The value of public-private interactions for transport projects in Eurasia

_ Prof. Marco Ricceri, Secretary general, Eurispes Institute (Rome). Report at the 5th Workshop “Developement of Transport and Infrastructure in Eurasia” within the IIASA research project “Challenges and Opportunities of Economic Integration Within a Wider European and Eurasian Space”. Laxenburg, 15 – 16 September 2015.

The strategic projects and the value of public-private interactions

Introduction

To understand the value of the major development projects for transport and infrastructure in Eurasia, as well as the contribution that their achievement can give to the economic and social integration within a Wider European and Eurasian space, we must refer to the political and operational decisions taken by governments in recent international summits, particularly by the G20 summit in 2014 in Australia and by the BRICS summit, in 2015 in Russia. It deals with political and operational decisions containing precise indication both to the objectives to be pursued as well as the working methods to be applied. Even the decisions approved by the United Nations, the studies, research and practical experiences made in recent years in view of the upcoming assembly on Global Sustainable Development – Post 2015, planned in New York on Sept. 25, 2015, are an essential reference point for public and private operators; in particular as regards the relationship between science and policy, research methodologies, systems of governance to promote on the occasion of major development projects.

1. The G20 summit 2014 on economic development and infrastructures

The final communiquè by the leaders attending the last G20 summit (Brisbane, nov. 2014) is very clear and precise about the goals to achieve and the concrete actions to promote: “Raising global growth to deliver better living standards and quality jobs for people across the world is our highest priority”. We welcome stronger growth in some key economies. But the global recovery is slow, uneven and not delivering the jobs needed…We commit to work in partnership to lift growth, boost economic resilience and strengthen global institutions”.

Particular attention is paid by the heads of state to the core function of investment, in particular, to infrastructure investments for which a specific program was elaborated. Yet the final communiquè on this subject: “Tackling global investment and infrastructure shortfalls is crucial to lifting growth, job creation and productivity. We endorse the Global Infrastructure Initiative, a multi-year work programme to lift quality public and private infrastructure investment. Our growth strategies contain major investment initiatives, including actions to strengthen public investment… We have agreed on a set of voluntary leading practices to promote and prioritise quality investment, particularly in infrastructure. To help match investors with projects, we will address data gaps and improve information on project pipelines. We are working to facilitate long-term financing from institutional investors and to encourage market sources of finance, including transparent securitisation, particularly for small and medium-sized enterprises. We will continue to work with multilateral development banks, and encourage national development banks, to optimise use of their balance sheets to provide additional lending and ensure our work on infrastructure benefits low-income countries”.

To support implementation of the Initiative, the G20 summit established the set up of a specific Global Infrastructure Hub with a four-year mandate. “The Hub will contribute to developing a knowledge-sharing platform and network between governments, the private sector, development banks and other international organisations. The Hub will foster collaboration among these groups to improve the functioning and financing of infrastructure markets”.

Finally, to strengthen infrastructure and attract more private sector investment, the G20 summit decided the launch of the World Bank Group’s Global Infrastructure Facility as well as to support similar initiatives by other development banks.

Further, important decisions made by summit deal with, inter alia: a) the mandate given to major international economic organizations, such as OECD, IMF, World Bank, ILO, to monitor the results of the programs promoted by the summit and by the member states (a report will be presented at the next G20 summit in Antalya-Turkey, November 2015); b) the approval of the OECD report on the High-Level Principles on Long-Term Financing Investment by Institutional Investors, based on those indications of the summit in St. Petersburg in 2013 with the objective of establishing the best conditions that could promote the role of the institutional investors as sources of long-term investment financing. “The High-Level Principles – OECD states – are intended to complement and do not substitute for any existing international principles and/or guidelines that may apply to particular categories of investors. Rather, they seek to foster consistency in approaches for long-term investment across different policies and jurisdictions”.

A preliminary issue to be clarified is, then, the following: how to support, coordinate, link the initiatives concerning the infrastructural projects of the Eurasia corridors to this clear framework of goals, principles, programs and actions decided by the heads of state and government at the last G20 summit?

