Opportunities and challenges of Public-Private Partnerships

Emerging countries are increasingly using Public-Private Partnerships (PPPs) to fund infrastructure projects, but there are several challenges with using such systems which could be rectified by a strong framework for preparing PPPs.

The Boston Consulting Group has released a report on the rising prominence of PPPs as emerging countries look to the private sector to fund development. Constrained by tight budgets, governments today are increasingly looking for private-sector support in financing and delivering new bridges, airports, and electricity grids, which are critical drivers of a country’s economic prospects and social well-being.

Although there are many advantages of using such partnerships, many projects are failing or struggling to get off the ground as a result of ill-suited preparations, which is something the report is looking to render. Four best-practice areas have been put under scrutiny in addressing the most commonly raised issues with PPPs: managing a rigorous project-preparation process; conducting a bankable feasibility study; structuring a balanced risk allocation and regulation; and creating a conducive enabling environment.

For each of these areas there are six specific success factors that have been identified in the report, covering topics from political leadership buy-in to project preparation funding. Getting it right certainly isn’t a simple endeavour and can also incur significant costs. However, as the report notes: “You end up paying even more if you don’t do it properly. Under Preparation is going to cause delays, cost overruns, or renegotiations further down the line.”

TMF Group works with leading private equity and venture capital firms to enhance their global operations, administer international investment structures and support portfolio companies expanding and operating abroad. Our core legal administrative, accounting and compliance services enable private equity firms and their portfolio companies to invest, expand and operate anywhere in the world.

 

 
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