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Published on 2019-12-15 22:58:46 | words: 7733
Post-Brexit UK politics is apparently becoming as chaotic as what we are used to in Italy.
Therefore, beside some points and items about Brexit, I will share few ideas and observations on something that I observed, read, and discussed about while in UK.
It is something that will be useful to both UK after Brexit (to reposition), and Italy (to catch up with other countries), by finding resources and skills where available- the much reviled or worshipped private-public initiatives and project financing.
Incidentally: I am on neither side, as I think that decisions should be made on a case-by-case choice.
First, a recap on the current status of Brexit, starting with the results of the elections, as published on 2019-12-13, followed by some links to commentary, just to have a shared starting point.
Elections and Brexit
First and foremost, the data:
" Conservative 365 variation: +66
Labour 203 variation: -42
SNP 48 variation: +13
LibDem 11 variation: -10
Green 1 (no change)
Others 22 variation: -27
- Democratic Unionist Party 8 variation: -2
- Sinn Féin 7 (no change)
- Plaid Cymru 4 (no change)
- Social Democratic and Labour Party 2 variation: +2
- Alliance 1 variation: +1
- Brexit 0 seats
- Ind 0 variation: -23 (included a number of Conservatives sacked for dissidence before the November dissolution of parliament)
- Change 0 variation: -5
The Guardian view on the 2019 election results:
"a new political landscape - Boris Johnson has redrawn the map and Labour and the Lib Dems are in disarray. Brexit will pass and Scottish independence will move to the centre of the stage"
Two consequences of distortions introduced by the electoral system, first at the national level:
"The first-past-the-post electoral system means Mr Johnson polled 44% of the votes and took 56% of the seats. In a Brexit-dominated contest, parties that want to leave the European Union polled only 47%, while parties supporting a second referendum polled 51%."
Then in Scotland, where SNP won 45% of the vote, it obtained 48 out of 59 seats, i.e. 81% of the seats, on an 80% turnout, whereas the national turnout was 67.26%.
Hence, the demand from SNP's leader:
"Scottish independence vote a 'democratic right', says Sturgeon"
Curious that, upon SNP's leader request, a spokesman for the PM stated that
"A Downing Street spokesperson said the prime minister had reiterated "his unwavering commitment to strengthening the union".
"The prime minister made clear how he remained opposed to a second independence referendum, standing with the majority of people in Scotland who do not want to return to division and uncertainty. He added how the result of the 2014 referendum was decisive and should be respected.""
Even more curious, if you consider that Scotland voted against Brexit by 62% to 38%.
As stated by Riccardo Perissich from the Istituto Affari Internazionali "Well done Boris! And now what?"
The main point of that commentary I agree with? That in reality the landslide win of Boris Johnson is really the result of Corbyn's campaign that, in my view, frankly, sounded as if designed to scare voters and reinforce Conservatives.
But I disagree with his point, shared also by others in Italy, e.g. in an interview with a politicians, Walter Veltroni, that Corbyn lost due to ambiguity about the European Union.
In Italy, we still have this politicians' habit of using foreign affairs as a backdrop for speeches really focused on Italian politics, usually by lifting what could support a thesis, even by claiming without first checking.
I lived in UK in London, i.e. a "remain" area, but met and was in contact with people who lived also in what are now "brexiters" areas.
In my view, the scaremongering claims, that reminded Arthur Scargill at times, impacted more- post-Blair labour isn't really so open to nationalisations and assorted pre-Thatcher policies.
Add way too many twists within the Labour party itself, and, frankly, you wonder (as I wonder about the Italian Partito Democratico, despite being a "continuous voter") what it stands for, and which "grand strategy" (if any) are you supporting when you vote for them.
As commented within the editorial by The Guardian:
"This abject performance reflects mistrust in Mr Corbyn, lack of belief in some of Labour's manifesto pledges, and divisions over Brexit. But the election was not lost during the campaign. At its roots lie what has become an increasingly unstable alliance of Labour's left and centre, its remain and leave electorates, and its middle-class and working-class bases. In the 1980s, 80% of Labour voters were manual workers and their families. Today, that figure is around 40%. Mr Corbyn has shown himself unwilling and incapable of unifying that volatile coalition. He is right to go. Labour must face up to its failings and choose a different sort of leader now."