2. The BRICS summit 2015 on economic development and infrastructure

Among the major policy decisions of the last BRICS summit, we can indicate the choice to continue to operate within the framework of the G20 and inside of its goals and programs. The Ufa final declaration is very clear on this point. “We call on major economies to strengthen their policy dialogue and coordination in the context of the G20 to reduce the potential risks” – on global development…”We will…continue working – for – a macroeconomic policy coordination under the G20 Framework for Strong Sustainable and Balanced Growth”.

In addition, even the BRICS recognize, as the G20 summit already did, that investments in infrastructure and logistics are a “priority” area, linked to an important concept, that of the “integral development” of the territories; the precise words in the text are “Integral Development Projects” and state that these projects “ensure the basis not only for economic growth, but also for improvement of population’s quality of life, and for environmental preservation”.

To this aim, “the BRICS countries agree to collaborate for the promotion of investment opportunities in railways, roadways, seaports and airports among our countries”, that is in structural elements of the transnational corridors. Also the general goals on the matter of physical connectivity are very clear, as stated in the document on BRICS economic partnership: “Development of safe, balanced and dynamic transnational transportation and logistics systems is essential for economic growth of the BRICS countries. Efficient operation of the transportation system is crucial for international trade and integration in global production chains. Communication infrastructure, information and telecommunication technologies, as a key instrument of logistics system, also make a considerable contribution to accelerating growth and cost reduction”.

These statements and commitments, for integrated projects aimed at the integral development of the situations involved, open the way to another basic consideration, which is primarily political and concerns the choice between “closed systems” and “open systems”. In fact it is clear that the promotion of these projects involves a real opening of the affected systems as well as the support to a wide interaction with external systems. Here the following question: what kind of policies, tools, actions it will be useful to promote for managing this opening in the best way and allowing everyone to seize the progress opportunities it offers ?

A new element introduced by the seventh BRICS summit regards, specifically, the start of a participatory approach to identify the main needs, programs and actions. In fact, alongside initiatives finalized to promote public-private investment, with the BRICS Civil Forum for the first time a major opportunity was created for a “dialogue between civil society organizations, academia, business and governments of the BRICS countries on a wide range of important socio-economic issues “, an important opportunity that will be extended in the near future to the participation of trade unions. No doubt, that this tool – the Civil Forum – has a great potential in terms of participation in decisions and accountability, in case it should be addressed and expanded also to face with the operational aspects of the projects as well as it should be articulated into permanent working tables in the territories affected by the execution of works.

This extension of the scope of the Civil Forum and its articulation in the territories, could offer an opportunity to start innovative testing of new forms of governance, inspired precisely by the principle of participatory democracy, in particular as regards the implementation of two of several projects in the matter, mentioned in the report of the BRICS Business Council (2015):

a) the project “Belt and Road Initiative in Eurasia” (“this initiative aims to promote the connectivity of Asian, European and African continents and their adjacent seas, establish and strengthen partnerships among the countries along the Belt and Road, set up all-dimensional, multi-tiered and composite connectivity networks; and realizes diversified, independent, balanced and sustainable development in these countries”);

b) and the project Trans-Eurasian Belt “Razvitie” in Eurasia (“this project envisages creating a geo-economical belt of cooperation on the entire domain between the Atlantic and the Pacific oceans, forming on the territory of Siberia and the Far East the major components for technological, industrial, social, and cultural development. The main goal is to develop a multimodal infrastructure system, which associates transportation, energy, telecommunication, water, and oil and gas conveyance”.

3. The United Nations for a sustainable global development post-2015

On the basis of a long and in-depth preparatory work, started in 2012 as a result of the Conference on Sustainable Development Rio+20 in 2012, and played for the impulse of intergovernmental bodies, the United Nations has defined 17 goals and 169 targets for global sustainable development in 2015-2030, which will be discussed (and approved) by the member states in the General Assembly to be held in New York, on Sept. 25 2015.

Among the many new features introduced with this preparatory work, two innovations in particular directly concern the approach to be followed in the elaboration and implementation of major infrastructure projects. In this regard the United Nations are concerned, above all, to promote a positive and organic relationship between science and policy; therefore to support the adoption of methods of study, research and work based on a participatory approach.

