Public-Private Partnerships (PPPs) have been an important option to develop infrastructure and services.
However, challenges for preparing, procuring and monitoring PPP projects in LICs are huge. Challenges include weak institutional capacity, constraints in fiscal space, shallow capital markets, and lack of access to long-term financing.
Despite these challenges, LICs have made important efforts to implement PPP policies, laws and regulations. As a result, these countries closed 377 PPP deals between 1987 and 2013. Even with this considerable effort, LICs still have important infrastructure needs. This is a good start, but hardly enough to tackle the problem.
During the project selection stage, LIC governments have to discuss whether a particular project should be implemented under a PPP scheme or through traditional procurement. There are several reasons why governments decide to implement a PPP: to accelerate public investment programs, maximize the fiscal space or to try to avoid fiscal controls, for example.
At this key decision point, various options can be considered by governments, including a Value for Money (VfM) analysis.