Public Sector Finances as Determinants of Private Investment in PPP Projects – Experiences from Select Countries

Abstract

Public-Private Partnership (PPP) projects have been gaining in popularity in many developing countries along with developed countries. While there has been sufficient research on private sector capacity to make the partnership successful, not much research exists on the importance of the financial health of the public sector in PPP projects. The premise of the current research is that strong public sector finances instil confidence in the private sector of governments’ ability to honour PPP commitments and that, in turn, increases the attractiveness of PPP projects. Through a number of case studies relating to government finances of Indian states and other countries, it is seen that governments which have checks and balances to issuance of guarantees and other forms of indirect support for PPP projects are actually able to attract higher levels of PPP investment.