Federico Fabbrini from the Brexit Institute shared his commentary "Brexit: The End, The Beginning of The End or Just The End of The Beginning", and the key point is what Boris Johnson achieved:
"So Boris Johnson clearly succeeded where Theresa May had failed. First, he renegotiated the Brexit deal with the EU in October 2019 – finding a way to replace the backstop with an alternative solution, albeit one which is far less advantageous for Britain. And second, he won an election: whereas Theresa May had entered the polls in 2017 with a tiny majority and exited it with deficit of ten, Johnson has flipped the balance massively in favor of the Conservatives, which will now allow it to enjoy a comfortable majority to pass legislation implementing the withdrawal deal."
Is it a Pyrrhic victory? As the quantity of agreements to renegotiate is staggering,
"provisions exist to extend the transition period to December 2022 by mutual agreement. However, on the campaign trail Boris Johnson categorically excluded that option, which leaves the door open for a hard Brexit next December."
Again from the IAI, Nicholas Westcott's "The International Impact of Brexit" is worth reading, also if, having been released in March 2019, suffers a little bit from the recent results.
"Some may concede that Brexit might cause a temporary blip in Britain's international engagement while we sort out the departure arrangements, but nothing a little Dunkirk spirit cannot overcome. We will then be free to pursue what the former Foreign Secretary called our buccaneering tradition in world affairs, and the Defence Secretary has spoken boldly of the Royal Navy once more patrolling the South China Seas.
Sadly, this misunderstands the way the world works, just as the UK's negotiations with the EU revealed a fundamental misunderstanding of how the EU itself works."
Maybe also his opinion still overstates a bit the role of Britain after releasing/losing (depends who you talk with) the empire post-WWII and now leaving EU.
Remember how, in a previous phase, Britain tried to negotiate with Japan, that turned down the offer, stating that would discuss with the EU.
While I was living in UK, I remember how around 2003 newspapers reported that the country had budgeted 700mln for the war in Iraq and its aftermath, but tallied 3bln and more just for the war, and Americans had nicknamed their British comrades "the borrowers", along with news on the deployment of the National Guard of Puerto Rico to look at logistical bases in UK.
Also on security (even not considering a possible separation of Scotland and its impact on armed forces), Nicholas Westcott account is bleak:
"Though Brexiteers like to think of Britain as a big beast, sadly it is not.
A country that can barely afford the aircraft to put on its aircraft carrier, let alone the fleet necessary to protect it, will scarcely inspire fear or respect in others. Post-Brexit, the UK will be in a profoundly vulnerable international position, deeply divided internally and with no coherent foreign policy – at sea on a rudderless raft."
More interesting his conclusions:
"There are three ironies in all this.
Firstly, in weakening ourselves and the international system that protects us, we will weaken our own claim to a leading role in that system. When UN reform finally comes about (which may be sooner than we think), our permanent membership of the Security Council will be hard to defend. As David Cameron found out, a veto is only useful if you have the power to enforce it. Britain will not.
Secondly, Brexit reveals the truth that true sovereignty comes not from autonomy but from participation, not from ditching your friends, but from keeping them close.
Thirdly, to continue to play the global role we aspire to and keep our economy growing, Britain will have to open its borders to more visitors and immigrants from the rest of the world, not less."
On the last point, frankly, I think that Brexiters as well as many other Europeans (including in Italy) are out of touch not just with current and future demographic and actuarial reality (on the retirement systems' sustainability), but also with history.
Anyway, Boris Johnson did what anybody would expect after a campaign built on "us vs. them": first, there were announces that confirmed what was said during the campaign, but will take time to be implemented; then, probably after January 31st, coping with reality and build consensus on choices that will probably deliver less than what voters would expect.
Looking at recent history, Sir Winston Churchill, by birth, was more American than the current USA First Lady; in turn, by birth, she is more European than he was.
Nonetheless, he was the Prime Minister in UK, she is the First Lady in USA.
Therefore, your nationality is more a matter of choice than of chance.
Brexit Phase I, 2020-2022(2024)
Disclosure : I know that many friends and colleagues, whenever they utter "deep state" start venting conspiracy theories, but, frankly, I would like to get back to what "deep state" could actually mean, in a democracy.
