Global interest in private-public partnerships has grown steadily over the years. Because many governments will, from time to time, find the need for alternative ways of financing their programs and projects, the popularity of the PPP approach will likely continue to grow.
In this article we look at recent trends and the current state of PPP implementation at a global scale. This writeup uses information provided by two reports: a) World overview of the PPP Markets by Pricewaterhousecoopers (PWC), and b) Harnessing the Power of Public-Private Partnerships by the International Institute for Sustainable Development (IISD). Both reports were released during the early part of 2012.
According to the Pricewaterhousecoopers report, the global PPP market volume (with the exclusion of telecommunications, power and oil and gas projects as well as loan refinancings) totaled over US$75 billion in 2011. This represented a record 11 percent increase from the previous year. The 2011 volume is equivalent to about 160 closed deals.
Based on the same report, the market volume by region during the period 2009 to 2011 can be described as follows:
- Western Europe – Western Europe registered the largest volume of PPP projects during the period 2009 to 2011. That region recorded almost US$20 billion in PPP projects in 2010 but, this went down to a little over US$14 billion in 2011.
- Asia Pacific – This region recorded over US$5 billion in PPP projects in 2011, a significant increase over the 2009 level which was under US$2 billion.
- North America – The North American region recorded its highest volume of PPP projects in 2010 at about $US 4 billion. This went down slightly in 2011.
- Eastern Europe – This region recorded an enormous drop in volume of PPP projects in 2011. From almost US$ 4 billion in 2010, this went down to almost zero level the following year.
- Africa and the Middle East – saw a drop in volume of PPP projects from about US$ 1 billion in 2009, this went down to less than half of that in 2011.
- Latin America – From a US$ 2 billion level in 2009, the region’s PPP projects went down to under US$ 1 billion in 2011.
The PWC report mentions that the factors behind the global PPP growth are: a) the preference for infrastructure investment as a means to attain growth and sustain a country’s competitiveness, and b) because of the growing disparity between the financing required to promote growth and what governments can afford. The report mentions that the gap between the amount of investment needed to spur growth and current levels is around US$2 trillion.
In the case of the IISD report, it provided an overview of PPP regions in terms of maturity of their markets. Maturity refers to how sophisticated a PPP market is based on the model and framework it uses. A number of factors impact market maturity like policy framework, the political climate of the region, its culture and access to capital markets.
The IISD report explains the three levels of PPP maturity:
- Level 1: At this level, there is a legislative and policy framework. There is a unit that oversees PPP implementation. How deals are structured are developed and the marketplace is being established. Also, in this level a comparator model is developed for the public sector.
- Level 2: This next stage is where government agencies have their own dedicated units for PPP projects. Here the marketplace is taking shape and primed for expansion. In essence, there is greater depth of the PPP model as it gets to be applied in other sectors of the economy.
- Level 3: This is the highest stage of PPP maturity. Here, application of the PPP approach gets to be more complex. For instance, there could be greater flexibility in terms of how the roles of both the private and public sector are defined under a certain project. Also, the risk models utilized are more complex and much attention is centered on the life cycle of a PPP project. In a very mature market, the government learns a great deal from its private sector partners because of exposure on the non-traditional way of delivering projects and services.
The PPP market maturity ranking per the IISD report are as follows:
Level 1 (Low)
- Czech Republic
- South America
Level 2 (Medium)
- New Zealand
Level 3 (High)
Colverson, Samuel, and Oshani Perera. “Harnessing The Power of Public-Private Partnerships: The Role of Hybrid Financing Strategies in Sustainable Development.” International Institute for Sustainable Development. N.p., Feb. 2012. Web.
“World Overview of the PPP Markets.” The Organisation for Economic Co-operation and Development (OECD). N.p., Mar. 2012. Web. .