The role of PPPs and how they help governments to improve infrastructure and deliver essential public services to grow their economies.
As defined by UNECE PPP Business Advisory Board – PPPs are innovative methods used by the public sector to contract with the private sector who bring their capital and their ability to deliver projects on time and to budget. The public sector retains the responsibility to provide the services to the public in a way that benefits the public and delivers economic development and an improved quality of life. They can also be described as projects that the private sector funds, builds and manages, in partnership with the public sector, infrastructure of various types, over a length of time.
The central objective of these partnerships is to encourage governments to join hands with the private sector, civil society and international organisations to meet Sustainable Development Goals (SDGs) to build robust infrastructures that ensure access to all public services for all members of the society.
While PPPs have been successful in achieving SGDs, there have been some projects that have failed to achieve the desired outcomes. This demonstrates the need to have more transparency, effective communication, regulatory frameworks and full consultation with all stakeholders especially the citizens and consumers.
How can PPPs help infrastructure funding and finance?
Often many governments realise that they need more investment in infrastructure but the government cannot ‘afford’ to undertake additional infrastructure projects through traditional public procurement. This is one of the most common motivations for using PPPs but also the most debated. The public sector must recognise the responsibilities that it assumes when entering into a PPP.
Some of the common ways in which PPPs have helped increase funding available for infrastructure by:
- Increasing revenue from user fees- this is done by introducing user charges, or reducing leakage in the collection of charges.
- New revenue streams from greater asset utilisation – this is done by raising revenues from alternative uses for infrastructure assets. This can reduce the cost of infrastructure for the government or users.
Some governments use PPPs as a financing mechanism to meet short term cash budget constraints by spreading the capital cost of a project over its lifetime. Under a PPP, the projects are financed by private sector rather than public sector borrowing, which can enable governments to mitigate the financial constraints.
The extent to which PPPs can enable governments to mitigate borrowing constraints depends on how the PPP is accounted for. While international standards continue to evolve, PPP assets and liabilities are increasingly recognised in government accounts and financial statistics. Hence financing of PPPs should be subject to the same constraints as public borrowing for infrastructure projects. (Source: Public Private Partnerships Reference Guide, Version 2.0)
APMG International launched the Certified Public-Private Partnerships (PPP) Professional (CP3P®) Foundation course and exam in March 2016. The APMG PPP Certification Program is an innovation of the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the Inter-American Development Bank (IDB), the Islamic Development Bank (IsDB), the Multilateral Investment Fund (MIF), the World Bank Group (WBG) and part funded by the Public-Private Infrastructure Advisory Facility (PPIAF) with a shared vision of enhancing PPP performance globally.
