- Development & Aid
- Economy & Trade
- Human Rights
- Global Governance
- Civil Society
Monday, March 27, 2017
- For several decades, governments around the globe have turned to privatisation as the best option to help relieve the world’s destitute by providing them with health care services, water and electricity. By and large, however, this effort has failed.
If public pension and other government funds redirected their investments, it says, they could help provide improved access to water, energy and health services for the world’s poor. Municipal Services Project is an organisation that researches alternatives to privatisation and the commercialisation of public service provision.
“Public funds should serve to reinforce much needed public services,” David McDonald, co-director of the Municipal Services Project, said.
The research initiative is co-directed by Queen’s University in Canada and the University of the Western Cape in South Africa, with other partners including the Universidad Mayor de San Simón in Bolivia, as well as NGOs such as the Bangkok-based Focus on the Global South and the Accra-based Africa Water Network.
An approximate sum 75 billion U.S. dollars is needed to bridge the global public services gap, mainly in the developing world, where up to two billion people lack access to basic services such as water and sanitation, electricity and health care, says the report.
So how can countries close this gap? The Municipal Services Project suggests taking advantage of two types of funds: public pension funds, made up of contributions from public employers and employees; and sovereign wealth funds, through which governments collect and invest revenues from natural resources, budget and trade surpluses and other forms of state income.Together, these two funds manage as much as 10 trillion U.S. dollars worldwide and invest heavily in the private sector, seeking – though not always achieving, in the volatile current economic climate – an average return rate of seven percent, according to the report.
Some funds currently invest in some public service providers, such as privately owned utility companies and infrastructure operators, such as those at toll roads and airports.
If the funds were willing to invest as little as 1 percent of their assets in publicly owned and operated infrastructure, argues the report, it could create an initial capitalisation pool of up to 100 billion U.S. dollars – 25 billion more than the 75-billion-dollar gap.
Investment in public services more beneficial
Research has shown, the report’s authors point out, that while investment in the private sector may be more profitable for shareholders over a period of one to three years, “regulated public utilities tend to be more reliable sources of income growth over the longer term”.
In fact, some public pensions funds are already being invested in ways that provide public services, although they usually do so through private firms, thereby complicating the picture.
The Ontario Teachers’ Pension Plan invests in three private for- profit Chilean water companies, for example, and has been pressured by activists to divest.
“Privatisation of public services has had disastrous development results,” Madeleine Bélanger Dumontier, spokesperson for the Municipal Services Project told IPS. When private entities are responsible for providing services that traditionally have been publicly provided, the poor tend to end up worse off.
The privatisation of the delivery of public services – water or electricity, for example – have offered “disappointing results”, the report agrees, explaining that these results occur even though “governments and international financial institutions have touted” privatisation as a “solution to…shortcomings”.
Ultimately, the report sees funds such as pension plans and sovereign wealth funds as an alternative source of public funding that could help bolster public services.
It points out that while no single model exists to subsidise the provision of essential services, including health care, to the world’s neediest, current experiments “suggest that the ‘public’ approach is alive and well, thriving with community participation and constituting a real alternative to privatisation”.
NGOs and researchers must collaborate
Donald Cohen, chair of In the Public Interest, a national resource centre on privatisation and responsible contracting, thinks the report is an important addition to the discussions about public-private partnerships. “There is massive need for capital across the world, and there are lots of pension funds which are looking to invest,” he said.
According to Cohen, fund managers might be more easily convinced to put money into public infrastructure rather than a single public service, because more money is involved and therefore more revenue is to be gained.
The question, however, is whether investors exist that are interested in not only financial profits but also in social well being, and so the report also looks into how fund managers might be convinced to invest in public service provision for those 1 to 2 billion people without adequate water, sanitation, energy and health care.
“We are proposing that civil society activists and fund members put pressure on pension and sovereign wealth funds, possibly working with governments, to commit some funds for ‘experimental’ purposes,” Bélanger Dumontier said.
This would require a major collaborative effort among researchers, NGOs, legislators and activists in both the North and the South, as well as the creation of a global coalition that can pressure funds, governments and even the United Nations to commit to a set of development goals and targets that allocate public funds for public services.
Education and information campaigns, which would inform the public as well as fund members about the nature of current investments and strategies of the funds, are one strategy the report suggests.
It also recommends lobbying legislators and politicians to change existing laws or impose new legal requirements on existing funds.
Fund members should, insists the report, use their power to actively contribute to the funds’ policy strategies and put pressure on the funds’ boards to redirect the investments.