PPPs Could Spell Trouble For NZ And National
August 7th, 2008
The country’s largest daily newspaper, the NZ Herald, has been extremely pro-National in most of its editorial content but this week it took aim at the party’s plans to look at public private partnerships (PPPs) to fund new transport infrastructure. Here in part is what the paper had to say in its editorial of 5 August.
“… public private partnerships should also come with a caution. Business is often very keen to share any profits of public projects, less keen to share any losses. But unless private investment stands to lose should the project not produce the expected returns, the economic value of private participation is diminished.”
The fact a conservative newspaper should sound such a clear warning about the pitfalls of PPPs should highlight to National bringing in private capital to help boost the country’s transport infrastructure comes with fish hooks. Firstly, given the patchy track record of such partnerships overseas such as in Sydney, it can be expected any private sector backers will want some pretty hefty guarantees from Govt surrounding financial viability. If, for example, traffic volumes on a private road fail to life up to projections, private investors will push for any revenue shortfall to be met by taxpayers effectively creating subsidised profits.
Priorities Questioned. The impact on transport infrastructure priorities must also be called in question. What may turn out to be the most profitable investment for private investors may not be a project which is of most national importance. A toll road to cut commuting times for affluent people living near a major city may be an easy way to make money and so attract private capital to help finance it. However, it is likely the public contribution to the project would be better spent elsewhere, for example, upgrading a dangerous or substandard rural highway which carries valuable export commodities to port. Such distortions are far more likely to occur when commercial imperatives start to influence decision making.
Copyright © Media Information Ltd
NZ Transport Intelligence Briefing
Amalgamated Dairies
Strait Shipping