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As outlined earlier in this blog series, private investors are looking for reliable returns to justify the risks that they are taking. Financing and procurement of cross-border projects will often be more complex than national projects due to the scale of the project and compounded risks, and the financial returns may be more uncertain than for national projects.
Cross-border Infrastructure
Investors need certainty of the division of responsibilities between the various parties involved in the project, as well as a clear commitment of payment from the parties, before becoming involved in the project themselves. This requires countries to have reached a clear and durable commitment to their respective responsibilities.
Risks can be hard to define, manage and mitigate. In infrastructure projects that cross regional or national borders and involve multiple parties from both the public and private sector, these risks may be amplified.
With a growing global focus on attracting private sector investment into infrastructure and utilising the public-private partnership (PPP) model, it is crucial that governments focus on the entire duration of a PPP contract. Efforts need to extend beyond ‘achieving financial close’ and beginning construction or ‘cutting the ribbon’ for commencement of services.
While the infrastructure financing gap is huge, one of the main constraints to infrastructure development is not a lack of finance, but instead, a lack of well-prepared, bankable infrastructure projects.
The purpose of this blog series is to highlight some of the interesting aspects of the PPP Contract Management Tool to facilitate discussion around those issues. PPP approaches and practices are constantly evolving, and it is important to debate interesting topics to develop better practices and help governments deliver higher quality PPP projects.
Disputes in public-private partnerships (PPPs) globally involving key performance indicators (KPIs) represent 20 per cent of all disputes, as highlighted in our data using a representative sample of projects from around the world.
By their very nature as long-term large infrastructure projects, public-private partnership (PPP) projects involve a vast array of interconnecting relationships. Core to any PPP project is the long-term contractual relationship between the government’s procuring authority and the private party (the project company). This is one of many relationships that will affect the success of a PPP.
Private partner profit motives are frequently cited as a failure of the public-private partnership (PPP) approach. But those profit motives are also part of the fundamental make up of the PPP approach and why it has the potential to deliver better outcomes for the public.
Transferring risk to the private sector in a PPP contract is frequently referred to as a key part of a PPP arrangement, as well as a key reason why governments use such an approach to procure infrastructure.
Public-private partnership (PPP) contracts are long-term and they may have a duration of 20 to 30 years or more. Today, where technologies and social priorities (such as views on climate change and sustainability) are changing at an accelerated pace, it perhaps comes as no surprise that changes to PPP contracts through renegotiations are common.
Contractual disagreements and disputes are common in PPPs during both construction and operational periods.
How can governments deliver quality infrastructure outcomes?
Tackling the global infrastructure gap remains a priority for governments to drive inclusive growth and deliver quality infrastructure projects for their citizens.
The Infrastructure Knowledge Exchange (IKE) is Global infrastructure Hubs' (GI Hub) database of categorised infrastructure resources. The tool has been created to help Infrastructure professionals globally, to easily find resources that pertain to infrastructure tools, data, publications, organisations, reports and, news.
Globally, governments are accountable for the development of infrastructure and the delivery of basic services in an affordable and inclusive manner. The ability of governments to nurture a conducive enabling environment for infrastructure investment has often been found to be a key differentiator between countries that successfully scale up infrastructure and those that face challenges in doing so.
Most infrastructure investment plans and government policies rely on the delivery of projects and programs. To achieve these and unlock the real benefits of infrastructure, it is vital that projects and programs are delivered well.
Ambitions Beyond Growth- Economic and Social Survey of Asia-Pacific Region” by UN ESCAP 2019 reveals that achieving the Sustainable Development Goals by 2030 would require an annual additional investment of $1.5 trillion for Asia-Pacific developing countries – equivalent to five per cent of their combined GDP in 2018, or about four per cent in terms of the annual average GDP for the period 2016-2030.
Increasingly, infrastructure leaders, investors and developers are recognising the need to not only increase the quantity of infrastructure investment globally to drive economic growth, but also the quality of infrastructure investment, to ensure that that growth and development is inclusive and sustainable.
Insights into the The Schuphol-Amsterdam-Almere (SAA) program, which has been the largest PPP program in the Netherlands in the last decade.
