Public-Private Partnerships Fail.

In 2018, our report History RePPPeated – How Public-Private Partnerships are failing challenged the increasing promotion of Public-Private Partnerships (PPPs) as a silver bullet to finance development projects. It showed that PPPs often come at a high cost for the public purse and citizens, an excessive level of risk for the public sector and have a negative impact on democratic governance. Since then, the context for the continued promotion of PPPs has become even more complex and uncertain. In early 2020, the arrival of the Covid-19 pandemic highlighted how market-based models cannot be relied upon to deliver on human rights such as health, education and water provision, and the fight against inequalities. In 2022, the upsurge in the cost of living, the energy crisis and the climate crisis have further highlighted the failures of the current economic model and the urgent need to build a different one. However, calls for an increasing role for the private sector in the financing of infrastructure and public services, and for PPPs in particular, continue to grow. Currently, PPPs are being promoted through a vast array of tools and by a wide range of institutions, including bilateral donor agencies, United Nations agencies and multilateral development banks (MDBs). The World Bank Group continues to be at the forefront of the promotion of PPPs, and of the use of private finance in development more generally. The rationale is that PPPs may help overcome challenges in the financing, implementation and delivery of infrastructure and public services, based on the assumption that the private sector brings additional finance, and that private companies are inherently more efficient than the public sector in delivering high-quality public services. This overlooks evidence that points to the contrary and the fact that decades of structural adjustment programmes and austerity policies have left public services underfunded. This report is the second in the History RePPPeated series and is once again the result of a joint civil society effort from organisations around the world. Through emblematic cases across four continents, the report provides an in-depth analysis of various kinds of PPP projects in both the global south and north. It also analyses emerging trends in the intervening four years since the first report was published, particularly in light of the Covid-19 pandemic and the multiple crises facing the world. According to Eurodad’s estimates, since 2012 the amount of money invested in PPP projects in the global south has been volatile. The onset of the pandemic in March 2020 led to a drastic decline in investments in PPP projects, in line with the slowdown in the global economy – from US$99 billion to US$57 billion, which represents a 42 per cent decline. While in 2021 there were signs of recovery (US$63 billion), this is still not enough to anticipate an upward trend. However, the intense promotion of private finance in development, and of PPPs in particular, by MDBs – and increasingly also by the International Monetary Fund (IMF) – is leading to substantial reforms in developing countries’ laws and regulatory and policy environments at the national and local level. Many developing countries have enacted PPP laws and have set up ‘PPP Units’ to scale up their capacities to implement PPP projects. This suggests a problematic redefinition of the policy space for public service provision, which seems to be focused on attracting private investors. In recent years, the evidence of the failures of PPPs has continued to pile up, especially in terms of their fiscal and human impact. The high fiscal cost of PPPs is due to the high cost of capital; the expectation of profit from the private partner; the high transaction costs associated with the negotiation of complex PPP contracts; and the high likelihood of renegotiation. These higher costs are rarely justified by proven efficiency gains in delivering public services. Of serious concern, particularly in the context of a growing debt crisis and a forecast of a global recession, is that they can create a ‘hidden debt’ for the government, which adds to their overall indebtedness. The human cost of PPPs is evident around the world, as this report shows, and is affecting different aspects of people’s lives. It is especially, but not exclusively, evident in PPPs in public services delivery, and is ultimately due to the fact that private companies, unlike the state, are accountable to their shareholders, and not to citizens. Access to services like health, education and water is increasingly dependent on citizens’ capacity to pay, which transforms rightsholders into consumers. Especially problematic are PPPs in the health sector, where the introduction of commercial imperatives in the delivery of healthcare can undermine the right to health and the achievement of Universal Health Care (UHC). One of the most emblematic examples of the failures of PPPs is the World Bank-supported Queen Mamohato hospital in Lesotho. This project first came under the spotlight for the rapid escalation of its initial cost – up to more than half of the country’s health budget. In 2021, at the height of the Covid-19 pandemic, all nurses at the hospital were sacked for their strike action demanding equal pay to government employed nurses. This and numerous other disputes, and financial challenges, led to the premature termination of the PPP contract. Netcare, the biggest company in the PPP consortium, transferred the hospital back to the government.