G20 Foundation Publications China 2016 | Page 42

TRADE & FINANCE INFRASTRUCTURE DEVELOPMENT THE ROLE OF PUBLIC PRIVATE PARTNERSHIPS MUKHISA KITUYI Secretary-General of UNCTAD 42 Financing infrastructure to accelerate transformational change is among the key challenges of the 2030 Agenda for Sustainable Development. Public investment continues to play a strategic role, but public budgets are often constrained and governments may lack required capacity. This has heightened expectations that public-private partnerships (PPPs) with the domestic and foreign private sector could furnish much of the $3.3 trillion to $ 4.5 trillion per year, which is the estimated need for basic infrastructure investment in developing countries alone (UNCTAD, 2014). In addition to bringing private finance to the table, PPPs also aim at sharing risks and combining private and public managerial and technical skills. However, it is important to keep in mind that there is insufficient empirical evidence t o support the growing expectations placed upon PPPs, and governments should be cautious about viewing them as a panacea. A prudent approach creating dedicated expertise on PPPs in public institutions, supported by technical assistance from the international development community, can help PPPs to deliver their expected development benefits. PPPs have been widely used in developed and developing countries. Private sector participation in infrastructure projects in developing countries has doubled since the beginning of the millennium. It amounted to about $164 billion in 2014 (Figure 1), roughly equivalent to overseas development assistance (UNCTAD, 2015). In 2014, among low – and middle-income countries, China had the second most PPP projects – hosting 50 projects with the largest amounts spent in transport and energy – just behind Brazil, down from its first position in 2013. India remained third both years. However, projects in China involved smaller investment amounts, with total PPP investment of $4.0 billion in 2014, in the 10th place, far behind Brazil ($57.6 billion) and Turkey ($14.4 billion). PPPs are the most effective when public budgets are severely constrained and when the technical expertise provided by the private sector improves the effectivity of public service provision. But there is significant evidence of inherent limitations, liabilities and pitfalls (IEG, 2014; ECLAC, 2015; UNCTAD 2015). PPPs typically make only a small contribution to total