You have one layer, a political, elected layer, that has an agenda, but will eventually leave power.
There is another layer, the civil service, that actually ensures that those temporarily leading do not wreck the ship.
In my experience living and working in UK, I often said to my British colleagues that I found fair and balanced my interactions with the State- even more than my interactions with private suppliers.
As an example, after UK did not join the Euro, eventually I remember seeing a communication stating that, if a company had business mainly with Euroland, could go, accounting-wise, in Euro, until it was time to pay taxes etc, when it had to convert in GBP.
Just the opposite of what I saw in the 1990s in Italy (I was routinely asked around Christmas for taxes already paid or not due), albeit I must say that since my return as a local customer in 2012 now in many cases also private businesses aligned to bad habits...
If you consider that I started working in UK before the Euro, and even as a sole trader had to deal sometimes with more than half a dozen currencies, as my consulting customers were around Europe (also if often I worked remotely from home), switching to just a few was a significant reduction in complexity.
I lived there over a decade ago, so maybe the environment changed, but my experiences increased my expectations that the civil service would actually help to prepare to minimize Brexit impacts.
And, frankly, even during the negotiations, I saw that actually UK's bureaucracy was giving more information to businesses than many EU countries.
Now, if the twists-and-turns in 2020 will be similar to those since the Brexit referendum, probably no level of preparedness could really make the transition easier.
From an Euroland citizen perspective, the clear win of Boris Johnson is, anyway, a success: at least, if he keeps with his self-imposed January 31st deadline, then the recently elected European Parliament and recently instated European Commission will be able to work without "one foot in, one foot out" Members of the Parliament and Commissioners or staff.
I am still skeptical about UK citizens who announced that, in order to retain their job in Brussels within the European institutions, were going to pick up a local passport.
I found it more transparent when, after the results of the Brexit referendum were announced, some British citizens simply resigned: there will always be the doubt of divided loyalties.
Moreover, now that even a close advisor of President Trump clearly stated in an interview on an Italian newspaper that their purpose in enticing UK into a quick trade agreement with USA, even before the completion of Brexit, is to become a showcase to convince others to leave the EU.
Assuming that there is a hard Brexit, I already wrote in the past about some of the potential consequences.
The reason for the title of this section is that, while professional commentators of EU affairs refer to the potential extension up to 2022, I am thinking instead of the whole mandate of the new European Commission.
Like it or not, this will not be the "post-Brexit", but the "defined by Brexit and its aftermath" European Commission.
Like it or not, this is why I am equally skeptical of those EU Member States who are seeking to start bilateral agreements with UK, instead of doing it jointly: it is just the opposite of what is needed now.
Otherwise, the Brexit negotiation from February 1st, that could stretch by mutual arrangement for years, will gridlock the European Union.
Whatever final-final agreement will be reached for the post-transition period, contingency planning already started a while ago, and the elections results did not really change those plans (unless those preparing the plans were following predictions such as those that Dyson would bring to UK his plans for an electrical car, plans that eventually focused production in Singapore, before being scuttled).
Entering the EU was assessed for new members years ago at being something involving harmonization (that UK could in large part already have in place), but also defining new terms, as it is neither trying to become again a member, nor looking for one of the various agreements reached e.g. by Switzerland or Norway.
Actually, I remember almost a decade ago somebody from Norway stating in Schuman, Brussels, that Norway complied with EU rules, regulations, etc better than many of its full members.
Just as a comparison, from first contact (1991), to inclusion within the PHARE programme and first agreement on Trade and Commercial Economic Cooperation (1992), to full EU membership (2004) it took Latvia 13 years.
As for Norway, a comparison for UK is not possible, as Norway does exactly what UK does not want to do (source:
"As member state of the European Economic Area, Norway fully applies the whole acquis communautaire relevant to the four freedoms (free movement of goods, persons, services and capital), along with that pertinent to flanking policies (ie transport, competition, social policy, consumer protection, environment, statistics and company law).
As a result, the EEA agreement provides for a high degree of economic integration, common competition rules, rules for state aid and government procurement."
Somebody is advocating a new status that isn't full membership, or EEA-style membership, but something "lighter", without explaining what would be the bilateral meaning.
