Subsection Public-Private Partnership

Public-Private Partnership is a combination of financial, technological, organisational and management, personnel and other resources of the government and business when creating and using government or municipal facilities and also when providing socially significant services traditionally reserved for the competence of the government.

Using PPP schemes helps to raise the efficiency of the use of budgetary funds, ensure a more effective project implementation and also conduct a greater number of projects within a certain period of time. As a PPP scheme is used, the quality of services provided increases, a portion of risk is transferred to the private sector and as a result of the competition, a more effective use of resources is achieved. PPP is becoming an important element in an effective model of government management, in which the government has more regulating functions, rather than functions related to service provision.

Advantages of PPPs for the government

Positive budget and socio-economic effect.

Accelerated implementation possible for a project meeting government needs and interests.

Raising funds from the private sector. The PPP mechanism helps the government to significantly reduce the volume of its capital investments into an investment project using the funds of private investors, which saves on budgetary funds.

Attracting management and intellectual capital from the private sector:

  •         the private sector conducts independent checks of the return on investment of a project;
  •         a PPP provides additional opportunities for innovative solutions;
  •         construction time for an investment project is reduced due to the need to observe the interests of an investor and return their investment in the shortest possible time;
  •         the quality of work and monitoring of the use of facilities and building works is significantly higher as there is additional monitoring on behalf of the investor who, when construction is complete, is entitled to operate the facility on a commercial basis.

No budget costs for operation. In most PPP models the investor bears all costs for the maintenance of a facility during a period of commercial operation.

Transfer of a portion of risk to the investor.

Advantages of a PPP for the private investor

Administrative and political support from the government in the implementation of a project.

Government participation in the funding for the project.

Possible guarantees from the government:

  •  possibility of guaranteeing an investor a minimal income at the expense of the government;
  •  guarantee of partial or full return of an investor’s funds by the government in the event of unsuccessful implementation of a project.

Sharing risk with the government. An investor shares the risks of implementing a project with the government and therefore carries only a portion of the risk defined by an agreement. The investor only bears risks that are applicable to them.