Wednesday, November 26, 2008

Private sector doesn't want PPPs

For the past three years, National has been holding up Public-Private Partnerships (PPPs) as the answer to New Zealand's problems. Need another hospital? Use a PPP. Need more roads? Get the private sector to build them and toll them. Want more prisons? The private sector is the answer.

Unfortunately, the private sector disagrees. Fletcher Challenge, New Zealand's largest construction company and the likely prime contractor for any privately operated roads, has criticised the concept, saying that many projects are too small, too risky, and the costs of bidding are likely to be too high to make competing for a PPP contract worthwhile. They also doubt that private sector funding would be available in the current economic climate. Instead, they think the government should just raise debt and do the project the usual way. Of course, this defeats the primary purpose of PPPs: hiding debt off the balance sheet, so politicians can present a rosier version of the government books. Which makes it a real problem for National. What if they offered a PPP and nobody came?

Sadly, I suspect National's answer will be to sweeten the pot by not fully transferring the risk - i.e. giving PPP contractors money for nothing. This would be a bad deal for the public, but one which fits perfectly with National's metapolicy of diverting public money permanently to the private sector. To them, PPPs are not about getting a good deal for the public; they are about looting the state for the benefit of their donors and cronies.