PPP mistakes spreading around the world

I’ve just come back from a trip to St Petersburg where, at the instigation of the Bankwatch organisation,  I gave a talk to activists fighting against various transport schemes which are to be funded by Public Private Partnerships. I came away deeply depressed at the situation in Russia but full of admiration for these brave campaigners, standing up to a state that is all-powerful and utterly undemocratic.

Of course, to a country like Russia a PPP seems like a great idea as they think it means they will get infrastructure without having to pay for it – or at least far less than otherwise. So they come up with grand schemes – the one in St Petersburg involves a road by-pass around the City that would cost a staggering $6bn – and then try to get the private sector interested, with lavish displays of hospitality and all kinds of inducements. There is undoubtedly corruption at play here on all sides, because on the face of it such schemes seem to be massively expensive and yet offer few real benefits.

The scheme itself makes little sense with hugely optimistic traffic forecasts. In environmental terms it would be massively damaging, especially to the Yuntovo forest area north of the city. In transport terms, it merely encourages the generation of more traffic in a city which desperately needs better public transport, though it already has an excellent metro which serves the central areas.

The scheme is currently on hold following the world financial crisis but is kept alive because of promises of funding from the European Bank for Reconstruction and Development, the state-owned belonging to 59 countries across Europe. If it were not for the bank, such schemes would never get off the ground.

Above all, one has to admire the courage of people prepared to resist these schemes. The Russian state barely makes any pretence of democracy and is entirely dominated by Putin and his cronies. A group of activists from the Yunklovo forest area wanted to stand as candidates in the local elections but were prevented from doing so by bureaucratic obstacles deliberately put in their way, such as demands to prove that signatories were valid. It does show what an easy time of it we have here.

  • Dan

    V interesting post. One would have thought that for the bank to want to ‘do business’ within a state it would surely want to be sure it was a solid democracy with some gaurantees it would honour its pledges – eg in the event of financial default. I suppose if you raise that question it starts to open up discussion about the democratic status of much of the ‘new europe’ which is probably off the agenda for all sorts of reasons.

  • If Russia were to default on loan repayments, it would lose a lot of credibility from outside investors. Given that even a dictator needs to fund his megaprojects somehow, it’s rarely a good idea to argue with the accountants. You can always cut the flow of money to something else.

    This view of private enterprise cooperation as some kind of universal panacea has played its own part in our own national infrastructure’s problems. You won’t see many PPP or PFI projects focused on untangling the odd junction or other, “quick-win” tweaks to existing infrastructure to remove long-standing bottlenecks. It’s hard to make a profit from a new roundabout or a few hundred yards of dive-under. It’s much easier to ‘sell’ a megaproject of some sort, where the potential for profit is greatly increased. The result has been a rise in new infrastructure, but at the expense of fixing long-standing problems with the old.

  • As an illustration of my point above, consider the East London Line Extension project. This is intended—at least in part—to provide London with an orbital rail route. Which is nice, except most commuters using the railway south of London want to get to work. *In* London! The ELLE works will *remove* capacity for such services.

    The ELLE is classic sleight-of-hand. No new capacity is being added—quite the opposite! No major junctions are being adapted to provide much-needed grade separation to improve flows. (There’s one at New Cross Gate as the proposed services couldn’t have been provided any other way.) Nothing at Brixton. Nothing at Peckham Rye, which has junctions at both ends. Nothing at Battersea either. Both major branches will diverge at Surrey Quays, but even there it’s all at-grade. Yet all this is taking years to build at great cost.

    To what end? What does London need an orbital rail route *for*?

    If it’s to provide improved east-west journeys with easy interchanges, it fails utterly: how does someone from Greenwich get onto it? How do people from Lewisham access it given how few services run via Nunhead and Peckham Rye? The decision not to restore the high-level platforms at Brockley is another example of the penny-pinching design of this project. Why remove useful journey opportunities—Brockley has very poor connections even by road, particularly with nearby Lewisham. An interchange here would also have granted easier access to Sydenham and Croydon, both of which are awkward to get to by other means from Lewisham and Catford, thanks to the sick joke that is the A205 South Circular.

    The ELLE creates more problems than it solves. But it’s going to be built anyway, because it means banks can screw some more money out of the taxpayers. And lord knows the banks could use the money right now.

  • Dan

    Isn’t it something to do with the Olymipic officials being billeted in Croydon or Purley or some such…?