Although public-private partnerships were only in France in 2004 — mainly as a response to the advantage gained by countries such as the United Kingdom, whose private finance initiative model had been in the early 1990s — the country has led the way in PPP innovation, particularly in the framework of concession agreements for the realization of long-term infrastructure projects.

Corruption, an Unnecessary Evil

READ MORE

A concession agreement is as one under which “a grantor assigns, for a limited period of time, to one or several economic entities, the performance of works or the management of a service.” In France, such agreements are common and can be found in sectors like catering, water and sanitation, district heating, transport and sports facilities. They represent a form of economic and social innovation within a state that has been committed to institutional modernization for over a decade.

A French Style

For over half a century, France has developed one of the most modern, innovative motorway networks in Europe, thanks to a great extent to the concession structure put in place with a number of so-called concessionaire companies. These companies were by the French government’s public service delegation with the task of “financing, building, running, and maintaining their networks.” A “user=payer” toll system was then put in place to offset taxpayer funding and allow the concessionaire companies to collect annual revenues.

This model has several advantages for both the French state and the concessionaires. The governments delegate the construction and management of the network to private companies while retaining ownership and transferring financial risk. Private companies can create significant revenues through the user=payer toll system, and users are able to enjoy a highly efficient, modern and reliable service.

Sustainability is also on the list of advantages. The setup allows for a sustainable avenue of resource allocation, which over €18 billion ($21 billion) in investment between 2005 and 2015. A high rate of investment and the competition encouraged between concessionaire companies has produced a high-quality network with high-quality services that will remain without debt when the contracts come to an end as the risks are shouldered by the private sector.

The system has also had a profound impact on mobility, coupled with high investment in services. This has been made possible by concession agreements that have profits from “mature” concessions to subsidize less profitable sections of the network. These profits are raised through the toll system, run directly by the concessionaires. It is a highly innovative, collaborative system that meets the economic and social needs of both states and private companies in an of unstable financial market.

In 2011, France the European PPP market, accounting for 62% of the overall market value. According to the World Bank, this was in the “wave of new ‘social infrastructure’ investments in health, education, defense, transport and urban planning sectors.” In the water sector, France is a in private sector participation, with three French companies, Veolia, Suez and SAUR, dominating on the world stage. As Xun Wu and Leong Ching , the French model of concession agreements in the water sector has increasingly been adopted in developing countries, “particularly in large cities because of the large investments required to meet increasing demands due to urbanization, along with shortages in fiscal budgets.”

A Modern Solution

In 2013, the French government launched the Plan France Très Haut Débit, aimed at rolling out high speed broadband across all rural areas by 2022. The initiative received over €20 billion in funding from the French government and the European Union, with several PPP projects under concession contracts being in 2014 between local authorities and the private sector.

The concession system allows for a more viable initiative in rural areas, where investment cost is often very high and profitability difficult to achieve. The of the initiative is for France to guarantee 100% coverage by the end of the project, which will secure almost 1 million connections for both households and companies across more than 3,000 municipalities. Such targets could not be met without public-private cooperation.

Make Sense of the World

Unique Insights from 2,500+ Contributors in 90+ Countries

I agree to receive emails and other content from 51łÔąĎ. I understand that I may repeal my consent at any time. You can review our Privacy Policy and Terms of Use for further information..

As public budget limitations have become more palpable as a result of often unstable financial markets, governments have found that PPP schemes have been a viable solution to the problem of financing modern infrastructure projects. Concession agreements can be hugely advantageous to both governments and private actors committed to finding innovative solutions to public infrastructure problems.

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

The post France Leads the Way in Public-Private Partnerships appeared first on 51łÔąĎ.

Corruption impacts every aspect of society and involves all kinds of companies, large and small, in an array of industries. Certain sectors are seen as carrying a higher risk of corruption — oil and gas, armament, construction, among others — but no industry is spared. The World Bank estimates that more than  is paid each year. In the health sector alone, an estimated , or around 6% of total expenditure, is lost to fraud annually. Some argue that bribery is part of doing business, but such practices increase costs and put companies at risk of severe financial, legal and reputational damage.

Tackling Corruption: The Solution Is?

READ MORE

For society at large, the effects of corruption are far-reaching and have severe economic repercussions, create unfair competitive advantages and result in the loss or decreased quality of public services. The consequences of this can be devasting. , head of the Federation of African Engineering Organisations, notes that when public contracts are not awarded based on honest and fair bidding, “Infrastructure collapses. Roads develop potholes, and people die. Basically, corruption kills.”

