4.9. Review

IDevice Icon Review of module 4 on financing PPP projects

Key messages learnt in Module 4 include:

  • There is a huge gap between needs and available funding for investment in the infrastructure sector. The existing financing mechanisms may not be sufficient to serve the special needs of investment in infrastructure. Governments need to consider additional financing mechanisms and instruments to meet the investment needs of infrastructure projects through PPPs.
  • Domestic financing has become more common in many countries. This trend is expected to continue in the future. The establishment of special financing institutions, development of domestic capital market and innovative financing instruments are required in order to have domestic financing a greater role in financing of PPP projects. One major advantage of domestic financing is that it reduces the risks due to fluctuation of the local currency. It also reduces country's obligation to allow repatriation of capital and profit.
  • Governments may consider other appropriate measures to reduce the financing costs of PPP projects like grants or subsidies.
  • PPPs can be designed based on cross-subsidization between project components, when excess revenues generated from one component can be used to compensate the shortfall in another component. There are good working models in the region that apply this concept.

Copyright © 2008 by Transport Policy and Development Section, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).