Kurt Bodewig Bundesminister a.D.

Public-private partnerships - a catalyst for reforms in Europe?


Dear Klaus Tiemann, dear Boris von Chlebowski, Ladies and Gentlemen, thank you for the kind opportunity to speak to you about public-private partnerships in Europe. It is a particular pleasure for me to speak about this topic in the view of numerous PPP practitioners who are rendering high quality services to the public sector in their everyday life.

How can PPPs play a part in the evolution of the European states? This is a vital question for the future of Europe as a whole.

I believe that in Europe, more discourse on public-private partnerships needs to occur. That's why I am so glad to be here.

The point I would like to make today is rather simple: All the member states of the European Union face similar challenges. Therefore, we are forced to renew current economic and social models; and public-private partnerships are going to be an essential component of this endeavour.

The challenges ahead

The 21st century poses many challenges for member states of the EU. At least five challenges strike me as inescapable:

  • First, due to globalisation, European companies are facing more intense competition.
  • Second, a new type of economy is arising: the knowledge-based economy. Companies who want to stay one step ahead and remain competitive need to possess more "knowledge" than their competitors - they need to produce more sophisticated ideas and create useful innovations.
  • Third, social cohesion in almost all European societies is in danger. Certain groups, particularly unskilled workers or migrants are at high risk of becoming socially excluded.
  • Fourth, demographic change is leading to the ageing of Europe. This not only threatens economic growth but poses a crisis for our social insurance systems.
  • Fifth, public budgets are under pressure in all member states, while citizens continue to expect efficient, high quality public services and public investments.

The Lisbon agenda

In 2000 - as a reaction to the rapid change and the challenges ahead - the leaders of EU member states agreed upon the Lisbon agenda. The Lisbon agenda is a comprehensive strategy for preparing Europe for the transition into the knowledge-based economy and society. It aims to modernise the European social model by focusing on economic growth. Public-private partnerships are one of the essential components of this plan.

In Lisbon, the Union set itself the strategic goal "to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs, and greater social cohesion." So the quotation.

According to this strategy European states have to modernize both their economic and their social models. Only then can we seize the opportunities implicit in globalisation and a knowledge-economy. A dynamic economy and a well-functioning social system are intertwined.

The Lisbon agenda has been the most promising European project of recent time. European member states had never before articulated common challenges so thoroughly. Never before did they agree on such a comprehensive strategy, comprising so many different policy fields. Maybe most significant was how well they proclaimed their will to learn from each other, in the aim of progressing the European project.

According to the architects of Lisbon, the strategy relies largely on the private sector, on public-private partnerships and the resources available in the markets. The heads of state saw Public-private partnerships as a central instrument for economic and social modernization for their respective states within the framework of the EU.

Advantages of Public-private partnerships

This is not surprising, since public-private partnerships present a number of advantages for European member states:

  • They have the ability to raise additional finances where public budgets are constrained or under pressure.
  • public-private partnerships facilitate the reduction of costs by using the efficiencies of the private sector, while continuing to promote the objectives of government.
  • Moreover, they have the potential to enhance the quality of services.
  • There is also the likelihood that the speed of infrastructure development can be increased through public-private partnerships.

Let me emphasise once more that there are both economic and social arguments that support public-private partnerships. The economic advantages lie in cost-reduction, in efficiency and in enhancement of the modern infrastructure essential for a knowledge-based economy. The social benefits are striking as well. By guaranteeing well-functioning high quality social services the social reality of Europeans can be improved. Plus: The state-money saved through public-private partnerships can be redirected to further spending on political initiatives.

Despite the great potential inherent in public-private partnerships it is incumbent upon me to underline that these partnerships are not miracle solutions. As the European commission has stressed: Public-private partnerships need to be carefully assessed in the context of each project. Costs and benefits of private sector involvement versus public alternatives have to be calculated and weighed carefully. It is the task of politicians to ensure that a public-private partnership enhances the public benefit.

We need to make certain that public-private partnerships are implemented in areas where they can be most effective. If done well, negative perceptions of public-private partnerships can be avoided. Only then will we be able to seize the significant opportunities inherent in governments and the private sector working together in this way.

The German experience

In Germany, the Lisbon Agenda has been an impetus to use public-private partnerships in order to foster significant reforms:

  • Under Chancellor Gerhard Schröder nothing less than the biggest social and economic reforms since the Second World War have been derived from the commitments made at Lisbon.
  • The last government initiated the most comprehensive labour market reforms in German history and reformed the tax system featuring major cuts for both firms and private tax-payers. The government reformed the health system and the pension system (this was the first step, the next step will follow)
  • Moreover, his government has improved the environment for families and children as well as for enterprises.

PPPs and the Schröder cabinet

Since 2000 the concept of public-private partnerships became much more important in Germany. An ideal example is how the ministry for transport formed a committee of representatives from the public sector and the construction- and finance industry. This committee suggested measures for implementing effective public-private partnerships and promoted a network of PPP-competencies.

In 2002 a PPP-task force was prepared in this ministry - one of its tasks was to supervise pilot projects. Similar task forces have been established in the German "Länder" - the German states. The result of this consultative approach has been to the advantage of both the private sector and the public.