As an example, if you were to have just free movement of goods and capital, you still have to retain what UK doesn't want, e.g. consumer rights and jurisdiction on what entails outside UK, or otherwise you risk having eventually divergent application and evolution, unless the UK Parliament is willing to rubber-stamp what will arrive from Brussels, having had at best non-binding involvement in the definition of the legal framework.
The real alternative is that, once out, UK becomes non-EU and non-EEA country with agreements within the WTO etc framework.
As I wrote a while ago across few posts (you can see the list here), for goods might be designed "technical" solutions similar to those adopted by USA after 9/11 to avoid disrupting international trade while increasing security "at the source", i.e. assessing compliance before material leaves UK, and ditto before it leaves the EU in the other direction.
Whatever happens, the role of UK-based plants within EU supply chains will have to change, until such an agreement is reached, and probably the (first) transition period of 2020 will be, to play it safe, used by many Continental companies to restructure their own supply chain.
Obviously, there would be a difference between "ordinary" and "organic" suppliers, considering the latter those that are in effect externalization of processes and internal production or sub-assembly from components delivered either by the "customer" (or its suppliers).
Anyway, this is a long discussion that is not appropriate in this outline post.
The same would apply for the financial sector: at an additional transactional cost, e.g. that embedded in having had UK banks applying for a license within Continental EU (many did), the "backoffice" side could still be in UK, with the "retail" (consumers and SMEs) or "customer-facing" side for companies that do not have a presence in UK via a European Union subsidiary, to enable any divergent evolution in compliance, etc.
Still, removing the freedom of movement for persons and services would create a contentious point, as UK would de facto become a free-rider on the social costs of the other freedoms.
It is, as usual, a political choice- and should be settled politically, not delegated as a "technicality", as otherwise it would become an incentive for old and new members: take the benefits of the EU, and leave others to pay the costs.
As UK has been recently negotiating as if it were a mere business case, let's restate it as if were a commercial negotiation: if you are a supplier to a major supermarket chain, you cannot expect to use its shelves and have access to its customers for free- usually, unless you apply "most favorable" conditions and have a significant volume, you are asked to pay for space, and cannot even choose where your products will appear on shelves.
But Brexit changes the picture also for other reasons: Scotland and London (except three seats in Central London to the Conservative, as well as an "external ring", plus three seats in the periphery to the LibDem) both retained their difference:
The differentiation in motivation will add a further layer of complexity to any negotiation.
Any agreement while UK was still a Member State of the EU implied that it was on top of "basic commons" (e.g. support to avoid depopulation of rural areas, other incentives for areas with economic disadvantages, etc), beside having a share of the agencies and research facilities.
The Brexit impact? As an example, according to the European Social Fund section on UK:
"During 2014-2020, the ESF and European Regional Development Fund are investing around €11.8 billion across the UK. The ESF share of €4.9 billion is funding six operational programmes in Wales, Scotland, Northern Ireland, England and Gibraltar, and includes €206 million for the Youth Employment Initiative (YEI)."
As funds for such initiatives post-Brexit will not leave UK, it will be up to the UK Government to decide the allocation rationale, not some shared EU parameters.
Or: more "political" and less "technical" (there will be winners and losers within the re-distribution, as it would not make sense to leave EU, and then closely mirror its practices down to political choices).
When I wrote 2024 within the title of this section, I was being, as usual, an optimist.
There are so many details to arrange for any new agreement with UK, that each dossier will have the potential to acquire a different majority supporting any position.
This, in turn, would enable UK to do what I heard once said by a British diplomat in Brussels during a book presentation, and that sounded a little bit as, again, "Yes Minister" (or "Yes Prime Minister").
Or: the idea of having UK acting as a de facto facilitator for a different majority in every dossier, so that it can continue from outside to procrastinate any risk of further integration.
The old joke about NATO could still be recycled and paraphrased: such an arrangement would enable to keep the French down, the German in, and the Russian out.
Anyway, it would be a clear example of what, during the Cold War, was called "M.A.D."- Mutually Assured Destruction.
The commentary from the US, enticing UK to break apart the EU, is simply aiming to ensure that Europe is just a market, and potentially the Balkans or Middle East of the XXI century, i.e. a "playing ground" for external powers.
