Transparent and Resilient PPPs

I am a strong proponent of PPPs under certain conditions which include the allocation of risk appropriately to all parties, and competitive and transparent procurements. I also believe that they should be People First PPPs, where the users have a meaningful voice in the adoption of PPP projects.

I believe in projects that are planned with transparency, sustainability and resilience as goals, where resilience implies financial, commercial and environmental resilience.

Water PPPs are Increasingly Controversial
Water PPPs (or privatization where the private sector plays a significant role) can be very controversial as access to water is considered a basic human right and is a primary concern of the Sustainable Development Goals.

Taking these fundamental rights into consideration, it is important that water PPPs, be they brownfield or greenfield projects include consultation with all stakeholders including the users who will pay for the PPP (either through water tariffs, or taxes). Water PPPs negotiations and agreements should never take place in secrecy and should address stakeholder’s interests. In addition, contractual agreements between the public and private sectors should be accessible to the general public for review and comment, albeit with certain constraints when it comes to intellectual property and competitive innovations.

Water PPPs should also be politically neutral as possible, as concessions can be up to 30 years in duration and outlive politicians who were sponsors of the projects, yet saddle communities with commitments that they have to live with for the duration of the agreement.

Secrecy

Unfortunately, in practice, water concessions are more often clouded in secrecy where the perception has been embraced that PPPs should not be open to the general public’s scrutiny as it is too complex for them to comprehend. This fallacy can only lead to poor concession agreements that could lead to conflict between stakeholder and threaten all PPPs whether thay are good or bad.

A good insight can be gained into the implications of poor transparency and poor oversight in PPPs by watching a recent Al Jazeera documentary that was broadcast called the “Secret Water War in Europe” See -

https://www.aljazeera.com/programmes/specialseries/2018/04/drop-secret-water-war-europe-180402084125467.html

The Secret Water War

The following was discussed in the documentary.

In 2010, water was officially recognized as a universal human right by the UN. Regrettably, the EU has not fully embraced this notion.

As a consequence, activists have embraced actions against water privatization (including PPPs) in Greece, Ireland, Germany, Italy, and Portugal. Unfortunately, clumsy attempts to create a “Water Market” in Europe have created considerable antagonism towards water concessions inclusive of PPPs. Less than transparent decision-making by politicians and civic leaders has led to protests where communities have accused the private sector of excessive profit making in PPP type agreements. Poor responses where public sector officials have tried to keep contract terms secret have only exacerbated the confrontational situation that exists.

In many instances, government institutions have reversed their efforts to introduce privatization into the water sector through re-municipalization.

The Move Towards Re-municipalization

In the Al Jazeera documentary it is reported that decisions to close the book on water privatization is the response to the failure of private operators to put the needs of communities before profit. As a result, it is reported that there were 235 recorded cases of water re-municipalization in 37 countries from 2000 to 2015, affecting over 100 million people.

While Paris and Berlin have taken back public control over their water services, European Union institutions have continued to enforce the privatization of water in Greece, Portugal and Ireland.

This has put the European Commission in a bad light which has been accused of imposing privatization on countries of the south as part of a “Troika” - a decision group representing the European Union which is formed by the European Commission, the European Central Bank and the International Monetary Fund.

Nationalization of Debt and Privatization of Profit


Increased tariffs, lack of transparency and accountability under private water companies is driving the emerging trend of re-municipalization. This has also unfortunately resulted in PPPs developing a bad reputation – one which seems to result in nationalization of debt and privatization of profits through badly structured concession agreements.

Good PPPs?

I firmly believe that water PPPs can be good for service delivery and as a mechanisms of delivering innovation. However, this should not occur at the expense of citizen users who in certain instances have seen their water bills increase in hundreds of percentage points.

To have a water market that acknowledges access to water as a basic and universal human right, we need to ask the following questions -

  • Is the privatization action in the interest of the public?
  • Should functioning utilities be privatized or only new utilities?
  • Should privatization be a nationally imposed action or a decision made by local government?
  • Who should control the technology and the operational knowledge of each project, so that if a project is terminated the public sector would still be able to operate the project?
  • How should availability payments and user fees be gathered – as a tax or through water metering.
  • Is value for money being truly considered?
  • How should risk be allocated appropriately?
  • What can be done to develop People First PPPs that prevent poor partnerships between the public and private sector?
  • Who is responsible for the fallout from termination of badly structured PPPs?
  • How can transparency be enforced so that all parties have the facts about all projects?
  • Should PPPs for water even be considered?

Conclusion

These questions are not meant to support any specific agenda, other than to stimulate a debate that allows the adoption of best practices that will lead to sustainable, equitable, and resilient partnerships between the private and public sector to deliver water to communities that have a right to it.

It is fundamentally important to remember that PPPs are not always the right choice.