Public-Private Partnerships

Building modern, sustainable, and reliable infrastructure is critical for meeting the rising aspirations of billions of people around the globe—and for addressing the climate change challenge. Infrastructure investment helps raise economic growth rates, offers new economic opportunities, and facilitates investment in human capital.

The numbers are stark: about 800 million people live without electricity; 2.2 billion people lack safely managed drinking water service. Congested and inadequate ports, airports, and roadways are a drag on growth and trade.

Public-private partnerships (PPPs) can be a tool to get more quality infrastructure services to more people. When designed well and implemented in a balanced regulatory environment, PPPs can bring greater efficiency and sustainability to the provision of public services such as energy, transport, telecommunications, water, healthcare, and education. PPPs can also allow for better allocation of risk between public and private entities.

When governments choose to use public-private partnerships (PPPs), we provide solutions to ensure they’re designed well, benefit from a balanced regulatory environment and good governance, and are fiscally sustainable. We aim to foster better, more efficient public services and infrastructure.

Yet, much work is needed to make projects «investor-ready» and to develop innovative frameworks to leverage private investment. We support governments make informed decisions about improving access and quality of infrastructure services, including—where appropriate—using PPPs as one delivery option.

Successful PPPs require finding a balance among the needs of all parties through appropriate risk allocation. The governments’ needs are to ensure that the projects are built on time to the required specifications, maintenance works are carried out, and the services are delivered throughout the operating periods, according to the contractual provisions, both in terms of quality and price. Governments also have a responsibility to their citizens to protect their limited budgets by minimizing their fiscal and contingent liabilities, as discussed elsewhere in this guidance book. Private investors in PPPs can be divided into two broad categories—equity investors and lenders. Understanding their different needs will assist in understanding the rationale behind government guarantees for PPP projects.

The government should establish a system, process, or mechanism to plan, coordinate, and manage its risk exposure ahead of time. The line ministries in charge of project development and approvals should coordinate closely with the MoF, which should measure and disclose the government’s exposure and obligations on a regular basis. Many countries have established a centralized PPP unit to oversee the government’s undertakings and obligations under different PPP and privately financed projects. Just because the government does not provide any explicit guarantees does not mean it has no risks. The underlying concessions or PPP contracts may have many explicit or imbedded clauses that require the government to perform certain contractual and financial undertakings, which should also be carefully analyzed and managed.

By providing a wide range of expertise, data, tools, and services, we contribute to getting PPPs right—when this modality is appropriate within a country’s context.