So, if UK were to accept to turn into a US satellite and act as a fifth column, would it maybe attract also some of the Member States, e.g. the Visegrad group?
Too early to say: since the Brexit referendum, the concept of time within UK politics is getting closer and closer to that familiar in Italy.
Meaning: between December 15th and January 31st there aren't six weeks, but six political-geological eras...
What is quite curious is how, by reading commentary from UK, it still seems as if they are the ones setting the time and game rules.
In that scenario, any disruptive activity from UK during the negotiations might actually be the crisis needed to create a "core group" within Euroland.
But, and on this I disagree with what said some Italian commentators advocating for a quick push toward EU integration, the risk is that it will be a Euroland-LevelA, leaving other Member States to choose between leaving in their turn, or becoming a Euroland-LevelB, i.e. staying with the current Euroland arrangements but without political integration, until they "converge" with the Member States that will be founding members of Euroland-LevelA.
Anyway, if UK were instead to become a kind of "European offshore" while retaining the largest "financial backoffice" in Europe, a kind of European fund manager platform, there could be other opportunities, considering the investments that are planned toward a "greener Europe" (and UK, too, could benefit from receiving benefits from that, and seed its own infrastructural plan)- being an "outsider", and not directly a recipient of any allocation of funds, could make it a service provider with no conflicts of interest.
A major role within Public-Private Initiatives and project funding, as UK could attract funds from outside EU, including from Sovereign Investment Funds or vehicles, and package them to invest in EU projects, taking a fee and confirming its own role as financial place-to-be, and releasing EU from the political touchy issue of, say, getting funding from the Middle East or China or Russia (unless Russia joins the EU should the USA further relax its commitment to Europe).
Via a non-EU UK, just a business matter, not a political influence.
As the other major financial locations are considered too close to the geopolitical windstorms of the hosting country (witness the brouhaha whenever a diplomat or politician on a US blacklist has to get to the UN in New York, agreements notwithstanding).
A digression of Public-Private Initiatives (and few notes on Italy and UK)
As I wrote above, in Italy often both politicians and professional commentators, as well as business leaders, often "recycle" foreign affairs to send messages in Italy.
Anyway, since the day after the Brexit referendum, many Italian commentators remarked how much the British political scene during the Brexit psychodrama (somebody would say "psycho-drama") sounded familiar.
Yes, nothing here is ever final, and sometimes in negotiations between large organizations there most definitely a disconnect between reality and perception (to say nothing about perceived relative positions, strenghts, weaknesses, and motivations).
Incidentally: and as I explained repeatedly also abroad, all the scandals that happened in Italy since I was born in 1965 (this week we remember the "internal terrorism" of 1969), show that we do not really have a monolithic "deep state", in Italy.
Maybe "deep tribes", but with fleeting and opportunistic temporary cross-tribe alliances, as shown whenever there is something to fix, and you can almost say which tribe is involved, by looking at the "Ghostbusters" they call.
It will take a while (if ever) before the current advertised sensibilities about "sustainability" and "commons" will result into what should be a natural consequence (at least cross-tribal cooperation, eventually continuous "coalitions of the willing", whatever their tribal allegiance).
I will share a short outline from my perspective as "foreigner in my birthplace", as this could serve as background information for further uses.
During the First Italian Republic (roughly late 1940s - early 1990s), was quite common to see press conferences abroad where Italian politicians "answered" questions from Italian journalists that enabled them to sound as Urquart within the BBC original of "House of Cards"- i.e. plausible deniability, as the questions were a Q&A but the message was anyway delivered.
This extended often to interviews or reports that were denied the following day: as anyway barely 5% of the population was said to read newspapers on a daily basis, this implied that having something published on a newspaper was often a way to use an "independent" channel to deliver a message, and even then amending the message did not remove the prior delivery.
In Italy, we lost long ago the dualism of the "Blairite left".
At the end of the First Republic, as a side-effect of the "Mani Pulite" early 1990s investigation, about 1/3 of the Parliament Members was under investigation.
Back then, the Italian Communist Party had already de facto started to "self-epurate", to become more "acceptable".
The various centre-left evolutions since then were, frankly, led mostly by former-State and party bureaucrats, as shown also by some quixotic legalistic explanations on actions that routinely surface, as if politics had been turned into a matter of formality, not impact.
