PPDP: controversial rather than coherent

Le siège principal de Swiss Re à Zurich.
Article as analysis
Win-win – everyone benefits. That is the promise held out by the closing of ranks between State and private sector. Alliance Sud looks at the stumbling blocks.

The Swiss Agency for Development and Cooperation (SDC) is following the international trend and planning to step up its engagement with globally active Swiss corporations. Alliance Sud has taken a critical look at the new guidelines for these «Public-Private Development Partnerships» (PPDPs): Who benefits from this cooperation? Is SDC paying sufficient attention to the fact that PPDPs involve a clash of two fundamentally different «business models»? The private sector lives from competition and profit maximization, which entails not least of all the protection of business secrets. SDC on the other hand has a duty, as a public donor, to serve the common good and to disclose its data. That is the sole source of its legitimacy to get involved in the development plans of the poorest countries through its projects.

In its guidelines published at the beginning of the year, SDC describes these challenges in a nuanced manner. But what is the situation in practice? The evaluation of the PPDPs existing up to now is long overdue. An outside consultant was commissioned in May to prepare a report by August. It is yet to be seen whether this will dispel misgivings as to the suitability and effectiveness of PPDPs. The SDC Controlling Division presumes that the available data can only allow for general statements about the scale of SDC's PPDP involvement, but not about qualitative aspects, as many private partners were not required to render any detailed account.

This situation has arisen because up to now, decentralized structures have allowed each division and each cooperation office in the field to launch partnership projects with private companies. Numerous programmes therefore came about in an uncontrolled manner, including a vocational training initiative in South Africa, a Nestlé programme for milk producers in Pakistan, a worldwide pilot project for micro-insurance by Zurich and a joint-venture with the pharmaceutical industry to develop new anti-malaria drugs. No evaluation was ever made of the relationship between development benefits and the advertising effect of these programmes, or whether companies – thanks also to the SDC quality seal – were able to tap into new markets.

SDC principles

With the new guidelines SDC wishes to regulate PPDPs more tightly. Unlike the case of numerous European countries where development money is used to replenish generous funds for PPDPs, in SDC they are to be used only when they are superior to other forms of programmes. There is controversy in SDC over claims that private-public partnership projects are opening up new and additional sources of funding, and over their supposed cost efficiency. This mirrors the frequently heard criticism that PPDPs constitute a new form of «tied aid» – in other words, the hidden promotion of one's own economy under cover of development.

According to the SDC guidelines, Switzerland wishes to embark on new avenues. It presents itself less as a promoter than a tamer of the private sector. Hence it wishes not only to harness already existing activities by Swiss companies abroad for development purposes but also to influence their environmental and social behaviour. In the future, it will no longer be sufficient merely to embrace a voluntary UN Global Compact. Instead, SDC expects its private partners to put forward concrete plans to strengthen human and labour rights and protect the environment, as well as concepts for the settlement of disputes. It is gratifying that SDC intends from now on to make all PPDPs subject to independent monitoring throughout all programme phases, should the relevant criteria regarding the developmental utility of PPDPs also be established.

SDC distances itself from projects involving the privatization of public infrastructure as well as from companies in the commodities sector, whose business models virtually rest on the lawlessness and impunity prevailing in developing countries, and in so doing is displaying sensitivity to the possible risks of PPDPs. At worst, the good reputation of Swiss development cooperation is on the line. This is why it wishes to prevent a situation in which companies utilize public monies to tap into new export markets and areas of investment as a way of getting around the stagnating economic situation in the industrialized countries. Now there is even mention of the possibility of terminating partnerships. SDC does not think much of the call to exclude from partnerships internationally active corporations that are accused of human rights violations or of damaging the environment. More important than flawlessness throughout the world is the readiness to recognize mistakes and to take concrete measures in the event of challenges.

It remains to be seen whether SDC will heed the urgings of Alliance Sud to seek more partnerships with public service providers (e.g. Swiss water supply companies), cooperatives or local companies in the future, something that would surely be more positive for SDC’s image.

Public and democratic participation

In addition to the risk to the reputation of official development assistance posed by careless and selfish dealings by major corporations, the main developmental achievements attributable to PPDPs are under threat: the «ownership principle», that takes recipient governments on board in decision-making processes, and the «use of the country’s systems», which calls for close cooperation with local public and private players in implementing development programmes. Both are missing from the SDC guidelines. Also completely missing is mention of any scope for those directly affected to have a say and to file complaints. This is all the more displeasing given that in recent months, numerous complaints have come to light against Swiss companies active abroad.

Convinced that today’s innovative programmes call for cooperation with the private sector, SDC is distancing itself from any blanket suspicion towards PPDPs. New instruments for development cooperation are honourable; partnerships with large corporations, however, entail the risk of running counter to the approaches followed so far. No monitoring that is adapted to the business logic of big corporations will prevail against this.

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Developmental effectiveness for PPDPs – suggestions for a quick check

  • Were lessons learned from past partnerships and alternatives sufficiently examined?
  • Is there an additional developmental benefit which the private company would not have realized without public financing?
  • Can the displacement of local providers be ruled out?
  • Is adequate attention being paid to human and labour rights as well as environmental protection?
  • Is the reporting transparent and is success being independently tested?
  • Are the rights to a say in beneficiary countries being respected and is local expertise being used?
  • Does the choice of instruments follow a coherent development concept?

 

Article published in: Alliance Sud News No. 75, Summer 2013