PPP evaluated and controversial
The Focus articles in this issue of D+C should be read along with the ones that appeared back in the April issue. They complement one another and together provide a good overview of the concepts on which development cooperation with private enterprise is founded, and the problems inherent in it. The reason that the subject came to be treated in issue No. 4 was that the Aid Evaluation Division of the BMZ had commissioned an evaluation of the PPP facility and we felt it would be interesting to publish a summary of the results. A great deal had already been written about PPP, from both a conceptual viewpoint and a political one. Since the idea of the instrument was to mobilise more money a commodity in short supply in the development sector and since privatising public services is perceived as a solution in other policy areas too, great hopes were placed and still are placed in this instrument as a tool of development cooperation as well. Critical views had also been published and like the positive comments were based more on political premises than on researched facts. Now, a first cross-sectional evaluation was to provide empirical data showing whether PPP was the right way forward and what mistakes (which are inevitable with a new instrument) had been made. We wanted to make the evaluators' findings accessible to D+C readers.
The results of evaluations are often controversial. That is in the nature of things. Evaluators are supposed to hold an independent position (otherwise there would be no point in doing evaluations), and if they reach conclusions which differ from those of the people they evaluate, there is a dispute. But dispute is something fruitful; according to Herakleitos, dispute is the father of all things. But not everyone sees dispute as an instrument of truthfinding. In the case of PPP, it seems there was also unfruitful dispute, even calls for the final report to be partially re-written. That kind of demand devalues evaluation as an instrument. Having said that, it must be added that both evaluators and implementors are entitled to their mistakes as long as they learn from them.
Our April issue rubbed salt into a few wounds. As the evaluation was controversial, some felt that those responsible for PPP at the ministry should have had a chance to state their case. However, controversies within ministries take place behind closed doors so D+C was at first entirely unaware of the problem. Also, there were numerous ministry publications on PPP already available, so it seemed reasonable for D+C to publish what was new the evaluation and not to re-broadcast what was old. But there is no objection to giving the relevant BMZ division another opportunity to comment; that is what we do in the current issue. At the same time, from both the private sector and other implementing organisations it was pointed out that they too had made major contributions to the development of PPP that were worth publishing. The present issue offers an opportunity to do that as well, rounding off the overall picture.
So what is at the heart of the debate? Certainly, the biggest bones of contention are the amount of developmental added value that would not have been realised without private-sector participation and, conversely, the incidence of "windfall profits" reaped by the private sector. But what are windfall profits? They are profits which are realised where a subsidy or other financial incentive is granted for an investment that would have been made even if no incentive had been offered. This definition can be found in business dictionaries (such as the well-known Gabler) or even in the Brockhaus. Michael Blank (arguing from the vantage of the private sector) tries to obscure that connection when he defends windfall profits in his article in this issue. Their purpose is, he says, to "motivate [companies] to make an entrepreneurial commitment which they would not make without the back-up provided by the state." That would be legitimate but is not what is called windfall profits. So it must be stated again: windfall profits can have no legitimacy in the context of development policy.
Another issue of fundamental importance is that of isolated single projects. In a learning process of several decades, the actors of development policy have come to realise that isolated projects bring only temporary relief, not development, and that development stems from structural change only, so development policy requires strategic gearing. Michael Blank has only one argument against this: "What would better suit the business community is the retention of the present appropriation of funds." No doubt it would but that cannot be a reason for shaping development policy; where no developmental benefit is anticipated, BMZ money should not be spent. At the end of his analysis, however, even the representative of the private-sector concedes that his case does not carry much weight, and he offers, as an alternative, the proposal that the private sector ought at least "to be involved in the proposed sectoral projects at a much earlier stage". This is an idea well worth considering, and it is hard to think of a reason for not accepting it.
The two examples show the gulf that still exists between the perception of PPP by policy-makers and by the private sector. A great deal of clarification still needs to be done. What would also be welcome is if political authorities and representatives of government aid agencies were to see the dividing line drawn by the evaluators as a helpful analysis and not an assault. Anyone who speaks of a "so-called cross-sectional evaluation that was way off the beam" is certainly not promoting better understanding.
Reinold E. Thiel