It might be true that something is "legally acceptable", but is it politically acceptable?
Not even private companies nowadays do just what is "legally acceptable", and, as part of their branding and market positioning, had to turn to an extensive concept of "sustainability", that extends beyond the "technically sustainable" and goes toward the "technically and perceived sustainable".
Due to its origins (the largest communist party in Western Europe), the new centre-left went not the extra mile, but the extra light year to show how pro-business it was, sometimes actually entering business, but often stretching in ways that sounded a bit unusual.
The Italian left converted into centre-left routinely used as a banner high-visibility politicians from abroad: Clinton, Blair, Obama- you name it.
Main reason? To look "modern".
We went even as far as having a centre-left politician converting "yes, we can" from Obama campaign into a "se po' fa'", as somebody said, something that in Italian actually sounds as a quote from the Young Frankenstein, a Mel Brooks movie.
About the latter: yes, I routinely write about "Frankenlaws", a bipartisan Italian habit to pick up the "best practices" as if you were in a global legislative supermarket, assemble a law that mixes apples with pears, without considering any of the elements of the original context that made that "best practice", then start tinkering according to public and politicians' reactions.
A quixotic turn of the tables has been that often the most enthusiasts promoters of Private-Public Initiatives (PPIs) in Italy, and project financing, aren't from the supposedly pro-industrialists centre-right (that often in its recent autarchy instincts ended up being more collectivist than most of the extreme left).
And when it comes to defining the boundaries of PPIs or project finance, sometimes I received through partners RFPs or read about initiatives where it seemed as if all the risks and costs (generally, all the negative externalities) had been externalized to the public coffers, and all the potential upside had been transferred to the private partner in exchange a vague potential future set of positive impacts.
We even had local and national public sector signing derivative contracts that no CFO would sign.
I shared in the past some cases and links to articles, but this 2015 post summarizes the terms of the complaints from public authorities after the 2008 crisis, including an unusual
the public authority's lack of expertise in respect of financial instruments, notwithstanding that it signed a declaration that it was a sophisticated investor before executing the derivatives transaction
Now, my interest in public-private initiatives started in my political activities in the early 1980s, as I reviewed a continuous stream of papers originating in Brussels (or at least skimmed through them- a library then filled the gaps in my theoretical knowledge as much as needed to roughly understand: I was back then in high-school, and political economy was something I picked up only outside school, from those documents and library searches plus listening to those who had specific expertise).
In business, in the early 1990s started extending on what I had learned in the late 1980s while designing Decision Support Systems models with senior managers in a wide range of industries.
When eventually I was asked to propose how to design feasibility studies and select vendors, instead of just replicating what was coming via IT and management consulting methods that I had already applied and learned, I ended up purchasing in English and French a book from UNIDO on Industrial Feasibility Studies, as from the business side the concept of "feasibility" and "vendor selection" that I learned weren't limited to what I saw from the consulting side.
To that, I added also an early 1990s CD-ROM that I had received as a gift from the USA, as I was following the "re-inventing the government" and joined the mailing list, and that CD along with further material on feasibility studies in the public sector, and vendor evaluation for public procurement within the Department of Defense and overall US Federal Government, included other tools and material.
As outlined in the 1997 report that you can find here:
"BUSINESS PROCESS REENGINEERING DoD established the business process reengineering (BPR) support program to redesign the Department's business processes and to achieve improvements in DoD measures of performance. (skipped) DoD, the National Academy of Public Administration, the National Performance Review, and several other partners established joint linkages to BPR information, training, and government reinvention materials, including a BPR CD-ROM. DoD developed this CD-ROM as a self-contained College of Process Innovation, which features the latest government and industry information on BPR and a toolset called TurboBPR for desktop use. These materials and tools have been extensivelyadopted by a wide range of federal, state, and local government agencies."
Note how the description specifically states that the whole initiative included information from industry and academia, not just self-developed by DoD (or its consultants).
In Italy, often within the public sector the outsourcing of knowledge went as far as removing the capability to actually do what should be routine and part of the business continuity of the organization (and therefore should justify having internal resources), and relying completely on temporary staff and external suppliers working on a mission basis, i.e. people not necessarily aligned with or understanding the overall strategic direction of the organization.
