As countries recover from the COVID-19 crisis, public infrastructure has emerged as a focal point to spur job creation, economic growth, and green development. What role can the private sector play in delivering public infrastructure? How do governments and companies work together to finance and accomplish ambitious infrastructure projects? Jyoti Bisbey, an infrastructure finance specialist at the World Bank, answered these questions in a virtual seminar sponsored by the Julis-Rabinowitz Center for Public Policy & Finance.

Beginning with an overview of the variety of public infrastructure goals, from transportation and energy to health and recreation, Bisbey highlighted the enormous investment gap of about 4.5% of gross domestic product (GDP) required for lower-and-middle-income countries to achieve infrastructure-related Sustainable Development Goals. To overcome the myriad challenges that large-scale infrastructure development projects face, Bisbey stressed the need for increased efficiency, smarter investment, private sector financing, and a whole-lifecycle approach to planning such projects.

To meet these goals and overcome these challenges, Bisbey emphasized the importance of public-private partnerships (PPPs), long-term contracts between public and private parties for the development or significant upgrade and management of a public asset that entail a significant transfer of risk from the government to the private sector and link remuneration to outcomes, not just inputs. Unlike privatization, Bisbey said, PPPs do not mean “that the government is going to step out.” The private party in a PPP can design, build, finance, operate and maintain the infrastructure, but ownership resides with the public sector

So when and where are PPPs needed? Principally, to optimize efficiency, Bisbey explained. It’s a misconception that PPPs lower the cost of projects, but because of the transfer of risk, the private sector can handle cost management, life cycle management, reliability and effectiveness, innovation, risk management, and utilization better than the government, massively increasing efficiency. Bisbey used a case study from Timor-Leste–the Tibar Bay Port project–to illustrate this point. PPPs are typically incorporated under a special purpose vehicle, which the government pays directly (in a “government-pays” system) or authorizes to collect fees (in a “user-pays” system) and manages the project until the end of its life-cycle and contract, at which time the government assumes control of the asset.

Bisbey also debunked a few misconceptions about PPPs. One such misconception: the private sector is a panacea. “The government is the driver” in PPPs, Bisbey emphasized, and ultimately needs to be prepared to drive its private partners to achieve infrastructure goals. She closed by sharing a resource from the World Bank, the APMG PPP Certification program and website.

A recording of the seminar is available here.