Saturday, May 25, 2013

National Assembly adopts Public Private Partnership Law

A look at the websites for international development agencies, shows a great deal of attention being paid to public-private partnerships. In El Salvador, a  public private partnership law (the "P3 Law") supported by the Funes administration and the United States, would create a legal framework allow an increased use of such partnerships.  The National Assembly just passed the law on a unanimous 84-0 vote.

What is a sometimes known as PPP or 3P, public-private partnerships can take a variety of forms. At its simplest, the government can hire a private contractor to perform a task which might otherwise be performed by government employees. For example, the government could hire a private contractor to build a highway rather than using Government employees to build the highway. The deals can grow increasingly more complex with the private entity making on more and more functions which are traditionally performed by government entities with public employees. An example of this could be the private prison industry where private corporations run the prisons in a state or country.

One of the primary criticisms of such partnerships rests in the motivations of private contractors. The private entity exists to generate a profit for its shareholders, whereas the government entity is, theoretically at least, motivated by the well-being of its citizens.   A loud voice of protest against the partnership law comes from El Salvador's public employees.  Public employees often have greater work and labor rights enjoyed by private sector employees. The public employees fear that outsourcing to these partnerships will result in a loss of public-sector jobs as well as new replacement jobs which lack labor guarantees and where the incentive of the private actors is to hold down wages and labor costs as much as possible.   You can see some of the other criticisms which were advanced against passage of the law in this 2012 article from Revista Envio.

Public-private partnerships are often touted as a way to bring the knowledge and expertise of large multinational corporations to bear on the delivery of public-sector goods and services. Currently public-private partnerships are proposed in connection with large infrastructure projects such as airports, bridges, courts and railways.   According to ContraPunto, the first two partnerships being contemplated are in connection with improvements at the country's international airport and the development of a wind energy farm.

The United States Embassy in El Salvador had been openly supporting passage of its public partnership Law in El Salvador. The support goes along with the two primary US foreign aid initiatives in El Salvador, the Partnership for Growth, and the possibility of a second round of funding from the Millennium Challenge Corporation.  Such support generated great suspicions among various groups in El Salvador that the US is simply looking for more business opportunities for the multinational corporations which could act as outsourcing contractors.

A further fear is that the process of negotiating, awarding, and later monitoring and enforcing such contracts will be rife with corruption.   El Salvador still lacks strong governmental institutions and processes which can make sure that such contracting is done in the public interest.   The Funes government has made steps forward in transparency, but the job is not finished, and there is no guarantee that the next administration will have the same commitment.  

That being said, the prior history of El Salvador's government in delivering services or building infrastucture projects is hardly a model of success.    Patronage jobs, nepotism, and employees who are paid for doing very little are found in every branch of the Salvadoran government.  

The P3 law will put more power in the executive branch to enter these kinds of contract relationships and concessions with big business and multinational corporations.   Now that the executive branch can invite foreign business to invest in El Salvador's public sector, the Salvadoran people and civil society will have to hold the president accountable for the use of the power.

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