The potential of private public partnership in financing municipal capital projects in developing countries

Abstract

The purpose of this paper is to undertake literature review to assess the effectiveness of public private partnership (PPP) finance on municipal capital projects in developing countries. The basis of this investigation is informed from the fact that urban development is the centre for attracting the required investments in the country. Furthermore the municipal councils’ revenue base is not adequate to provide the required capital for the development of the infrastructure necessary to attract investments in these urban centres. The paper draws on extensive literature reviews on the historical development of PPPs, and the underlying theories and models which are useful in this type of research. A comprehensive review of current literature covering all types of PPPs and municipal projects which have been financed using this type of finance, have been undertaken. Further the factors which need to be taken into account in a PPP type of financing have been analyzed. The paper found that municipal projects ranging from infrastructure (roads, telecommunication, power water undertaking etc); housing projects; hospitals; schools and other institutions of education can attract PPP finance. Various types of PPP finance for municipal projects are also identified with the most common once being BOT, BOOT, contracting and leasing including Concessioning. Further the paper found that there are certain critical factors which need to be fulfilled before a country/municipal authority embark on a PPP type of project finance. The most critical factors include the legislation of appropriate laws and regulations, analysis of major risks and design of methods to mitigate the risks’ and analysis of the positive and negative underlying factors which would need to be taken into account in PPP analysis. hi conclusion the paper notes that the PPP finance for municipal capital projects would be a major milestone towards service delivery and should be encouraged.