What Happened?
Some countries are looking to engage in significant outsourcing moves, while others hope to reverse privatization agreements to regain control. The question over privatization highlights the importance of considering all factors and options before making a major decision.
Germany
Hamburg passed a referendum last year to take over the electricity, gas and district heating networks that were sold to private companies in a privatization initiative decades earlier. Hamburg joins the ranks of 170 municipalities in Germany striving to reverse privatizatize – or remunicipalize – key community services. Many cities found prices increased drastically under private ownership of services, while the evolving energy goals of the community no longer aligned with the actions of the companies in charge of energy decisions, The Guardian reported.
In Berlin, a cooperative has gained momentum to buy back the electricity grid from a private company. The Citizens Energy Berlin organization wants to adopt more renewable energy sources throughout Berlin, which houses more than 2 million electricity customers. The private company currently in control also owns coal and nuclear power plants, ABC reported.
To achieve the buy back, The Citizens Energy Berlin has partnered with the City of Berlin – which will choose the next grid operator for a 20-year contract. The grassroots organization has raised 11 million euros so far to buy back the electricity grid – but needs 100 million euros to complete the purchase.
Mexico
On the other hand, Mexico passed legislation last year opening the national oil company Petroleos Mexicano (Pemex) to partnerships with private, foreign oil companies. The bill allows output sharing contracts and licenses for private oil companies to set up locations in Mexico while shipping oil to their own refineries.
Under the arrangement, Pemex will keep 83 percent of the country’s proven and probable reserves, as well as 20 percent of prospective resources. The remaining discovered and undiscovered sources of oil will be made available to the highest bidder in a competitive market. The legislation creates a situation where Mexico’s oil could easily be owned completely by private companies. The Mexican government expects $50 billion in bids from private companies over the next four years, MarketWatch reported.
More recently, the Mexican Senate recently proposed oil reform legislation that would allow the government to grant contracts and licenses for exploration and extraction of oil and gas to private oil companies – which is prohibited under the Mexican constitution. The contracts could be issued by the state government, completely bypassing the state-run oil company.
USA
According to the Reason Foundation’s Annual Privatization Report, outsourcing at the federal level in 2013 was a combination of failures and successes. Some programs resulted in significant economic losses, while others proved to boost performance and efficiency in certain industries. In addition, several new proposals were laid out regarding other areas of the federal government where privatization will likely occur including defense and data management.
The Question of Outsourcing
Gov1 has reported on a wide range of privatization projects that aim to improve performance while increasing revenue.