Open letter to donors contributing to the Public-Private Infrastructure Advisory Facility

01 May 2007

Dear PPIAF donor, we are part of a coalition of civil society organisations which has been monitoring the work of the Public-Private Infrastructure Advisory Facility.

Dear PPIAF donor,

We are part of a coalition of civil society organisations which has been monitoring the work of the Public-Private Infrastructure Advisory Facility; this follows the publication of a report, Down the Drain (November 2006), which assessed the work of PPIAF (in the area of water) since its creation in 1999.

The report made many criticisms of PPIAF, and since it was published, the government of Norway has announced that it will not support PPIAF in the future. In particular, the Norwegian ministry of foreign affairs has said that it no longer views PPIAF as a means to solving the problem of access to water for the poor. A further reason given for the withdrawal was PPIAF’s bias towards private sector ‘solutions’.

We are aware that the Program Council of PPIAF will meet in The Hague on 23-24 May and that you will be asked to re-confirm your political and financial support for PPIAF at this meeting. We ask that you review your support for PPIAF’s water work in the light of its obvious flaws. PPIAF’s mission is to “help developing countries …tap the full potential of public-private partnerships in infrastructure”. In particular, PPIAF has told us that because of “tight fiscal constraints and stagnant ODA” developing countries have to look to the private sector to bring investment if they are to meet the MDGs.

We deeply regret this decline in overseas aid, especially as it relates to water and sanitation. Although some donors are now working to reverse this decline, we criticise the extent to which, on a collective basis, donors are seeking to escape this reality by trying to leverage private money into the water sector. Afterall, the evidence shows that the private sector has shown a great reluctance to commit finance to connecting the poorest people to clean, affordable water.

In Down the Drain the authors found 18 developing countries where PPIAF was operating and where international financial institutions or donors previously or subsequently set out one or more conditions relating to water services and privatisation. As the report makes clear, the relationship between PPIAF and conditionality is complex; we consider it to be disingenuous to ignore these conditions and argue that PPIAF is fully demand-driven.

We consider PPIAF’s ‘consensus building’ work to be amongst the most unpalatable of all its activities as it works to convince stakeholders about the ‘benefits’ of public-private partnership reforms. Genuine, open-minded, independent consultation on all possible options for water utility reform, which includes the wide range of public management options, is clearly appropriate. But, PPIAF’s priority is “to work through a broad range of public-private partnerships, choosing the arrangements that best fits the infrastructure sector and the political and institutional context”. We also have strong concerns about the way in which PPIAF operates. We note the non-existent developing country membership of the Program Council which governs PPIAF; as PPIAF says it is “owned and directed by its participating donors”.

The Down the Drain report also criticises PPIAF for a lack of transparency regarding its activities. In the light of these criticisms, there are very serious questions to be asked about whether donor funding for PPIAF’s water projects can be considered to be the most effective and appropriate expenditure of this aid. Our conclusion is that this aid could be better spent and we ask donors to withdraw this funding.

We are aware that at the May Program Council meeting there will be discussion about “a new window within PPIAF to support sub-national entities and select public enterprises as they access market-based private financing to invest in improved service delivery”. PPIAF has said that we should be “happy” about this as this addresses another important criticism of PPIAF in Down the Drain, namely the lack of PPIAF support for public-led reforms such as those possible through public-public partnerships. No information on these proposals is available on PPIAF’s website; however, from the little that we do know, we feel strongly that this proposal is very far removed from the agenda that was put forward for donors in Down the Drain in the area of public sector reform and public-public partnerships. That report said: “It is clear that a new facility is required to promote public-public partnerships; one which places commitment to the public sector at the heart of its ethos.

It would not be desirable to add public-public partnerships into the remit of PPIAF, an organisation which is set up to promote private sector participation. A wholly new organisation is required to address the criticisms of the way in which PPIAF operates and which employs staff with experience of, and commitment to, public provision of water and sanitation services.” We urge donors to oppose the extension of PPIAF’s remit and instead to collaborate together to create a wholly new mechanism to support public-public partnerships in the water sector.

In recent months, several PPIAF donors (UK, Japan, Asian Development Bank, as well as Norway) have indicated support for the UN-Habitat proposal for water operator partnerships; we believe that this agenda should be followed vigorously with strong political and financial support as part of an alternative strategy to funding PPIAF. A number of us have approached PPIAF for permission to observe the Program Council meeting in The Hague; you should know that our request has been rejected.

Yours faithfully,

Corporate Europe Observatory (Netherlands)

FIVAS (Norway)

Friends of the Earth International

Transnational Institute

World Development Movement (UK)