Looking for Accountability

Historically, citizens have expected governments to hold companies accountable for corrupt behavior, but their track record of doing so is spotty. Following the 2008 global financial crisis, the United States began enforcing the Foreign Corrupt Practices Act more vigorously. Since then, the US has been a in prosecutions and investigations of foreign bribery, but countries such as the United Kingdom, Switzerland, Israel, France and Spain have recently increased efforts as well.

However, a recent report from the  found that only 30% of Europeans believe their governments’ anti-fraud efforts are effective. Indeed, Transparency International’s  project finds that although high-profile settlements make headlines, the enforcement of foreign bribery laws is very low amongst most Organisation for Economic Co-operation and Development countries; in 2020, only four out of the 47 OECD members actively pursued prosecutions.

Over the past two decades, there has been a proliferation of company-wide anti-corruption compliance systems and industry-level regulations designed to discourage bribery. Governments are often â€śâ€ť to pass the cost and responsibility of enforcement off to someone else, but self-regulations are often inadequately administered and lack audits performed by independent, disinterested parties. Tools such as the  provide companies with recommendations for implementing compliance programs. It is then up to the companies to conduct internal audits and ensure employees and contractors are following their anti-corruption policies. Companies are motivated by a variety of factors: legal requirements, the risk of fines and prosecution, reputational damage and, for some, a genuine desire to act more ethically. But while there are  of foreign bribery, the temptation to cover up infractions is compelling. 

Various efforts by industries to self-regulate have also emerged. Non-binding, industry-led initiatives or “soft laws” attempt to set anti-corruption norms by asking companies to adhere to a set of principles. For example, the  â€śinvites” multinational companies to disclose money they pay states to extract natural resources.

In industry-level self-regulating organizations (SROs), member companies develop policies for a particular industry and they, as opposed to an independent agency or government regulator, monitor and enforce member compliance. One example is the  (BnEI). The organization was created by some banknote producers to “provide ethical business practice.” Members agree to abide by BnEI’s Code of Ethical Business Practice and to undergo an audit “carried out by a third-party auditor” in order to become accredited. According to their , audits are conducted by two entities: GoodCorporation and KPMG. But if there are only two options for auditing members of an SRO, are auditors actually independent?

While SROs can help set standards for industries in the absence of effective government regulation, there is also an inherent conflict of interest. As the NGO  argues, “Self-regulators are, by definition, funded by the companies they claim to regulate. Don’t for a second believe that any self-regulator wants — or even would be permitted by its constituent members — to do all that it can to prevent harmful or deceptive business practices that are proving lucrative for the industry.” The  add that self-regulatory processes are often burdened by a lack of enforcement and inadequate sanctions of member companies, lower incentives to voluntarily report bad practices and are dominated by a small number of companies that prioritize what is in their best interests.

An International Anti-Bribery Standard

A new development offers hope for addressing the global corruption problem. In 2016, the International Organization for Standardization (ISO) introduced the . Created using input from existing recommendations and from countries, non-profits and esteemed multilateral institutions, the standard provides an auditable, independent benchmark of international compliance principles and enables organizations of all sizes, public or private, to prevent, detect and address bribery.

To become , an anti-bribery management system meeting the standard’s requirements must be implemented, an individual overseeing compliance needs to be appointed, and financial controls, monitoring and reporting processes need to be in place. Audits are done over a three-year period (to ensure policies are not simply on paper) and are performed by independent certifying bodies.

Numerous companies and governments have since pursued certification as ISO 37001 has increasingly become recognized as the reference for anti-bribery. Anti-corruption lawyer  says the advantage of certification is benchmarking and reassuring organizations that they have implemented effective measures. Moreover, “It also demonstrates that you have a system that works to stakeholders, personnel, shareholders, and the community at large.”

As a sign of confidence in the standard,  in Brazil, the US, Denmark, Switzerland and Singapore have required companies to pursue ISO 37001 certification as conditions of settlements in many lawsuits. While certification cannot guarantee bribery will not take place, it is universally recognized proof of a company’s willingness to prevent it. Companies and governments should require ISO 37001 certification from potential partners as a prerequisite to doing business, discarding superfluous and therefore suspicious self-regulation.

Increased efforts to curb bribery have had varying levels of success. Government enforcement of existing laws needs to be strengthened as evidence has shown that self-regulation is flawed. The introduction of ISO 37001 as an independent standard for anti-bribery holds the most promise, but more companies and governments need to pursue certification for change to happen. Corruption may be as old as it widespread, but it can also be avoided.

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

The post Corruption, an Unnecessary Evil appeared first on 51łÔąĎ.