After privatization, joint ventures, franchising and contracting out, « Public-Private Partnerships » (PPPs), are the new darling of cash-strapped governments looking to lighten the financial burden of infrastructure investments. PPPs provide opportunities for governments to shift financial obligations off their balance sheets, and for institutional investors to match low-risk assets with their long term funding needs. However, the success of such partnerships is intrinsically linked to the contracting framework and the risk sharing agreement. At stake are crucially important capital and social infrastructure projects traditionally called « public goods » and overseen by the government. Putting these in the hands of investment fund managers can bring about greater efficiencies to the benefit of the end user (you and I), but the appropriate alignment of incentives is imperative.
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