Partnership with the private sector

Agreement and disagreement on the future shape of the PPP programme

Where there is not always agreement, of course, is about the weaknesses identified by evaluators and the proposals for improvement. In the present case, representatives of German business would like to see public co-financing of their investments kept as "unbureaucratic" as possible and are not keen on the idea of PPP measures being coordinated with bilateral DC programmes or on the introduction of the kind of independent efficiency control standards that are found elsewhere in development cooperation. That attitude is a legitimate one for a pressure group. However, as companies receive taxpayers' money from the development budget for their projects, there needs to be a guaranteed minimum of public efficiency control.

The evaluation recommends moving away from small-scale one-off measures that have little structure-building impact and switching to the promotion of stategic alliances (fewer measures with greater volume, possibly longer running times, involvement of institutional sponsors and civil society). This would boost the significance of the measures, permit synergies with Technical (TC) and Financial Cooperation (FC) measures and make efficiency control easier. The establishment of priority areas has also gained acceptance in conventional DC – and rightly so. In principle, the BMZ and GTZ endorse this recommendation. Ulrike Haupt (BMZ) sees PPP measures as "pilot projects … (which) are a starting point for strategic alliances with the private sector". Also, "PPP projects in the future should be pitched more frequently at what is known as the meso-level ... (so they) will make a greater contribution to structure-building and sustainable development in partner countries." Consequently, the BMZ commissioned the DIE to conduct a study looking for opportunities to continuously develop the concept of public-private partnerships further. Graf von Hardenberg (GTZ) even describes the programme's initial focus on "small projects with a modest impact" as "teething troubles" that have now been overcome and points to PPPs at GTZ which are moving in the direction of strategic alliances and which he would like to see encouraged. The BMZ, however, also stresses the need to continue realising small-scale single projects. This line is endorsed by the Association of German Chambers of Industry and Commerce (DIHK), DEG and InWent, which see particularly innovative potential in the diversity of small single measures and thus believe the original business-related concept would be unrealisable if PPP were to be tied to current DC priorities. There is a conflict of objectives here. The BMZ is evidently steering towards a compromise, which still needs to be defined more precisely.

The evaluation report also points out that partner countries at present have no influence on PPP measures. The BMZ, in its article, accepts the evaluators' argument in favour of establishing PPP as a constituent part of government negotiations and agreeing on "PPP windows" to enable priority-compliant PPP measures to be acquired without red tape at a later date.

Where there is disagreement between the DC institutions participating in the PPP programme is over the line that should be taken on distortion of competition. The evaluators state that public co-financing of private-sector measures which are open to only German or European companies distort competition in the partner country to the detriment of local firms and do not comply with the OECD's call for untied assistance. When the BMZ argues that German DC is open to cooperation with companies in Germany, Europe and partner countries "as a matter of principle", this is certainly true, but it does not alter the fact that PPP facility funds are not available to companies from partner countries.

The DIE report states that in some instances companies received funds without making any developmental contribution. Even if this probably happens only in isolated cases, and the number of such cases has been reduced by better project supervision, the problem still remains that 'windfall' effects cannot be systematically ruled out. This assertion remains uncontested, although assessments of the extent of windfall profiteering differ.