Social services

Background

PPP civil society strategy session

4 October 2016

4 October 2016 | Minutes

Sponsors: Eurodad, Jubilee Debt Campaign, Heinrich Böll Foundation and Center of Concern.

1. Institutional update:

World Bank:

  • The Bank continues to energetically promote PPPs, particularly through technical support akin to consultancies. This is particularly relevant to its relationship with the G20.
  • While there is no doubt that the Bank is pushing PPPs, it continues to deny this is the case, arguing instead that it provides unbiased advise adapted to each individual and particular context. This is the uniform response by all Bank staff, including EDs.
  • PPP directory of the Bank is coordinating various banks. 7 Multilateral Development Bankss, with over 100 working groups meeting yearly. Taking over or developing a governing structure of future PPP framework. The achievement of scale necessary to go from billions to trillions requires standardisation of as many elements as possible, including  contracts.
  • Heinrich Böll has released a report on the proposed model PPP contract. The contract stipulates that in case of delays to projects caused by strike or protests governments must pay penalties to private provider. This is highly troubling as it incentivises suppression of descent. In addition to fiscal, social and environmental impacts.
  • The World Bank Disclosure framework classifies countries according to good vs. bad capacity to disclose information about PPPs. This raises the obvious question: If the WB chose to engage with countries with low capacity – what are the implications vs. the capacity of those countries to negotiate and manage complex PPPs.
  • The  Bank historically does not consider alternatives to PPPs – per IEG’s report.
  • Bent Flyberg of the Said School of Business, Oxford has also provided a very critical analysis of PPPs. He demonstrates that mega projects imply mega risks.
  • Regarding the government’s capacity to negotiate and manage PPPs, many are undertaken by sub-national governments, which implies they have even less capacity than national governments would.

G20:

  • The G20 has become instrumental in push for PPPs.
  • China was formally president to be followed by Germany. While G20 does not agree on very much, there is strong consensus on infrastructure development. G20 control of institutions allows them to roll out ‘consensus’, creating a lack of accountability towards other institutions such as the WB, IMF and UN where, for all their flaws, there is at least some level of representation.
  • There has been a shift in the PPP debate. Previously the focus was on feasibility/damage of single initiative. Now, attempt to financialise infrastructure as an asset class. Each country or region is encouraged to have many PPPs across areas – risk diversified. Insurance companies, investors are being provided portfolio of packaged PPPs.
  • Infrastructure master plans have been developed or are being developed for many regions. Eg, silk road, Summit in China – global connectivity alliance – ‘the alliance’. Central purpose of these large-scale infrastructure projects is trade facilitation. Objective is to connect regional plans – attempt to generate demand for goods and services to counteract declining global trade.
  • Global context of mass liquidity seeking higher return. G20 has no bias toward any particular energy source – ie, no bias against fossil fuels – supportive of gas. G20 75% of GHG emissions – 60% from infrastructure.
  • MDBs have issued a Joint Declaration of Aspirations, which contains list of minimal contribution of 300 Billion by MDBs for the period of 2016-18. Strong collaboration supporting the model among all MDBs– ie, allowing for state-owned enterprises.
  • Indonesia as model country within G20 – for restructuring of government to facilitate PPPs – eg, land acquisition. These powers have been centralised in the president’s office.
  • China had 40 studies of ‘model’ PPP arrangements, not only OECD (quasi secretary of G20).

UN

  • G20 realises that it must sell ideas to outsiders, the UN therefore becomes instrumental – eg, Addis Ababa/FFD. Some good and some bad language in FFD. UN Economic Commission for Europe – are developing global standards, despite the regional remit. CSOs refused to participate as it would legitimate the effort. However ‘consultations’ continue. CSOs must step in to set parameters.
  • UNECE has very little traction in Europe – even if this is a reality – it may be the case that UNECE may gain momentum within FFD.
  • Unlike other issues areas where there is divergence between Northern and Southern positions, opposition to PPP is a ‘lonely world’. Four Latin American countries are pushing for institutional structures for PPPs. In Brazil – BNDES – must demonstrate effort to leverage private sector investment.
  • The push for PPP is not only taking place within FFD, also SDGs. These things are still in process.
  • Liberia – big PPP push in education and health. Need to develop coalitions in Global South.

2. Fiscal implications:

  • OECD – able to produce quite a lot of research. OECD to organise a meeting early in January on health and employment. Clash of policy orientation between ILO and OECD.
  • IMF PPP Fiscal Risk Assessment Model (PFRAM) – new framework being piloted in 10 countries. New report due in Spring 2017. IMF good working paper on fiscal risks in China.
  • PFRAM – relatively well-structured. Perhaps there is a need to investigate the pilot as much hinges on the way countries respond to what are actually good questions.
  • Debt Sustainability Framework – PPPs may or may not be considered. Hope that after the next review there will be a renewed focus on inclusion of PPPs, given fiscal risks.  IMF’s position is contradictory – guardians of fiscal rectitude vs. elemental in developing consensus.