An initiative involving public and private partners that generated some head-scratching and complaints while I was living in UK was an outsourcing contract that ended up being the source of some hilarious comments within the UK press (and it was still a discussion point at the House of Commons a decade later, within a report on "Lessons from PFI and other projects").
Looking for numbers instead of individual cases, e.g. on Project Finance a 2016 working paper from the EIB (Pinto, João M.; Alves, Paulo P. (2016) : Project finance in Europe:An overview and discussion of key drivers, EIB Working Papers, No. 2016/04, EuropeanInvestment Bank (EIB), Luxembourg) examined a large number of cases (over 200k), gave an indication that assessing the partners' motivation and long-term viability should be a keystone within the overall architecture of the deal- and wasn't really that positive about what resulted from the study of those cases.
It is not to say that project financing or PPIs are negative per se, but the overall motivation and governance structure should mirror the risks assumed- otherwise, it is akin to a State subsidy to a private business.
Now, if you merge that with other material, my perception of reality, moreover after seeing some "detours" of PPIs in line with what, to save you from reading the UNIDO long manual, can be read in a short 2016 World Bank report for a specific initiative:
"(page 16) Like any investment project,a PPP project must be evaluate dboth from a private/financial perspective and from aneconomic/social one (i.e. the point of view of the whole society), and additionally a full risk analysis must be included. However, the integrated cost–benefit analysis for PPP projects –according to world best practices–should include an additional "Value for Money(VfM)" analysis, which could encompass the calculation of a public-sector comparator(PSC). Given the complexity of a full-scale PSC model and the heavy data requirements, this procedure might pose significant challenges in order to be implemented"
"(page 17) estimates the whole-life cost of carrying out the project with a traditional approach, estimating the whole-life cost of the PPP alternative (either as proposed by a private bidder or a hypothetical "shadow bid" at the pre-procurement stage), and completing an "apples-to-apples" comparison of the costs of the two approaches."
"(page 18) Explicit government guarantees and insurance schemes, or any implicit understanding that a government will come to the rescue in the case of various market failures, can generate serious moral hazard problems in the PPP markets."
The point is that either skills or finances or both should be provided by private partners (otherwise, what is the point of involving them?), and, if the latter are in reality provided by public funding, extreme care is advisable to avoid a moral hazard.
What is needed is anyway to re-import within the public side the skills and abilities whenever there is a critical mass justifying a continuous use (as I discussed also repeatedly in other posts and few mini-books on cultural and organizational change).
Also to remove other potential conflicts of interest, instead of externalizing oversight or "filtering" activities to parties that might eventually turn into suppliers.
Furthermore, while a business might relocate if an initiative is not working anymore, local authority or a State will have to consider the whole lifecycle, and do some contingency plan on what to do in that case, as well as what to do after the lifecycle of the investment is completed (meaning: including the full operational life and maintenance up to disposal).
In reality, it is a concept that is already widespread in e.g. the obligation of the take-back of discarded electronics, and while living in Belgium I saw a "contribution" (recupel) on each itemized purchase of electronics- and it is an example of a private initiative to fulfill an obligation.
As outlined within its website, on the Q&A on why the recupel isn't a tax:
"The Recupel contribution is used in order to allow for services by the Managing Bodies, and was created as a private initiative.
Since the Recupel contribution is collected in the framework of a legal take-back obligation, it is, however, controlled by the supervisory regional authorities."
So, maybe, in some cases transparency could imply that prices paid by users of a service outline also how much they are contributing toward the costs of the initial funding.
As I wrote above, everybody asks for more sustainability, but the point is beyond burden sharing, what matters is also educating citizens on the perception of impacts.
Hence, I find puzzling when some politicians say that having proposals to reduce pollution and unemployment, and ensure a continuous investment in human capital, i.e. lifelong education, is something that could differentiate a political party as being "on the left": it is a 1970s perception of politics.
Currently, at least in Europe, those concepts as well as welfare are common parlance, left to right.
European Federal Union in the XXI century?
We still talk about nation states and the return of nationalisms, but in reality few countries can afford (not just economically, also socially) to do without without (at least part of) the rest of the world.
Are we heading into continental states?
