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PPPs line private pockets with public money

13 July 2004

PPPs line private pockets with public money

Green Co-Leader Rod Donald says those behind today's call for Public-Private Partnerships (PPPs) in infrastructure development are thinking first and foremost about private profits, rather than the public good.

Former National Party leader Jim McLay is fronting a campaign for PPPs as chair of the newly formed New Zealand Council for Infrastructure Development (NZCID). McLay said today there is an "urgent" need for the NZCID and the PPPs it advocates to solve "the nation's infrastructure woes".

"Public-Private Partnerships are all about lining private pockets with public money," said Mr Donald, the Green Party's Finance Spokesperson. "'Think Big' projects like the Maui gas contract and the Methenex synfuel plant are examples of typical PPPs - the private sector takes the profit and the public sector carries the loss.

"Yes, New Zealand needs substantial capital investment, but big business is only interested in big projects because they return big profits. It is very easy to think big is better, but really, small is smarter. 'Big bang for your buck' thinking is so last century.

"The infrastructure challenges that New Zealand faces require flexible responses that increase sustainability and economic security, such as numerous wind farms and other distributed energy sources, rather than single 'silver bullet' solutions that compromise our environment and quality of life, like Project Aqua.

"New Zealand's net government debt will be below ten per cent of GDP by 2007, so the Government is not facing a capital constraint. In general, the Government can borrow money more cheaply than business; why would you want to effectively pay out, say, an eight per cent return to a private partner when you can borrow the capital yourself for six per cent?

"In any case, there is no need for the Government to borrow because it is sitting on billions of dollars in its Superannuation fund. That money would be doing more to insure certainty and security in retirement for New Zealanders if it was invested in sustainable infrastructure here instead of being gambled on overseas share markets, as it is at the moment.

"Claims that PPPs are more efficient are mischievous; no one has ever shown that the efficiency gains to be had from a PPP deal cannot be equally achieved through the builder being properly contracted.

"And suggestions that PPPs allow the risk to be spread ignore the low-risk nature of the very projects being proposed. No one is going to close a road or a power station once it is open, so when PPP-funded projects go bankrupt, as they occasionally have overseas, the public sector always has to bail them out. There have also been examples of Governments having to compensate PPPs because they haven't reached their profit target.

"Jim McLay previously fronted the Wholesale Electricity Market Development Group, so people should be aware that today's call is coming from a man who played a key role in the wholesale electricity reforms that stand in the way of resolving our current energy crisis," said Mr Donald.


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