Key question for Bank and Fund – what happens when PPPs do not meet standards? European ED during meetings have always had the same response, stressing the benefit of engagement vs. loss of leverage if Bank disengages.

3. Planned CSO activities:

Jubilee Debt Campaign (JDC)
Focus on fiscal risk. Interested in global coordination. Launched new google group. 42 countries. Will launch new report on UK experience.

Corporate accountability International
Looking to link with other partners to challenge PPP agenda. Volunteers will ‘flier’ the bank to pressure on water privatisation.

Heinrich Böll
Focus on education as separate from ‘advocacy’ – would like to see a resource that would allow different regions to analyse the PPP model. Interested in link between contract framework and potential for suppression of civil society.

Seeking to support work on translating social and environmental advocacy language into ‘financial terms’ in order to increase traction with finance ministries. Rule being written in OECD and G20 – ‘OECD transformed into secretariat for G20.’ Investors are focused on revenue streams. Would like to tell stories, such as Korea.  Trying to address difficulties in bridging gaps in coalition building – eg, Labour 20 is quite strong, but tends to support infrastructure.

Oxfam
Focus on new IDA window. Health sector, humanitarian assistance. Blended finance. What counts as ODA.

Food and Water Watch
Focus on water/ US and internationally. Part of successful effort that caused Bank rethink of supporting large-scale water privatisation in Latin America. In the US financial conglomerates looking to buy water companies.

PSI
Focus on water and utilities. Nigeria, Indonesia and Argentina. Some reversal of privatisation – examples of best practice and coalition-building. Also develop research including social impact bonds. Will release research on role of MNCs on health in Latin America. Launched Privatisation Watch. Would like to use the publication as platform for sharing information.  Will set up new open campaign e-platform.

Rethinking Bretton Woods
Role of institutional investors. Looking at possible regulation framework.  Finalised case study in Mexico with Fundar. Question the narrative of Mexico as ‘poster child’. Looking for additional case studies of institutional investors in PPPs. Tracking FFD work. Will, together with Eurodad, review new Bank framework document. Ebase – considering an event in February 2017. 2018 – Argentina will hold the chair of G20.

Telis Institute
Focus on subnational PPPs and urban infrastructure. Ultimate aim to provide guidance to those considering the use of PPPs. Will hold a workshop in Quito – Brazilian official in charge of PPPs and housing.

Eurodad
Systemic and macro-economic risks and consequences. Thinking of developing a joint-campaign. Perhaps around a charter for social service provision.

Indonesian infrastructure coalition
Indonesia is beginning to demand release of information. Centralisation of decision-making at presidential level. Parliament is excluded, as is the population. New laws, eg. Land acquisition. High-speed rail project planned – minister of transport opposed project because it would use productive land and also had no social impact assessment (joint Indonesia- Chinese project). Focus on informing parliament. PPPs excluded from budgetary processes.

Bretton Woods Project
Brings concerns on PPPs to light through its various publications and supports critiqueing the Bank’s narrative on PPPs through publications and engagement with Bank and government officials. Seeks to link thematic CSO activities through networking.

American Federation of Municipal Employees
Difficult to move Obama administration. Labour Department has done some work on labour standards. Miami Dade county – new PPP task force to develop ordinance. Protect public services.

Coalition for Human Rights in Development
Focusing on Bank watchers and human rights communities – focus on regional infrastructure – Africa. NDB will expand to private sector. Interested in IDA work.

In the Public Interest
Interested to communicate across sectors. Investors look at it from an investment class analysis. What happens if interest rates rise? Investors are very concerned. Finance is concerned about cost-overruns. Support information exchange – however this is difficult as largely reliant on the media. At present one only hears of PPPs when they are in progress.

Indonesia advocacy organisation
Opposing power plant in Indonesia. IFC involvement – 800 to 2000 MW Batang project. IFC published a ‘success story’ paper on the project. Organisation began to fight against land grabs. Lost case in court – people forced from land. Greenpeace is supporting community to file case.

ULU Foundation
Focuses on financial intermediaries which happen to support PPPs. New guarantee body purpose built for support to PPPs. Guarantee body in Indonesia meant to appease fears deriving from previous experience of failed government guarantee.

Infrastructure monitoring coalition in Indonesia
Focus on negative social and environmental impact. Push for dialogue between communities and project implementing agencies.  Jakarta – Bantung rail project – use of productive land in land-slide prone area. Government unwilling to engage. Fighting for compensation for those displaced.

Mexico / Chiapas
New investments with disastrous impacts in water, sanitation. Interested in guidelines for effective implementation.

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