will need to bridge.

Having said that I do like the idea of using the city as a focus or a laboratory. In the PPP hierarchy I am less convinced that PPPs should be used for global public good areas like health, education.

Principle 2 Policy first for people first

The idea of developing standard PPP contracts is a very good one. As is a model PPP law. While companies have huge experience of negotiating PPPs local, sub national and even national governments do not. Standardizing these will help a lot and will make it easier to monitor and hold them accountable. I also like the idea of an inter-Ministerial committee. In Australia as reported in the civil society manifesto “an Independent Commission against Corruption found that politicians unlawfully influenced a decision on a water PPP so that AUS$60m of state money was siphoned off to a minister, his family, and associates.” That might not have happened if there has been other Ministers involved. The present Uranium One issue in the USA will turn out to not be a Hilary Clinton issue as Shep Smith from Fox News point out this last week nine different US government departments were involved so the chance that someone could benefit  (Clinton Foundation) from this was very little.

Principle 3 on Capacity building is critical. The issue of capacity building is even more needed at the level of the city or the city within a region. If you add that the possibility of a PPP in low or even middle-income countries then the chances of those local or sub national authorities having the right staff with the right experience to be able to review PPPs is highly unlikely. This is what Communitas found when discussing it for the Habitat III process.  Though it Is great for the World Bank to have a PPP lab it would be much better if it was independent from the Bank as the Bank is engaged in PPPs and therefore can’t be seen as neutral in this. It might be better place for developing countries within UNCTAD.

Principle 4 Strengthening Accountability

I would like to see in the development of contracts that they not only promote local job creation but also that contracts go to unionized labour. Why? Unions will protect the health and welfare of their members and act as a balance to ensure that their role as a stakeholder in the PPP is enabled. The need for clear dispute resolution mechanism is central to the credibility of a PPP is absolutely right

Principle 5: Risk Sharing and Derisking

For low income countries or countries in conflict zones there is a zero chance of gaining the funds for a PPP. Maurice Strong before Rio+20 advocated an Earth Fund at either the IFC or World Bank that would insure such PPPs to enable those countries to be able to access the funds. This might be worth looking at again.

Principle 6 Value for Money Value for People – Another example from the Civil Society Manifesto “The St Bartholomew’s Hospitals PPP in the UK involved initial investment by the private sector of £1.149 billion, but has left the public sector having to pay six times more – £7.194 billion – between 2007 and 2048. These very high costs have necessitated cuts in health services and quality of care provided by the local health authorities.”

This isn’t Value for People or Money. With low interest rates particularly in Europe this could have been financed much cheaper by just borrowing.

Principle 7 The environment

The need for a full life cycle impact is critical to ensure that the right questions are asked but also that the FULL cost of services and impacts are clear.

Principle 8 Innovative financing – doing well by doing good

A prerequisite for companies to tender for a PPP s they should have to annual publish their environment, social and governance reports and have a sustainable development strategy. It might be worth considering the idea that they adhere to the Ruggie Principles on Human Rights, are a Global Compact member or at least not having been delisted. These external requirements would give more accountability.

Final thought

We live in perhaps the most insure world since the 1960s and what we need is inspiring leadership that understands the risks and challenges ahead.  The SDGs and the Paris Climate Agreement showed the intergovernmental process at its best. We now have to deliver these agreements – this is the last best chance for humanity if we want to create a just, equitable, fair and sustainable planet – as opposed to a fortress world.