Yielding new benefits from public—private partnerships (page 3 of 3)

• Enter the country or not? Countries with large markets and low political and economic risks are most attractive to investors.
• What is the optimal mode of entry? Based on the sector, level of risk, and the potential to generate revenue, this is where the investor will decide its level of commitment to the market, which determines the type and value of the PPP contract.
• What is the level of resource com­mitment and knowledge transfer? This step may be the most important. The level of commitment and knowledge transfer is what most affects the PPP's influence on the economy.

The government's role is clear:

Governments need to minimize economic and political risks. Investing in an infrastructure project is risky for the private investor and the government must minimize risks to attract more PPPs to its market.

Governments need to optimize private-sector commitments to maximize the PPP's effect on the economy. PPP arrangements with greater private-sector involvement will contribute to GDP growth. "The government needs to promote and negotiate contractual agreements that encourage the private sector to invest more money, transfer expertise, and increase accessibility and product choice," commented Richard Shediac.

Governments should secure a sound regulatory system to maximize resource commitment and transfer of know-how. Competitive markets yield benefits for consumers and government alike by reducing prices, creating more services, and providing greater accessibility, but the government must also establish a number of policies that encourage competition.

PPPs lay the groundwork for global development

PPPs can help increase a nation's GDP, but this is dependent on the number and value of PPPs in the country, the type of contract, and the policy and institutional environment. Policymakers must evaluate these factors, and craft a strategy for infrastructure development, then ensure their actions can sustain the strategic goals. A PPP-friendly environment must exist to attract investors, encourage public support, and ensure long-term project success.

"At every step, private investors' interests must be balanced with public safety and access. Because every PPP prospect presents a new and different opportunity to guide economic development, every prospect must be evaluated, vetted, and selected on its own merits," said Rabih Abouchakra.

Third-party advisors with knowledge about the intricacies of PPP structures and the factors that drive economic growth can provide assistance with creating PPP-supportive frameworks. Once the ideal circumstances are in position, public-sector policymakers can chart a course for a stronger, more vibrant future where pri­vate investors improve public infra­structure projects.

In return, the government invests more resources in other areas of public interest in anticipation of a thriving and open economy that is better positioned to extend its global reach.