Listen to the first part of a radio programme about public private partnerships in the UK. Complete the notes with between one and four words in each gap.

Traditionally, public private partnerships in the UK are related to ............ ¹such as............ ²and............ ³services in hospitals. The Private Finance Initiative (PFI) is different from earlier partnerships. It is now the main way that the UK government finances............ ⁴. PFl allows the government to build new............ ⁵ projects without ……………………….⁶.A wide spectrum of projects are funded using PFI, for example new ............ ⁷ and waste-disposal systems. PFI projects now tend to be much bigger than they were............ ⁸ ago.

Listen to the second part of the discussion and complete the summary of the arguments for and against PFI projects.

Arguments in favour of PFI Criticisms of PFI projects

1. The-government can commission 1.

public services it couldn't otherwise afford

Partnerships

Complete these sentences using the correct form of the words given in brackets.

1.Privatisation.. (private) is the full transfer of publicly owned assets into the private sector through a sale on the stock market.

2 Critics argue that............(compete)............(tender) for public services emphasises cost-cutting over quality of service.

3 The............(run) and............(maintain) of this public hospital have been............(source) to a private company for the next five years.

4 Government............(spend) on transport, roads and railways has declined in the past 30 years, and many services have now been ............(private). Nonetheless, the private............(own) of rail services is proving to be controversial in the UK.

Infrastructure: Experience of the 1990s has put people off!

By Sarah Murray

1. The failure of inefficient and under-funded govern­ments to provide citizens in the developing world with essential services such as water, power and sanita­tion provides a compelling argument for private sec­tor involvement in these activities. However, it is dif­ficult to persuade compa­nies to participate when pricing remains too low to repay investments, and when lenders are reluctant to back projects in places where political risk is high.

2. Private money flooded into infrastructure projects in the 1990s, particularly power projects in Asia and Latin America, which was a target for multinationals that invested widely as for­mer state monopolies were privatised. But as problems emerged - both in the region and in companies' home markets - many with­drew, and today Latin American countries are embracing the privatisation of energy resources with less enthusiasm. Even if investors could be tempted back into power or water distribution projects in emerging markets, the high­er tariffs associated with private systems are often politically unacceptable.

3. 'The private sector not only has to improve opera­tions and collection, but also has to increase the level of investment and cor­rect for historical under­investment,' says Francisco Toureilles, director for infrastructure at the Inter­national Finance Corpora­tion (IFC).

4. In the case of water, pas­sions run high, with many arguing that access to water is an essential human right that should not have to be paid for. However, Michael Klein, vice-presi­dent for private sector development at the World Bank and IFC, points out that many are paying for it already. Those without access to water, he says, are often forced to buy from vendors, paying ten times or more than people connected to modern water systems. 'The idea that you can't raise prices because it's not affordable is, in many cases, just plain wrong,' he says.

5 But even if the argument for a private-sector role in infrastructure development has been won, the question is how to persuade business to participate, particularly since the experience of the 1990s has made companies and lenders more risk averse. 'Companies got badly burned in Latin America,' says Dan Bond, who co-chairs the Experts Group on Developing Coun­try Infrastructure Finance. 'They invested heavily before the regulatory regimes were worked out, so they were building the foundations on shifting sand.'

6 Another difficulty is that infrastructure projects gen­erate local currency rev­enue, while the long-term financing is in dollars or euros. A sudden devalua­tion, such as the 1999 Brazilian currency crisis, means that what seemed a promising enterprise can

no longer service its debt. 9 'We're trying to figure out how to get projects' spon­sors interested again, and one of the key things we see is some type of risk sharing between the public and pri­vate sector,' says Mr Bond. 'Because the private sector is certainly not going to step back in and take the kind of risks it did in the 1990s.'

7. Besides financing diffi­culties, recouping invest­ments remains a challenge. The World Bank estimates that power prices cover an average of about 60 per cent of the costs, while water prices cover just 30 per cent. 'So whether it's public or private, if nobody 10 pays for this stuff, it does­n't get built,' says Mr Klein. 'The private sector can't recoup the investment, and the public systems don't get expanded and become decrepit.'

8. The participation of multilateral institutions is seen as one answer. The IFC hopes to foster public-private partnerships by providing upfront financ­ing, advising governments on how to structure con­tracts and establishing transparent processes, thus creating conditions it believes can attract investors.

9. Mr Klein believes other opportunities lie between! big government and donor-l funded projects and primi­tive systems such as collect­ing water from bore holes] or using wood as fuel. Local entrepreneurs, hej says, can provide services that, while more expensive! than modern systems, are] an improvement on what is available. Here, govern-| ment legislation is the! obstacle. In Africa, nation­al electricity companies supply power to little morel than 10 per cent of the pop-] ulation, and yet most! African countries forbid! the building of intermediate] electricity systems.

10. In the few places in the j world where this is permit­ted - as in Yemen and Cam-⁵ bodia - hundreds of small] companies have bought! generators and established] wires connecting neigh­bourhoods or villages. 'Prices are higher than for! national systems, but there are no modern systems, so] people prefer this to noth­ing,' says Mr Klein. 'This! isn't a perfect world. But it's second best in a world] where the best is far away.'

Date: 2016-03-03; view: 2213