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30 May 2008
Patricia Karvelas
The Australian
Conflicts of Interest with
Private Sector Involvement in Infrastructure Funding
If Infrastructure Australia is
expected to identify specific projects which might attract government
commitment, there seems to be every reason for concern about the potential for
conflicts of interest which your recent article discussed - and this problem
is by no means limited to an advisory groups such as Infrastructure Australia.
My interpretation of your article:
Infrastructure Minister (Anthony Albanese) rejected suggestions that high
powered industry representatives who make up half of 12 member
Infrastructure Australia (IA) would
have a conflict of interest. Members would be expected to step aside when
board was considering a project in which they might have a pecuniary
interest. Projects might have public or private funding or be PPPs. Federal
Treasurer said IA and new $20bn Building Australia Fund showed government
was serious about overcoming infrastructure bottlenecks. Fund would be used
for roads, rail, ports and broadband. IA will submit guideline for PPPs to
COAG in October and a list of priority projects by March. Opposition (Warren
Truss) said that IA would slow down the process of uncorking bottlenecks -
being unable to look at existing ALP promises, and being unlikely to produce
decisions before 2010 (Karvelas P., 'Planning body revealed', Australian,
20/5/08).
There is a real potential conflict of interest related to any
private sector influence over
infrastructure decisions that involve
government support for private investment (see
Distorting / Corrupting Government for general comments on this risk).
This can be illustrated in
practice by current efforts to develop
'solutions' to traffic congestion in Brisbane (see
Brisbane's Transportation Monster),
which appears to involve a combination of:
-
a scheme which basically
involves new freeways through tunnels to join links in the city's major road
network, and upgrading of public transport networks;
-
apparently aggressive financial engineering in committing
to super-expensive tunnel projects by setting initial tolls that are too
low to be viable, and reliance on large growth in traffic volumes and
tolls in an environment in which a global 'peak oil' event is likely to
make historical rates of traffic growth unrealistic;
-
conflicts of interest
between potential investors in such projects and those who promote PPPs
(whose returns are largely independent of the viability of those investments
- like the position of the institutions who arranged subprime mortgages in
the US);
- a potential revolving door
between the public and private sectors, which raises risks that public sector
actors may profit from favourable decisions through a later change of career;
and
-
non-transparent decisions by the state government to
exclude the possibility of developing a Brisbane west bypass - the effect
of which must be to concentrate traffic, maximize surface level congestion
and thus force the public to use the super-expensive road tunnels.
It may be that this process is 'straight' and it might even
reflect good judgment. But this is not necessarily so. Any process
involving private sector influence over public sector decisions which have
implications for commercial returns risks the same sort of abuses that are
associated with the US's military industrial complex. The situation can be
even worse for infrastructure where the private sector's concern is
with profits derived from the community directly (by tolls and as investors)
rather than from governments. In such cases the interests of the
community may be even less likely to be adequately considered.
John Craig
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