3.1. For a new relationship between science and policy

In general terms, with reference to the urgency to address in new way the challenges of sustainable development, the Scientific Advisory Board of the Secretary-General of the United Nations stated clearly that science has clear responsibilities in front of the international community as well as specific duties to play. According to the Council, science should well consider its social responsibility (ie. it must direct its commitment according to precise social values and goals); it must also promote the desired innovative processes ensuring that such processes will be still ethically acceptable, sustainable, socially desirable. On the one hand, the United Nations are ready to support a major initiative to strengthen international scientific cooperation, both to promote joint research and study, and to make it possible an organic collection and arrangement of the many information, studies, research scattered in thousand situations not linked together, including assessments on major open issues; on the other hand, the UN are asking science to provide the international community a shared understanding of sustainable development as well as an equally shared assessment, on what are described as “emergent phenomena” (as defined when they are scientifically proven as such, evaluated on the basis of sound methodologies, confirmed by the forecasting models).
Once these basic guidelines are defined, the United Nations are concerned – this is the point to stress – to build an organic relationship of collaboration between science and policy, with initiatives and experiences that have proved so far to be very positive. A valuable program deals with the Science-Policy Interface (SPI), with which the United Nations have created a useful tool to promote an confrontation as well as a regular and systematic dialogue between scientists and policy makers to be made within the UN High Level Political Forum on Sustainable Development – HLPF.

It is clear that the relationship between science and policy, as defined by this Interface – SPI initiative, is not linear, but circular in the sense that each of the actors has a definite role to play. The science is considered in any case one of the actors in the policy-making process, and has to work in this process together and alongside the other players. But the link and, above all, the ongoing communication between science and policy is still one of the main critical issues to be resolved. Too serious yet, for example, the communication gap between the holders of the different scientific knowledge, including such holders and those who acquire knowledge on the basis of a practical experience, between science and policy, between science and society. Science, therefore, is required first to make available to other operators the results of the analysis, data, information; therefore, to cooperate with the United Nations Forum to the solution of the problems it presents; finally, to operate in a way that make possible to translate the results of the dialogue science-policy into concrete policy actions.

3.2. The value of a partecipatory research method

The other innovation introduced by the United Nations is concerning the launch of a new methodological approach to the solution of the complex problems related to sustainable development. The United Nations documents emphasize the importance of the fact that, to properly address these problems, science must strengthen as much as possible an interdisciplinary research approach, the testing and sharing of ideas, proposals, methods of analysis. But the urgency of the problems related to sustainable development requires the scientific world the involvement of non-scientists, that is, of those who for various reasons are currently the main development actors, which are bearers of a specific cognitive heritage. Such involvement of people outside the scientific world recalls the importance of integrating the interdisciplinary approach with another method of analysis and study that the UN defines as “transdisciplinary”. A method that combines interdisciplinary approaches and participatory ones, which aims to involve the various actors outside scientific world as well as the various communities in the research process (local communities, user and consumers groups, non-governmental organizations, public opinion).

It is just on the basis of these important innovations introduced in the relationship between science and policy as well as in the research methodology with the introduction of a participatory approach, that the United Nations were able to define the goals and targets for sustainable development to be discussed at the general Assembly in September 2015.

4. EU and the experience of transnational corridors

Useful suggestions for the implementation of the Eurasian corridors may also come by the concrete experience of the European Union in the field of large transnational networks TEN-T and its corridors. In the new programming 2014 – 2020, a change of perspective was made, political before technique, with the transition from the evaluation of a single transport project to the systemic notion of “network”. The so-called Core Network, identified as strategic for the European system, will be implemented and reinforced by structures of modal integration, interoperability and local development: these are precisely the “corridors”.

With regard to governance, for each corridor the Commission identified a European coordinator responsible for the project, which will work in collaboration with the member states interested in the project. The European coordinators are part of a Corridor Forum, a confrontation structure with a consultancy role.

In general, the review of transport policy carried out in recent years has led the major European states and the Commission itself to not restrict its assessments to individual facilities, but rather to consider the overall quality of service that can be offered by all operators of the sector. In practice, the infrastructure should not be considered as a task in itself but as a means to offer high quality services capable of enhancing the processes of liberalization; therefore the planning of the networks must be responsive to market requirements as well as the needs of integrated systems dealing with the management of passenger and freight flows. In other words, the transport policy should be an instrument of broad, non-sectoral economic policy.

