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What are PPPs and how can they help infrastructure funding and finance?

As APMG International readies itself to launch a brand new certification in partnership with the World Bank Group (WBG), funded by the Public-Private Infrastructure Advisory Facility (PPIAF) it aims to foster a common minimum level of knowledge and understanding among the practitioners for Public-Private Partnerships. This makes it important to understand what are PPPs and how do they help governments improve infrastructure and deliver essential public services to grow their economies. PPPs enable the public sector to engage with the private sector to develop and operate public sector facilities and services. Their key characteristics include:

  • Long term – up to 30 years of service provisions,
  • Access to private sector finance,
  • The transfer of risk to the private sector and
  • Different forms of long term contracts drawn up between legal entities and public authorities.
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Photo credit: WBG

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 will be launching a PPP certification scheme in partnership with the World Bank Group towards the end of 2015, to improve performance of PPP practitioners across all aspects of PPPs. This certification will be linked to specific stages in a PPP project and is funded by the Public Private Infrastructure Advisory Facility (PPIAF). It is also supported be the main Development Banks like the Asian Development Bank (ADB), the Islamic Development bank (IsDB), Inter – American Development Bank (IADB) to the Emerging Markets and Developing Economies (EMDEs).

About the World Bank Group (WBG)

The World Bank Group plays a key role in the global effort to end extreme poverty and boost shared prosperity. It consists of five institutions: the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Working together in more than 100 countries, these institutions provide financing, advice, and other solutions that enable countries to address the most urgent challenges of development. For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org.

About APMG International

APMG-International is a global examination institute. Its portfolio of qualifications includes AgilePM®, Change Management, and COBIT® 5. APMG-International works in partnership with a network of Accredited Training Organizations all of which have undergone the most rigorous assessment process in the industry. APMG-International examinations are available globally and it works with 21 languages. Our examinations are rigorous, challenging, psycho-metrically sound and consistent, so candidates can be proud of their achievement. For more information about APMG International, visit: www.apmg-international.com

For more information on the PPP certification, visit: ppp.apmg-international.com

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