The Importance of Transparent and Accountable Public-Private Partnerships in Burma

09.03.2020 | John Morrell

The National League for Democracy (NLD) government in Burma is under tremendous pressure to deliver tangible results to its constituents. However, the expectations placed on the government are more than it can currently deliver.

To help bridge this expectations gap, multilateral bodies recommend that the government mobilize private sector resources through Public Private Partnerships. The PPP is a mechanism for financing, building, operating and delivering public works and services, typically paid for by private sector capital. This mechanism involves formal collaboration between a government agency and a private company, and explicitly relies on the company’s profit motive to provide public goods. Under the military government, PPP projects were awarded to well-connected cronies, who were often sanctioned by the US government.

Currently, several high-profile PPP projects are under discussion with the aim of addressing desperate infrastructure needs in a cost-effective manner for the government. But such transactions are a source of massive corruption risk, given Burma’s weak institutions, long history of comradery, and low government capacity. Corruption scandals arising from unaccountable PPPs can undermine democratic legitimacy.

Often, the overseeing government agency is unable to provide the public good itself. It might lack requisite expertise, be unable to financially afford the project, or both.

In Burma, as in many emerging markets, the lack of transparency and accountability in public-private partnerships undermines democratic governance and increases risk of human rights abuses. Simply put, manipulated and non-participatory PPPs are a conduit for immense sums of corruption, they reward crony businesses that can wield political influence, they render openings for exploitative foreign powers, and they directly undermine public faith in governing institutions. The ongoing COVID-19 crisis, and its resultant impact on capital budgets across the globe, will likely increase the reliance on PPPs by the government of Burma, thereby exacerbating this source of democratic risk. CIPE is addressing this acute risk through an innovative program co-developed with the Bureau of Democracy, Human Rights and Labor (DRL) at the U.S. Department of State.

The immediate result of this CIPE initiative will be improved PPP processes and oversight, along with the ensuing public benefits that (properly run) PPPs can yield. The ultimate outcome of this initiative will be improved government transparency and accountability, which in turn will demonstrate how democracy can improve living standards, create new pathways for entrepreneurship, level the economic playing field, and incentivize responsible investment. In short, by cleaning up the processes and regulations surrounding PPPs in Burma, this project is helping democracy deliver.

Democratic Governance – The Context in Burma Today

The NLD government faces intense domestic and international pressure to deliver tangible results, ranging from the economy and security to public health and sanitation. However, the expectations placed on Aung San Suu Kyi’s (de facto) government far outpaces its ability to deliver. If this expectations gap continues to widen, the only democratic movement – and leader – most Burmese have ever known will fail in the attempt at democratic governance. The lack of any meaningful “democracy dividend” in Burma could erode public faith in democracy itself.

CIPE’s multi-pronged strategy to making democratic governance work and endure in Burma is to improve governance outcomes, enable civic engagement in public policy, promote responsible business practices, and democratize economic opportunity. However, Burma’s governance challenges are numerous, and many have been generations in the making; legacies of decades’ of central economic planning, autarky, and stratocracy. Such challenges will likely be generations in the solving.

Democracy must deliver for Burma today

If democracy doesn’t deliver, promises of progress tomorrow will lose what little credibility they have left. Identifying governance challenges that are both acute and realistically solvable is therefore a critical step towards helping democracy deliver, a step that is further encumbered by the oversaturation of international donors and NGOs present in recent years in Burma.

CIPE and its in-country partners, including think tanks, business groups and grassroots Civil Society Organizations, identified a specific governance challenge in the country that poses an immediate threat to democratic consolidation, is technical in nature, has hitherto attracted limited outside attention, and is within CIPE’s ability to solve. This challenge is the lack of transparency and accountability surrounding Public Private Partnerships (PPPs).

PPPs and Democratic Governance

Transparency in public finances is at the heart of good governance. Knowing how their government is spending money empowers citizens to move from passive consumers of government decision-making to active participants in the definition and delivery of public services. In Burma, there are insufficient government and donor funds to meet the country’s skyrocketing infrastructure and public service needs. PPPs are one way to mobilize private resources to build and provide things that would otherwise not be built or provided. But PPPs pose unique risks to public financial management and can exacerbate public frustrations with how public funds are spent.

A common example of a PPP project is the construction of a road. In this example, the government “hires” a company to build a road which the government cannot afford to build. The company invests its own capital to construct and maintain the road, in exchange for future revenue from toll booths and user fees. In poorer countries where construction costs are high while government budgets are limited, PPPs offer a win-win-win outcome for the government, the company and the public. The ongoing public health crisis will likely push more governments to utilize PPPs, due to severe downturns in tax revenue. Burma is no exception.

Public-private partnerships, if done well, can bolster the credibility and trustworthiness of governing institutions. This is especially true of PPPs involving large public works, which is the most common purpose of PPP financing in Burma. In the case of large-scale infrastructure, which is hugely expensive and immediately tangible, it is critical that financing not be secretive, that local communities have a voice, and that implementation proceeds with independent oversight.

Intersection of Democracy and Economics

Public-private partnerships, if done well, can also have exceptional economic returns. In Burma, which has little choice but to rely on PPPs for the provision of many public goods and services, PPP financing of infrastructure is a foundational investment on which inclusive economic growth depends. Infrastructure, be it in health, sanitation, transport, or other sectors, functions as an input into production across the economy. The availability of infrastructure also functions as a public good that comprises a large portion of the consumption bundles of nearly every person and business. Furthermore, the production of infrastructure (i.e. construction) provides short-term economic stimulus through jobs and direct purchasing, while increasing long-term productivity and aggregate productive potential. However, these benefits materialize only if the PPP selection is transparent and publicly-accountable, if the PPP investments reflect the actual needs of affected communities, if the PPP process fosters competition and innovation, and if PPP projects yield quality public services.

Unfortunately, the converse is equally true. If the decision-making surrounding a public-private partnership is conducted behind closed doors, if the PPP contractors are selected without open tender, if financial terms are not disclosed, if civil society is unable to engage, and if the final output is a good/service that the public does not want, then the PPP project can make economic and political conditions even worse than they were before.

Take the aforementioned example of the road. If the PPP is implemented correctly, a new piece of transport infrastructure is produced, provided and maintained with minimal cost to public budgets. But imagine that the PPP is crafted in secret, contractors are selected in secret on secret terms, the contractors are crony businesses with direct ties to the Tatmadaw, the projects selected for construction are not prioritized by the local community, and the community only learns of the PPP at all when the final product is of poor quality. In a country where public frustration with the government is already simmering, this failed PPP served only to intensify existing problems of corruption, cronyism, and abuse of power.

Role of Civil Society

Civil society participation in the planning, financing and oversight of the processes related to public private partnerships in Burma can help ensure that PPPs reflect the interests of affected communities and reinforce the principles of participatory governance. Civil society can accomplish this by securing the openness and transparency of all stages of the PPP lifecycle.

Increasing transparency and accountability in PPPs in Burma will increase the probability that the potential benefits of such projects are actually realized. As many PPP projects can engender positive spillover effects, their success can help demonstrate how “democratic governance” can be synonymous with “effective governance.” And when democracy delivers the freedom and opportunity for all to prosper, democracy works (and lasts).