5. Italy: experiences of partecipatory approach

In essence, the participatory approach is based on the possibility of an examination and open criticism by citizens, civil society organizations, private operators to the assessment tools that are normally used by the public decision makers. These tools – such as the cost-benefits analysis or multi-criteria analysis – presumed to be perfectly rational and neutral; but in fact generally these instruments take as reference the existing situations, are associated with the management processes concerning routine situations, they are not able to predict nor to handle unforeseen situations of adjustment, conflict, uncertainty about the future, unforeseen choices between alternatives (Martinez-Allier et. Al, 1998). The participatory procedures (P.P.) correct this situation with the participation of citizens and stakeholders in assessments and choices, with the task to compare different visions and interests. According to several experts (eg. S.Franceschini, G.Moretto, 2013), faced with very complex situations and processes, such as those related to the implementation of major infrastructure projects, the public decision-makers can apply only a “limited rationality “. In these conditions, participatory procedures help decision makers to enrich their knowledge heritage.

On the other hand, the limits of this rationality and the risks implicit in the so-called “ottimism bias” that often accompanies the decision of major projects with inadequate forecasting and assessments are well confirmed, according to many experts, by the gap between costs and benefits expected and those concretely achieved (see, for example, B.Flyvbjer-2003; R.Prud’homme-2005; V.De Rugy-2011; F.Ramella-2014). A research conducted in 2003 by Bent Flyvbjerg, about 258 projects carried out in all continents, the Danish expert stressed that the lack of forecasts, evaluations and accurate planning caused an average gap between the costs of the initial and final works equal to 44.7% for rail projects, 33.8% for tunnels and bridges, 20.4% for the construction of streets and highways.

Traditionally, the most common participation practices are based on “mixed” techniques that combine tools to promote both a structured discussion and a multi-criteria evaluation with the final benefit of generating extra insights useful for the policy makers. Particular attention is paid to the guarantees related to the real involvement and participation of citizens and stakeholders, so to avoid that the results of the participatory practices are conditioned by the predominance of “dominant” interests, lobbies and organized pressure groups. The procedure followed in these practices involves the definition of an evaluation card by experts and stakeholders, public opinion surveys on representative samples, the organization of dialogues and open debates, collecting knowledge elements as well as the indication of possible alternatives to the various guidelines and project interventions. The ultimate goal is to provide the political decision-maker of the best possible alternatives.

Adopting these practices, even on an experimental basis, is to recognize that the development and implementation of major projects of intervention in the territory and the related economic and social system are not only the result of an institutional action, that is of decisions taken by many actors with public authority (government), but also the result of the interaction between a number of public and private actors, starting with the civil society organizations, involved in the representation and protection of their interests as well as in the assumption of specific direct responsibilities (governance). This integration government-governance is particularly important even to draw better the future, to go beyond the logic of the many projects and programs unrelated to each other, that while opening up new perspectives, however, do not express a general shared vision, which should be the real point of reference of the major integrated infrastructure projects.

Another aspect of the participatory practices concerns the way in which the interventions are planned. In this case, there are three steps to consider.

a) Planning the change and assess the impact. According to the EU and the planning programs on the territory 2014-2020 (see European Territorial Agenda 2020), the programs to be implemented should be based on an explicit theory of change. No more tools and containers “good for all occasions”, but programs which can provide answers to the needs through the promotion of a change that is measurable (Barca F. McCann P. et.al, 2011). “Planning – according to a great Turkish scholar, Hasan Ozbekhan (1968) – is a conscious rational activity in which all of us are engaged when we want to project into the future our desires and aspirations, in one word our values…planning is the organization of progress…is the willed future”.

To respond adequately to this need of change, public decision-maker needs to know not only if a program works, but also “how” and “why” the different interventions related to an integrated project should be combined among them. A programming set up to a real need of change, requires, therefore, first, the ability to promote integrated policies as well as the identification and definition, a priori, both of proper planning indicators (not only descriptive indicators, as usual in most of the cases) and of the different evaluation methods to use, including the very important impact assessment. In this regard, following the EU guidelines, Italy has promoted an extension of the assessment practices to local realities, with a broad involvement of the different territorial decision-making levels. They were set up, thus, the working tables with the participation of regional and local decision makers, gradually extended to other parties, particularly those representing social interests.

b) Strategic planning for results. The challenges of international competition as well as the need for new development policies led the major industrial states to recall the principles and practices of economic planning, which had been largely set aside during the period of more extreme interpretation of liberalism: for instance, in the years between 1970 and 1990 of the widespread de-regulation and privatization processes, under the slogan “less state–more market”, the Reaganism and Thatcherism.

