Investments in Public-Private Partnerships (PPPs) have grown in absolute terms since 1991 with two notable periods of expansion and one period of contraction.
The growth cycles of PPP investments have been influenced by five big economies– Brazil, China, India, Mexico, and Turkey — that have increased their market share over time.
The top five economies also remain dominant in terms of investment as percentage of GDP. A significant number of PPPs (23%) originate through unsolicited proposals (USPs), which raises some concerns about transparency in project selection. Lack of competition in contract award, in the form of direct negotiations, is also prevalent in the energy sector (33%) and among projects in low-income countries, or LICs (39%). A significant percentage of projects (69%) require government transfers or purchase agreements with public entities.
Multilateral Development Banks (MDBs) provide financial support to PPP projects mainly in the form of loans (70%) and guarantees (13%). Most MDB support went to Latin America (89 of 226 projects) and into energy (186 of 226 Projects). MDBs have teamed up to finance 144 renewable energy projects in the past five years alone.
Despite government and MDB support, empirical evidence shows that good institutions and regulations impact results. Countries with established and stable institutions and regulatory systems were able to advance more PPP projects. The percentage of PPP projects cancelled remains low (3.7%) at aggregate levels, but this rate is significantly higher among water and sanitation projects (28%). Overall, projects were cancelled, on average, 5.7 years after reaching financial closure.
PPP investment as a percent of GDP must increase. This will require them to strengthen their institutional and regulatory framework for PPPs. Data also confirms the potential for increasing competitiveness in the bidding processes, as well as for boosting the effective preparation of sound projects.
This justifies the strong implication of CICA in the improvement of the countries’ institutional and legal frameworks as well as CICA support to the International Infrastructure Support System Platform to facilitate the good preparation of the projects (Well Prepared Projects).