Beside United States, Cina, India, Australia, the European Union isn't the only group that is evolving toward shared initiatives on a structural basis, i.e. within a framework of "shared resources" and "shared aims".
While in the past this might have been linked to something closer to a "Risk" (the game) geopolitical mentality, globalization of supply chains and cheaper individual international travel since at least the 1980s have been compounded by the rise of the "virtual economic giant".
In the past, multinational companies had physical assets- and it was a routine either to be supported by a national state (e.g. remember the 1960s-1970s routine "government changes")
Therefore, paradoxically, what President Eisenhower called the "military-industrial complex" in his "Farewell address" had a symbiotic relationship with national states stronger than what is needed for our current "virtual economic giants", e.g. the GAFA (Google Amazon Facebook Apple), who often seem to be playing as stateless organizations.
I disagree with politicians that, as I read again over the last couple of days in the aftermath of the elections in UK, state that citizens want more integration more Europe and larger states.
That is, unfortunately, a case of what I could call "insiders' bias": they see continental states as a solution, and assume that citizens too do so.
I know that to my British friends would sound so much "Yes, Minister" or "Yes, Prime Minister", but it is a Pavlovian reflex of any bureaucrat: for any issue, create an office, commission, structure, watchdog, and... if the issue will not be solved, at least will be obfuscated under a pile of reports until it will fade away from memory.
As I wrote repeatedly, and I am not even trying to be original, with social media and smartphones, we have two elements that enable to have vocal minorities repeatedly utter the obvious.
First element: with social media, nothing really "fades away", you can always relaunch it (a big different vs. traditional media).
Second element: with smartphones, you can do "impulse shopping" à la Vance Packard- no time to think (often, could add also "no time to read"), like, share, maybe add a meme or two, and, voilà, here is a new political thread that will go around and around (I will try as much as possible to use "viral"- as a virus mutates, but doesn't cross-breed with other viruses and then split away to join others, and then again, as many of those "viral posts" do).
Citizens might appreciate the global impact of shared issues, and building up a newfound affection for "commons" on a global level, as shown by climate protests, but that is usually coupled with lack of trust of the traditional diplomacy and supranational agreements.
It isn't a, say, 500mln fine levelled on a GAFA company after few years of investigation that will make citizens perceive the benefits of a larger state with its associated rules, regulations, balancing of interests, etc.
Instead, those "new" channels to share messages and build coalitions, along with the renewed "we are on the same boat" sensibilities convert often into a hyperlocalistic, oversimplified concept of reality and society, that fuels not just souverainisms, but also considering the State as "other" (hence, you can imagine the perception of supranational entitities).
Almost nobody sees the contradiction of using a mobile phone to share your selfies and videos talking about the waste in our society, without considering that many of the elements that you challenge are actually what enables cheap access to your channels.
Supranational entities are way too often associated with a lack of transparency and political accountability, and ex-post fines are ridiculed as a slap on the wrist, notably when no fine seems to amend behavior, as if such large fines had been factored into business calculation.
Probably, what could show the value of being part of a larger entity, an entity able to stand up and be listened while negotiating, could ex-ante negotiations where a supranational organization, acknowledging de facto political status to economic counterparts (multinationals- virtual or otherwise), jointly defines the terms of access to the society it represents.
Or: negotiate access before granting access, on terms that can be revoked if there is a social impact.
Sounds an approach adopted by some countries with their "national internet filter", but due to the misbehavior of GAFAs and countless of hi-tech startups who think that being a startup implies that you are a freedom fighter entitled to do whatever you see fit, expect more "national barriers to traffic", unless a really global governance emerges.
So, for the time being, the first step toward a European Federal Union could be showing what could be its value by having its Member States, at least occasionally, show how working jointly in foreign affairs, political negotiations, and not just business, actually we can achieve something that individual Member States would not be able to.
Then, there could be a consensus toward further political integration.
Which, incidentally, is exactly the opposite of the method followed so far, of using each crisis to jump forward with further integration without even bothering to build consensus, fuelling the fires set up by conspiracy theorists.
Nowadays, going back to the end of that "Farewell address", if you remove the early 1960s elements, the roadmap for change was already there.
And now, let's wait for what the first political-geological era (i.e. the 10 days up to Christmas) will deliver within the Brexit psychodrama.