The new means of economic planning assign, in particular, new tasks, new roles and functions to the Public Administration and its management who is called to work less and less like bureaucrats but more and more like real managers, as the model of private companies.

In essence, the role of the public managers is significantly strengthened. They are called to take on specific responsibilities, to actively participate in decision-making and not just limit themselves to the correct execution of decisions taken by others, to ensure the success of the choices. It is a radical change of scenario which confirms ancient and recent analysis of the sociologists according to which the ruling class of the Public Administration is in effect non only an executive body but an active participant in the management of power.

According to Franco Archibugi (2008), one of the most respected Italian scholars in public policies planning, the reforms approved in recent years which have introduced in many industrialized countries the method of strategic planning for results, as the main instrument to implement public policies, have radically changed the role of the bureaucracy, which has been fully involved in the decision making process, not only in the executive. With these reforms the very nature of the public servant and his work has changed; to him, in fact, new skills are required and new responsibilities are assigned, with a process leading, inevitably, to turn increasingly the “bureaucrat into a manager.”

With the new planning methods, the effort to secure the formal boundaries, between the power of policy direction (Parliament, Government, Ministers, etc.) and the administrative power (Executives, officials), is an effort “useless and unproductive” to put the operational problem of the Public Administration. “In fact, in every field of the public policy there are the goals to be defined and the means to be put in place to achieve them. But this relationship between goals and means pervades all operational hierarchy. Each general goal is divided, we say, into intermediate objectives and, then, down the stairs we find always this relationship goals-means, up to individual actions. And, conversely, the analysis of the actions and their feasibility goes on, up to the general objectives allowing to verify their feasibility, prior to the decisions, and not only ex post”. This constant verification process, from top to bottom and vice versa, is an essential condition of any form of planning. In such a system, F.Archibugi adds, “the decision-making power is divided in a continuum in which it is difficult to identify the quality of the abstract separation of public and administrative law. A Minister respect to the Parliament is an executive body, but it is a decision-maker with respect to the Director General of his Ministry. The latter in front of the Minister is an executive figure, but it is a political decision-maker with respect to his ministerial subordinate. But neither the one nor the other can take any decision if they are not consistent with a feasibility analysis of the decisions that often comes from lower levels or separate technical administrations “.

In conclusion, especially with the new types of strategic planning for results, the different stages concerning the definition of the goals, the responsibility for decisions, actions to be performed, the results to be achieved, are distributed throughout all the operational structure of the state. “In the hierarchy of the planning process, there are no decisions that are political … and others that are administrative, or executive, or technical…Only a possible intervention by an external body can introduce elements of assessment as well as the distinction between the different aspects of the decision making and operational process; and in this case the only possible body is the Parliament, expression of the general will”.

c) The Conference of Services. Italy eventually may indicate a positive experience of administrative simplification and participation regarding the interventions on the territory: the Conference of Services. This tool has been widely used in the past for the organization of major events; as religious Jubilees or international sports championships, that is, when it was necessary to proceed urgently with the achievements of the great public works. Currently this tool is widely used in particular by the state, the regions and other local governments in initiating projects related to public works. Introduced by law in 1990 (Law 241/1990), subsequently reformed by laws in 2010 (Law n.122/2010) and in 2012 (Law 221/2012), this legislation is essentially an instrument of co-decision between all public administrations, of the different levels, national and local, directly or indirectly interested and/or involved in the project.

In practice, central or peripheral administration interested in starting a project of public work can support the establishment of a Conference of Services to be attended by representatives of all the government officials concerned. Generally, there are two types of Conference: inquiry or decision making. In the first case, the inquiry Conference, all public authorities concerned are called upon to assess the different public interests involved in the proceedings and to express their views, even to bring out and make up already at this early stage, the possible positions of dissent and/or different address. In the second case, the decision Conference, all participants are required to a joint decision; a decision – the point to stress – that supersedes all acts necessary for the start of the final project. In this way all the administrative process is simplified to the maximum, with a single decision expressed in a participatory way, by all the public bodies interested to it. Another important aspect concerns the fact that in case of disagreement expressed by one or more participants to the Conference, the law provides for certain procedures to achieve a final agreement. But if in case the agreement is not reached, at the end the state, that is the central government can exercise a power of substitution; this in order to not slow down the implementation of the project.