In 2005, the so-called "PPP-acceleration-law" went through parliament, making it much easier to establish public-private partnerships. It contained modifications of the law in various areas such as competition law and the federal budget law.

Even though public-private partnerships have existed in Germany for many years, since 2004 there is a real boom. And they have proven very successful. Public-private partnerships seem to be the way forward in many policy areas - ranging from traditional PPP-areas such as road construction to comparatively new areas such as schools and hospitals.

The German institute for urban studies estimates that there are about 300 public-private projects in the works in Germany. The number of signed contracts for public-private partnerships doubled in 2004 and 2005 compared to previous years.

One of the most important projects was the construction and maintenance of additional lanes for the motorways (Autobahn) which I initiated as minister with an "Investment Acceleration Program." Construction, preservation, management and financing of the lanes have been completely transferred to a private firm. In return, the firm receives toll fees from heavy trucks using the roads.

Currently, the federal states are testing five such projects. In this way, the government has achieved a major infrastructure goal through public-private partnerships.

More and more governments and authorities begin to understand the relevance of excellent public services and not only to talk about construction and finance. Serco has a broadly accepted stand-alone position in improving public services in terms of efficiency and quality. Due to your approach to promote organisational change and innovation you are on a very good way to establish Serco as a leading PPP service company in Germany and Europe!

Still a long way to go

Despite this exemplary record Germany still has a long way to go in terms of making the most of public-private partnerships; especially when compared to other countries. Only four percent of public investment goes to public private partnerships in Germany - compared to 20 percent in Great Britain. And in Germany three out of four local communities do not have any public-private partnerships.

We need to seize the opportunity to make use of this potential. In the long run, we should develop a PPP-culture similar to that currently found in Great Britain.

It is another merit of your work that you are transferring these models and this business culture to Germany. Many thanks, particularly to Boris von Chlebowski, that he is always available for competent discussions with us politicians to get a better understanding on PPP and how to improve its legal and practical conditions!

Germany is back on track

Due in no small part to the reform process of recent years - including the promotion of public-private partnerships - Germany is back on track. It is moving rapidly away from periods of social and economic stagnation: The unemployment rate is decreasing; for 2006 all major economic forecasting institutes predict economic growth to be up to two percent - the highest rate since 2000; and the barometer of positive opinion among business is rising.

Reforms under the grand coalition

The grand coalition - in power since November 2005 - continues this path of change. The reform of Germany’s federal structure will be the most significant constitutional amendment since 1949. The reform of the labour market proceeds at astonishing pace. Major reforms to the health system are in the works. And the government has reconstructed the federal budget; amongst other planned reforms.

PPPs will prove essential

Public-private partnerships will prove essential if this drastic reform agenda is to be successful:

  • The minister of finance, Peer Steinbrück, has set the target to raise the share of PPPs among public investment from 4 up to 15 percent.
  • We will abolish regulations discriminating against public-private partnerships.
  • New rules are planed that will facilitate medium-sized firms to participate more actively in Public-private partnerships.
  • We are also working to improve the general conditions for public private partnerships for civil engineering projects.

In line with this aim the grand coalition is supporting the Fehmarn Belt bridge project connecting Germany and Denmark. This massive infrastructure project will be done using a public-private partnership.

There is no doubt: Germany's ambitious political reform agenda goes hand in hand with the increasing importance of public-private partnerships. One could even go as far as to suggest that the relationship is one of symbiosis.

PPPs, other European countries and the EU

Like Germany, many other European countries are beginning to take to heart the potential offered by PPPs. For instance, many countries have set up task forces in key ministries to promote public-private partnerships.

Without a doubt: The member states have taken hold of the potential public-private partnerships offer. They are doing their part to promote this concept.

Meanwhile, the EU has itself been increasingly involved in a supportive role for public-private partnerships. Since the Lisbon agenda was set out the EU and the European Investment Bank has offered comprehensive instruments for the support and financing of public-private partnership-projects that run complementary to national programmes.

A great deal of opportunity for public-private partnerships has come about with the eastern enlargement of the EU. Of particular significance has been the work of the European Regional Development Fund. Reflecting the potential for public-private partnerships in Eastern Europe the European commission published a green paper on the topic. This document has been an impetus for a discussion about fostering the juridical environment in favour of public-private partnerships under EU-law.


To sum up: It is evident that the European Union and its member states are moving forward. And public-private partnerships are catalysts for the reforms of the economic and social models in Europe.

That's why we should confront prejudices against private sector involvement in Europe with good arguments. One convincing argument is the point I tried to make today: public-private partnerships have the potential for economic and social gains. This idea of seeing economic dynamic and social justice as intertwined is a central social and democratic premise.

My former colleague Hans Martin Bury once described the advantages of public-private partnerships as a paradox: Through giving up tasks and focussing on its core duties, the state organises better services for its citizens and thereby is accepted more by the people.

I do believe that public-private partnerships not only have the potential to increase living standards but also increase the legitimacy of state organisations in Europe. Let's continue to work together to exploit the opportunities public-private partnerships offer Europe.

I wish you and your colleagues good success for the further-development of PPP - for the benefit of your company, your employees and the public as a whole. All the best for your efforts for bringing service to life!