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Steve Savas: privatisation, decentralisation and transparent management

15 October 2010 / 12:10:27  GRReporter
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Let private companies experienced in health centers management manage unprofitable public hospitals. Consign declining public companies with large deficits in order to regain competitiveness and improve service quality. Decentralise state administration so as to commit society to regional economic development. All these were only part of the advices of the coryphaeus of economics and lecturer at City University of New York Steve Savas, who spoke in Athens about the changing role of the state and how Greece could return to the economic growth.

Privatisation is not just selling a state enterprise to a private entrepreneur. It means outsourcing under transparent agreement conditions that will lead to overall improvement in competitiveness of a specific field. This procedure could be applied to many different types of public utilities like bus transport, water supply, road maintenance, urban cleaning and many others. According to a study presented by the professor, if the privatisation processes are transparent and clear and the contract terms do not cause damage to either of the parties, the cost of management and operation could be reduced between 20% to 50%.

To visually present the advantages of privatisation, Steve Savas gave as an example one of the largest public hospitals in New Jersey, where he lives. Several years ago, the municipality decided to let a private company handle the management of the hospital. The results were 35% reduction in costs and about 20% of new jobs created later.

Steve Savas gave other examples of successful cooperation between the state and the private entrepreneurs. One of them was the 75-year concession of parking meters in Chicago, which the city mayoralty sourced against one billion dollars in early trade; the 50-year concession of some of the parking meters in Pittsburgh, Pennsylvania against more than 500 million euros. Currently, the authorities of New York are considering a similar deal that will gain them at least five billion dollars. Another example he used was the Stockholm subway, which is managed by a French company. Fire services in Denmark, which Savas defined as particularly successful, are also sourced to private companies.

The economist said the the best example of sourcing public services to the private sector is the bus transport in Denmark. The state has developed the necessary infrastructure and then, through open public tender, offered the lines for 5-year concession to three different companies that offered the best terms regarding price and service quality. Today, 81% of the Danish bus system is managed by English, French and American companies in five different concessions. As a result, management costs have decreased by 22% and 90% of employees are local citizens. Such a tool was applied for the bus lines in San Diego, U.S.A. where costs were reduced by almost 40%.

He said that it is important to understand that the problem is not the public against the private sector but the monopoly against competition. He explained that monopolies in general tend to grow, obese and, of course, affect the quality of services. This also applies to state monopoly. Greece has to decide for itself which services to remain highly dominated by the public sector and which can be sourced to the free market to develop the competitiveness of the country. He said that the construction of the new Athens airport Elevteros Venizelos, which was built before the Olympics in 2004, is a good example of successful partnership between the public and the private sectors. This example of cooperation could be applied to a number of unprofitable state enterprises today as the state railways, public transport companies, the electric company and others.

The economist stated explicitly that the role of the state is to outline the legal frameworks for the market to evolve and to observe the correct administration of relevant laws. Then the market will only follow the rules of free trade, subject to the rules of supply and demand and competition.

Steve Savas was Deputy Minister of Housing and Urban Development in the administration of Ronald Reagan (1981-1983) and deputy mayor of New York City (1967-1972). He is the father of the born in the 1960s idea of cooperation between the public and private sectors - public private partnership - to raise competitiveness and was a consultant on privatisation in 54 countries. He operates under the auspices of the World Bank, the UN, and the US Agency for International Development and was in the team of the legendary New York mayor Rudolph Giuliani. Steve Savas is Greek American and his last visit to the old homeland was at the invitation of the Karamanlis Institute for Democracy to present the practices for the successful cooperation between public and private sectors that many other countries have already tested and established.

Tags: EconomyMarketsSteve SavasPublic Private Partnership
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