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infrastructure financing

Keeping the public and private in PPPs

George Castellanos's picture


Tomas Castelazo | Wikimedia Commons

The Colombian magazine Dinero, one of the most respected economic publications in Latin America, recently published a story about a World Bank study that placed Colombia as the second most competitive country in the world—behind a tie between Great Britain and Australia—to finance infrastructure projects under the public-private partnership model (known as PPPs). This score (83 points out of 100) was also shared by Paraguay and the Philippines.

At first glance, this is a virtuous recognition—at least on paper. However, in daily practice in the Latin American region, like most emerging economies, the administrative complexity of government bodies still presents enormous challenges that demand immediate attention if PPPs are to reach their full potential. Getting this right would truly integrate the PPP model into the economic and social development engine required to compete in a globalized economy.

Suggestions from a pragmatist to boost the impact of PPPs

Patricia Sulser's picture



Recently, I published a book about infrastructure public-private partnerships (PPPs) in the most challenging developing countries—a private sector perspective on what is required to bring investment and expertise to partner with governments in providing vital infrastructure services.

There is already a substantial body of work on the potential of PPPs and how to design, finance, and implement them—even in countries where there are limited legal and regulatory frameworks on which to build. What compelled me to write my book is the urge to share, as a practitioner over two decades in some of the most challenging markets, common pitfalls I’ve seen and what appear to be the critical elements of success in creating successful and replicable PPPs. 

PPP Cancellations: If you do not change direction, you may end up where you are heading (Lao Tzu)

Jeff Delmon's picture



In a previous blog, I used the metaphor of marriage to explore the dynamic of public-private partnerships (PPPs) as relationships created between two parties with often very different expectations and methods of communication.

Today, we explore PPP cancellations, the what and why— further stretching the marriage metaphor. Cancellation of a PPP is a bit like divorce: rarely easy, often painful, and generally expensive.

The worst reconciliation is better than the best divorce – Miguel De Cervantes Saavedra

Muskets, PPPs, and standardization

David Lawrence's picture


BRJ INC | Flickr

In the 18th century, muskets were produced by skilled craftsmen, one piece at a time. Each component was individually forged, filed, and worked—like a piece of art—until they could all be put together into a single weapon.
 
Today, the limitations of this approach are apparent. The cost and time required to produce each musket were high, and replacement parts had to be made by hand. This method was replaced by production with interchangeable parts in the early 19th century, a process advanced by Eli Whitney, an inventor who produced arms for the U.S. government.

Three ways governments can create the conditions for successful PPPs

Lincoln Flor's picture
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A healthy Public-Private Partnership (PPP) has several defining features: strong competition, bankability with low financial costs, lower risk of renegotiations, secure value for money, and efficiency gains.

What does it take for countries to develop PPPs that can fit this description? Why is it that some countries such as India, Colombia, Turkey, and Egypt have been able to develop strong and successful PPP programs while others have not been able to award any projects under special-purpose PPP legislations? 

Our experience with infrastructure PPPs across the globe suggests that three institutional pillars are needed to increase the probability of PPP success.

An optimist’s view on climate-smart infrastructure

Vasuki Shastry's picture


Photo: RoyBuri | Pixabay

In developed countries, we tend to take infrastructure services for granted. It’s easy to forget, when living in London, Washington, or Singapore, how much lies behind the simple act of switching on the lights. But as a young person growing up in India in the 1960s, I knew what it was like to live with rampant electricity shortages and terrible roads. It was easy to complain about it, and we did. It seemed, then, that the solution was simple: government should simply cough up the money, get to work, and build the infrastructure.
 
But there was a lot more we didn’t think about. Behind good infrastructure systems lie much more than concrete, pipes and wires. There are other building blocks as well, such as sound policy, good regulations, viable institutions, and fruitful interactions between the public and private sectors.

When (and when not) to use PPPs

Shari Spiegel's picture


Photo: torstensimon | Pixabay

In the context of strained public finances and limited borrowing capacity for developing countries, there is growing debate on the roles of public and private actors to deliver the trillions of dollars of infrastructure necessary to achieve the Sustainable Development Goals (SDGs). On one hand, high-profile public-private partnership (PPP) project failures have cast doubt about the viability of the model. On the other hand, while public authorities are ultimately responsible for the delivery of public services, deficient infrastructure services in some countries have raised concerns about the ability of the public sector to deliver on its own.

This is not a black-and-white issue. Public and private finance are complementary, with different objectives and characteristics suitable in different contexts and sectors. The recently published 2018 report of the Inter-Agency Task Force on Financing for Development, to which almost 60 agencies and international institutions have contributed, explores this debate while analyzing financing challenges of SDGs 6 (clean water and sanitation), 7 (affordable and clean energy), 11 (sustainable cities and communities), and 15 (life on land/ecosystems).

Maximizing finance for safe and resilient roads

Daniel Pulido's picture


Around the world, roads remain the dominant mode of transport and are among the most heavily-used types of infrastructure, accounting for about 80% of the distance travelled for individuals and 50% for goods.

Despite this intensive use, the funding available for road maintenance has been inadequate, leaving roads in many countries unsafe and unfit for purpose.

To make matters worse, roads are also very vulnerable to climate and disaster risk: when El Niño hit Peru in 2017, the related flooding damaged about 18% of the Peruvian road network in just one month.

It is no surprise then that roads are the sector that will require the most financing. In fact, the G20 estimates that roads account for more than half of the $15 trillion investment gap in infrastructure through 2040.

Railways are the future—so how can countries finance them?

Martha Lawrence's picture
Photo: Kavya Bhat/Flickr
As a railway expert working for the World Bank, I engage with many client countries that are looking to expand or upgrade their railway systems. Whenever someone pitches a railway investment, my first question is always, “What are your trains going to carry?” I ask this question because it is fundamental to railway financing. 

Railways are very capital intensive and increasingly need to attract financing from the private sector to be successful. That is why the World Bank recently updated its Railway Toolkit to include more information and case studies on railway financing. Here, in a nutshell are the key lessons about railway financing from this update. 

Maximizing finance for sustainable urban mobility

Daniel Pulido's picture
Photo: ITDP Africa/Flickr

The World Bank Group (WBG) is currently implementing a new approach to development finance that will help better support our poverty reduction and shared prosperity goals. This crucial effort, dubbed Maximizing Finance for Development (MFD), seeks to leverage the private sector and optimize the use of scarce public resources to finance development projects in a way that is fiscally, environmentally, and socially sustainable.
 
There are several reasons why cities and transport planners should pay close attention to the MFD approach. First, while the need for sustainable urban mobility is greater than ever before, the available financing is nowhere near sufficient—and the financing gap only grows wider when you consider the need for climate change adaptation and mitigation. At the same time, worldwide investment commitments in transport projects with private participation have fallen in the last three years and currently stand near a 10-year low. When private investment does go to transport, it tends to be largely concentrated in higher income countries and specific subsectors like ports, airports, and roads. Finally, there is a lot of private money earning low yields and waiting to be invested in good projects. The aspiration is to try to get some of that money invested in sustainable urban mobility.

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