There is the possibility, provided by the law, that even a private person requests the convening of a Conference of Services. In this case it is called preliminary Conference. Generally this type of conference is organized at the request of a private individual who present a feasibility study for a project related to public works and who wants to know well the conditions required for the subsequent submission of the final project. Again, the participation of all the authorities concerned, allow to organize a positive, effective working relationship between the
public and private sectors, in the interest of the community to the implementation of the works.

APPENDIX

The “reinventing government reforms” : USA, UK, FRANCE

The main references of these reforms that are inspired by the principle of “reinventing government” and that have radically changed the nature, role and work of the public bureaucracy can be found in the laws introduced at the end of the twentieth century in the US, Great Britain, France.

USA: Government Performance and Result Act (1993). The law requires all public agencies to establish five-year strategic plans and annual performance plans that respond to the following questions: What to do? Why? How? With what resources? The plans must specify the mission, the general objectives (performance goals), financial resources and human resources, the timing and modalities of implementation of the programs, the evaluation of results (performance indicators), the criteria for adaptation of the programs to the emergence of new needs. The overall goal is to increase the efficiency and effectiveness of Public Administration, to better manage the programs of public spending. The management of the annual “performance programs” is attributed to the exclusive responsibility of public managers, in parallel to precise merit recognitions.

GREAT BRITAIN: the main innovation is dealing with the introduction of the “Law on Spending Review” (1998) which led to a general review of public expenditure, the introduction of analysis of the financial resources involved in each area of expenditure, to upgrading of public services as a counterpart of the allocated resources. The basis of this innovation is the “public service agreement” which commits every department of central P.A. to achieve certain goals, levels of performance, including indicators to measure the effectiveness of the ex-post results and benefits for the community of the citizens. Under this pact, public managers have an incentive to operate more and more like real private managers.

FRANCE: The main reform is the Organic Law of the Finance Laws (Loi Organique de Lois de Finance) of 2001 that was inspired by the program initiated in the US in the 90s and that led to a different structure of the state and its activities, organized into missions, programs, actions, budgets, which come together in the general state budget. The main objective is to ensure maximum transparency of public accounting.

References:

  1. ARCHIBUGI FRANCO: Da burocrate a manager (From Bureaucrat to Manager) Rubbettino, Soveria Mannelli, 2008
  2. BRICS Summit: Ufa Action Plan, Ufa, 2015
  3. BRICS Summit: Final Declaration, Ufa, 2015
  4. BRICS Summit – BRICS Business Council: Facing Challenges, Building Confidence, Second Report 2014-2015, Ufa, 2015
  5. CIAMPI SILVIA, ISFOL e SNV Sistema nazionale di valutazione della politica regionale (ISFOL and SNV National Assessment System of regional policies, EyesReg, Vol.3, N.2 , Modena, March 2013
  6. DE RUGY, V., M. MITCHELL: Would more infrastructure spending stimulate the economy?, Working Paper 11-36, September, Mercatus Center, George Mason University, USA, 2011
  7. EU COMMISSION: European Territorial Agenda 2020, Brussels, 2014
  8. FLYVBJERG, B., N. BRUZELIUS, W. ROTHENGATTER: Megaprojects and Risk: An Anatomy of Ambition, Cambridge University Press, Cambridge (UK), 2003
  9. G20 Summit: Brisbane Action Plan, Brisbane, 2014
  10. G20 Summit: Leaders’ Communiqué, Brisbane, 2014
  11. OZBERKHAN HASAN: Towards a General Theory of Planning, 1968
  12. PRUD’HOMME, R.: Infrastructure and Development, in François Bourguignon – Boris Pleskovic (editors), 2005. Lessons of Experience, Annual conference on development economy 2004, World Bank, Washington, The World Bank and Oxford University Press, USA, 2005
  13. RAMELLA FRANCESCO: Infrastrutture e crescita economica (Infrastructures and Economic Growth, IBL, Briefing paper n. 132, Milan-Turin, August 2014
  14. UN: Global Sustainable Development Report, New York, 2015
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