Involving the Private Sector and PPPs in Financing Public Investments: Some Opportunities and Challenges

Given that public investment requirements far exceed available resources in most developing countries, there is a need to both channel public resources wisely and also best leverage the opportunities to utilize both national and international sources of private or institutional finance. A range of instruments is possible, involving combinations of public and private management and financing arrangements (see the companion paper, Ahmad, 2014). Some investments are likely to be predominantly public, especially where there are externalities in the provision of a balanced and inclusive basis for sustainable growth (e.g., education, regional infrastructure and O&M). These are also needed to facilitate the involvement by domestic private investors and FDI. Worldwide there is a growing trend towards the involvement of the private sector in the financing of infrastructure and in the provision of public services. Private sector involvement takes diverse organizational forms and arrangements. These range from privatization to deregulation, outsourcing, and government downsizing (see Armstrong and Sappington, 2006).