Race to the Bottom




The popularity of public-private partnerships (PPPs) to support infrastructure development in emerging countries is growing worldwide. The G-20 backs PPPs to boost global growth and create jobs.

The BRICS economies see them as a way to build essential infrastructure quickly and cheaply. The United Nations hopes that infrastructure PPPs will provide the means to realise its post-2015 global development agenda. PPPs’ new appeal may redefine not just development economics, but also the overall relationship between rich and poor countries – though not necessarily for the better.

The PPP bandwagon has three essential components: an explosion in infrastructure finance (backed by pension and other large funds); the creation of “pipelines” of lucrative mega-PPP projects to exploit countries’ raw materials and the dismantling of environmental and social safeguards. Each must be carefully monitored as the use of PPPs expands.

The World Bank is already seeking to double its lending within a decade by expanding infrastructure projects. Its new Global Infrastructure Facility (GIF) will mobilise global pension and sovereign wealth funds to invest in infrastructure as a specific asset class.

The emerging world has also been active. The BRICS recently announced plans for a new development bank for infrastructure and sustainable development.

Indeed, these new development-finance institutions are seen as a reaction against the Bretton Woods institutions, whose pursuit of neoliberal austerity policies and failure to reform their governance structures to share power with emerging economies has been blamed for strangling public spending, deindustrialisation and the dismantling of national development banks.

Many emerging countries also resent the World Bank’s environmental and social safeguards, which they see as compromising their national sovereignty. In response to this criticism, the Bank is revising its safeguards and enforcement mechanisms.

But weaker oversight by the World Bank would leave loan recipients to monitor and enforce environmental and social standards themselves – regardless of their resources or political will to do so – thus jeopardising efforts to defend the rights of indigenous peoples, resettle displaced people, mitigate environmental damage, or protect forests and biodiversity.

The weakening of World Bank safeguards might also trigger a “race to the bottom”, pitting private or state investors, new financing institutions and a deregulated World Bank against one another, while provoking a popular backlash. That is why it is important to have citizens’ groups that can step in to ensure that investments operate fairly. Though civil society groups have long monitored the “supply side” – the project financing – they often ignore the “demand side” – namely, the value and impact of the projects being implemented.

This is especially true for infrastructure investments in energy, water, transport, and information and communications technology (ICT). The Programme for Infrastructure Development in Africa (PIDA), for example, has planned 360 billion dollars worth of “bankable mega-projects” in these sectors by 2040.

PIDA gives priority to energy (especially hydropower) projects to support mining operations and oil and gas pipelines, while sidelining renewable energy technologies, such as solar, wind and geothermal. Similar concerns surround the “pipelines” of projects in Asia and South America.

Though some PPP projects offer high returns, they also demand hefty additional guarantees from the host government to offset private sector risk. In this way, fundamental tensions are created, both in the way these deals are put together and in the overall conduct of North-South and South-South integration.

For example, powerful groups and transnational corporations are gaining influence within the G-20, the G-7 and the BRICS, whose members compete among themselves for access to resources and markets. That competition now features new Infrastructure Project Preparation Facilities (IPPFs) to accelerate and replicate large PPPs with a disturbing reliance on big dams and fossil-fuel infrastructure.

Indeed, the struggle for sustainability, especially in Africa, is becoming a new battleground, featuring deployments by the BRICS, the G-20, Asia-Pacific Economic Cooperation (APEC) and other international groupings and local vested interests. To understand how this plays out requires a rigorous new development paradigm.

That is a difficult challenge, because civil society organisations with the greatest interest in learning how to cope with the new pressures tend to specialise in specific development areas, such as the Millennium Development Goals (MDGs), or sectoral issues, rather than having a broader view of how development finance institutions and their big shareholders operate.

In Africa, pan-African bodies charged with coordinated oversight and agenda-setting authority should be judged by whether mega-PPPs in infrastructure reinforce a colonial-style extraction and consumption economy, or create a healthy and sustainable economy for generations to come.



By Nancy Alexander, Francis Kornegay
Nancy Alexander is a programme officer at the Heinrich Boll Foundation. Francis Kornegay is a senior research fellow at the Institute of Global Dialogue, University of South Africa.

Published on October 19, 2014 [ Vol 15 ,No 755]


SHARE :
               


Editorial

With a reformist administration in charge of the executive, there has b...


Agenda

The new electricity tariffs that became effective on December 1, 2018,...


Fineline

Who it is that midwifed the rapprochement between E...


Commentary

Ethiopia’s economy is at a crossroads. The same old advice will not s...


Viewpoint

A recent photo between Prime Minister Abiy Ahmed (PhD) and George Soros...


Opinion

The future is bleak. Millennials and younger generations who will inher...


View From Arada

There is heated debate on the propriety, decency and morality of breast...




Business Indicators




ADVERTISEMENT



Editors Pick















//