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Development without Public Services?

16 July 2015
While we have seen a remarkable shift in the debate on tax within the Financing for Development (FFD) agenda, the funding and recognition of the role of public services for development remains problematic.

PSI organised a CSO side event to the Third International Conference on Financing for Development Conference (FFD3) entitled "Mission Impossible: Development without Public Services" aimed at raising concerns on the effects of public-private partnerships (PPPs) in health, education and water and sanitation and propose alternative policy options that are more compatible with social development.

While we have seen a remarkable shift in the debate on tax within the FFD agenda, the funding and recognition of the role of public services for development remains problematic. The Action Agenda calls for delivering social protection and essential public services for all, but it refrains from using the word public in connection with health, water and education and strongly promotes PPPs without any limitations or safeguards.

This means that privatisation is about to become official UN policy. Many governments are still turning to public-private partnerships in the hope that the private sector will finance public infrastructure and public services. However, experience with so-called public-private partnerships (PPPs) shows that privatisation is fundamentally flawed. PPPs in countries both rich and poor and shows that these are an expensive and inefficient way of financing infrastructure and services, since they conceal public borrowing, while providing long-term state guarantees for profits to private companies.

Rosa Pavanelli, PSI General Secretary said:

"In the context of the economic crisis, governments are under increased pressure to find quick answers to hard questions about maintaining public services and funding infrastructure. The longer the crisis extends the more pressure mounts to find answers, but so do the risks of forgetting the root causes: greed, deregulation, and excessive faith in private corporations.

Our report “Why public-private partnerships don’t work” is the culmination of thirty years’ experience with and assessment of privatisation, in countries both rich and poor. It demystifies the shadowy PPP processes, most of which hide behind confidential negotiations to protect commercial secrecy. There are no public consultations, lots of false promises, and incredibly complex contracts, all designed to protect corporate profits. There is also a fair amount of bribery, as privatisation contracts can be extremely valuable.

PPPs are used to conceal public borrowing, while providing long-term state guarantees for profits to private companies. Private sector corporations must maximise profits if they are to survive. This is often fundamentally incompatible with protecting the environment and ensuring universal access to quality public services.

These privatisation policies are also linked to the new wave of trade negotiations (TISA, TPP, TTIP), which are being agreed behind closed doors and heavily influenced by business interests. These trade deals not only facilitate PPPs but will also lock them in, making it next to impossible to reverse them, regardless of outcomes.

There have been changes in the mix of different forms of health care financing, with higher rates of out-of-pocket payments and a decline in the contribution of public health care expenditure to overall health care expenditure.  Multinational health care companies are using a variety of strategies to enter markets around the world. 

Reforms promoted by the World Bank, IFC and Regional Development Banks, include marketisation, decentralisation and corporatisation of the public sector, provide opportunities for multinational companies to enter the public health care sector.  The increased commercialisation of public health and social care services makes them subject to inclusion in trade treaties, which will open up these services to competition from global services companies.

The World Bank, the International Finance Corporation (IFC) of the WB group, and the Asian Development Bank (ADB) have also championed PPPs in education, from a period of promoting ‘private sector participation’ in education projects, and subsequently becoming the strongest proponents for such partnership arrangements on a global scale.

While the proponents of PPP promote it as a panacea to address lack of resources, equity and quality, there are alternative propositions and excellent examples that do not require relinquishing education as a public good and state responsibility. Innovative domestic resource mobilisation through progressive taxation and other means can address the resource gap in a sustainable manner.

In sectors where PPPs are considered, they must be subject to intense scrutiny and review, follow strict criteria or guidelines, and show real added value versus traditional forms of public procurement. Procurement mechanisms should ensure that the private sector benefits local economies and does not infringe on the right to development by imposing conditions, but instead it supports all aspects of the sustainable development agenda.

There is a public alternative to privatisation, in which national and local governments continue to develop infrastructure by using public finance for investment, and public sector organisations to deliver the service. This provides numerous benefits to the public such as greater flexibility, control, and comparative efficiency – because of reduced transaction costs and contract uncertainty, as well as economies of scale – and the efficiency gains of more democratic accountability. 

PSI engages with national unions and with social movements. Our work on trade has brought new attention to the issue and has provoked a number of serious debates as to the merits of the ongoing negotiations. In the utilities sector, our work has helped provoke a wave of remunicipalisations around the world, most strongly in the water sector. And, our alternative to PPPs, public-public partnerships, based on solidarity and not profit, is having an effect in the development community.

For all the reasons that we have debated here today we therefore call for essential public services that implicate States’ duties to guarantee the human rights to water and sanitation, education, and health should be excluded from the promotion of PPPs in this agenda and the re-introduction of safeguards for PPPs – which were included until 12 June in the draft of the Action Agenda.

"We have to make sure that the corporate agenda will not privatize development for its own interests – we need a global partnership that works for the citizens of the world."

For more information on PSI's activities at the FFD3 see:

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