Ignorance provides the cover for dodgy public sector deals

By Savvakis C Savvides

The sad truth is that politicians and government officers involved in Public-Private Partnership (PPP) agreements is that by circumventing what needs to be evaluated and assessed prior to any commitment involving a public sector project the coast is left clear for all involved to enter into such dodgy deals. A blanket of ignorance conveniently provides the smokescreen for the culprits to arrive at and agree on such suspect pacts with the private sector.

A darkness over such issues, such as economic viability and the identification of project risks, allows those in power to serve and be served with no fear for recourse to them. The economy and the cost to the taxpayer are just collateral damages to them that only becomes apparent after they are long gone from office. It suits them to operate under a blanket of obscurity and below a veil of public ignorance.

This is why, intentionally in my opinion, in 2008 they made sure that the Cyprus Development Bank (co-owned at the time with the European Investment Bank as a minority shareholder) was transformed from an independent publicly owned expert professional capital investments and project financing bank into yet another privately owned small commercial bank with no clear purpose or a competitive advantage. This has left a huge gap in the economy as there was no way to study and assess the return and risk of such public sector projects and potential partnerships with the private sector.

I have written and published many articles on the very subject and some of these were published in reputable journals (notably with Les Manison and Helen Kavvadia). Perhaps, not so surprisingly however, the only real interest that was raised from these papers was from outside Cyprus rather than from those that should be concerned in Cyprus, such as politicians, bureaucrats or even the press.

Without an independent and professional organisation to study and rationally evaluate the proposed projects involving the state (cost-benefit analysis), there is nothing to ensure that only the economically viable and properly formulated and structured projects are adopted and implemented. Equally important, is that a proper risk analysis appraisal is applied to any such project. Without the identification and assessment of project risks it is virtually impossible to enter into any fair and balanced agreement with the private sector. As the Cheshire cat said to Alice in the book by Lewis Carroll when she asked what road to follow when she didn’t know where she should go “If you don’t know where you are going, any road takes you there”. Moreover, in the case of public officials and politicians in Cyprus, I would add: “If you do know where you want to go, but somehow you also ensure that there is no map available, you can always pursue your self-interest and no one can blame you.

Savvakis C Savvides is an economist, specialising in economic development and project financing. He is a former senior manager Head of the Project Financing Division at the Cyprus Development Bank and has been a regular visiting lecturer at Harvard University and currently at Queen’s University. Author page: http://ssrn.com/author=262460