Public-private partnerships are an effective tool through which the state and business work together on mutually beneficial terms to address socially important challenges. As a rule, PPP agreements involve the financing, construction and operation of infrastructure by the private partner on one hand, and return on investment with a particular yield guaranteed by the state on the other hand.
The PPP mechanism is used in the implementation of major infrastructure projects which require long-term investments, providing a balance between the interests of the private and public partners through the optimal allocation of risk between the parties.
The demand for infrastructure investments by the state relate mostly to public services: health, education, culture and recreation, IT, transport, housing and communal services.
The main advantages of PPP according to experts:
- Ability to implement large-scale infrastructure projects with limited budgetary resources;
- Engagement of highly skilled professionals from the private sector to solve public problems;
- Clear division of responsibility, a balanced distribution of risk between the government and business;
- Reduced construction time, cost optimisation and the use of innovative technologies to create a facility in view of the private partner’s commitment to project effectiveness in the long term.