Infrastructure PPPs in the most challenging developing countries: Closing the gap

Author: IFLR Correspondent | Published: 31 May 2018
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Well-functioning and accessible infrastructure is fundamental to social and economic development. But the scale of the scarcity of basic infrastructure historically provided by governments in many developing countries is alarming. It’s estimated that to close the gap by 2030, over $1.9 trillion per year required in developing countries alone.

IFC BookAnd yet, governments around the world, particularly in developing countries, are constrained more than ever, and unable to deliver the public services required on their own.

The private sector is becoming increasingly essential to support the budgets of governments to deliver basic services. It is also seen as a critical potential source of innovation, discipline and quality for these services, as well as providing essential resources to administer the services. In the context of severe infrastructure backlogs and limited public funds and capacity for addressing the problem, one viable option for private sector resources to be mobilised to address this daunting challenge is the public-private partnership (PPP).

This publication, Infrastructure PPPs in the most challenging developing countries: Closing the gap, is one international development practitioner’s experience over several decades on the ground in some of the world’s lower-income developing countries, including fragile and conflict affected states (FCSs), and certain other challenging circumstances. Observing the implementation of PPPs in these extremely challenging socio-economic environments, this publication highlights what has worked, what hasn’t and why.

Despite a number of failed examples in both developed and developing countries, there have also been many successful PPPs. There is still a good deal of confidence in the potential impact and value for money of well-selected and well-structured PPPs to deliver the basic infrastructure and services required to improve lives in developing countries.

While every country has its own complex political, social and economic history, there are a number of common factors that could deter the private sector from getting involved. And in developing countries with acutely or chronically difficult environments, some of which could be classified as FCSs, the challenges are even greater. While PPPs may not be practicable until some of these factors have changed, experience has shown that PPPs are possible even in the hardest of circumstances.

There are many quality publications and knowledge platforms dedicated to or addressing PPPs. They bring sophisticated and in-depth perspectives from PPP experts around the world, especially guidance for governments regarding PPP legal and regulatory policy and contractual arrangements. Yet, many of these publications are geared toward borrowing the PPP experience from developed or developing markets that have achieved some sector reforms or have a history of private sector involvement in the delivery of some public services, or markets that are relatively predictable and safe.

This publication has been written for practitioners and stakeholders in infrastructure PPPs in developing countries where the conditions for involving the private sector in the delivery of infrastructure have not been sufficiently established; or where events have occurred that have dampened the appetite of investors and lenders. Some of these countries are lower-income developing countries; some are FCS countries; and some are simply developing countries that have not yet been able to attract private investment on a sustained basis, even though they are not on the lower income or FCS scale. These are the focus countries of this publication.

To governments and public contracting authorities that are keen to explore and possibly adopt a PPP approach, this publication intends to highlight what conditions or protections potential lenders and private sector investors and companies are likely to seek before they commit their finance and other resources, and why. And to private party stakeholders and lenders, it aims to explain why governments may seem to be inflexible and resist the private sector’s requests for protection, and want to shift certain risks that are beyond anyone’s control to the private stakeholders. It also articulates why the private sector may resist taking certain project risks, which can help the private sector explain to its public counterparts about both the drivers and deterrents in a private sector stakeholder’s decision to commit to a project in their country. And finally, this publication shares the PPP experiences in especially challenging environments that have worked and effectively balanced the interests of the public and private stakeholders in the early round of PPPs in the country. 

Click here to download a copy of the Infrastructure PPPs in the most challenging developing countries: Closing the gap book.

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