Financing

Promoting new financing techniques, including public-private partnerships
In recent years, the international construction market has seen a steady rise of the use of Public-Private Partnerships and BOT-models (‘Build, Operate, Transfer’) by governments for financing of major asset and infrastructure procurements. Various projects – whereby risks related to its implementation and operation are transferred to the private sector – ranging from the construction of schools and hospitals to large infrastructure projects as the construction of roads, tunnels, bridges, harbours, airports, telecommunications and electricity networks.

 

NABU wants to contribute actively – through its membership of EIC and independently – to the development of these new financing techniques for (international) construction projects, and – more in general – to a better understanding of the use of PPP’s. The use of these models may often be seen by governments as a financing solution when public funding is insufficient for necessary infrastructure projects. The key to this approach, however, is not the funding of public projects by the private sector; governments cannot avoid the inescapable reality that infrastructure services have to be paid for, whether provision is public or private.

 

The overall objective is to deliver value for money and high quality public services at affordable prices over the longer term. The successful use of these (financing) models is based on a realistic approach of both parties to distributions of risks and rewards between the public and private sector. It requires a thorough assessment of the complex technical, environmental, legal, financial and commercial viability of the project, including a transparent procurement process. This approach brings value, but involves for both parties considerable transaction costs and is only suitable for projects of an adequate size. Moreover, the government has to accept the paradigm shift from buying an asset to buying a service.