Public-Private Partnerships: What do experts think we must do to close the infrastructure gap?

In the Global South, where infrastructure is scarce, the demand for investment exceeds current levels, necessitating over $2 trillion annually to support projected GDP growth over the next 15 years. Public funding often proves inadequate, prompting greater private sector involvement to fill the investment gap. A recent workshop organised by the MobiliseYourCity Partnership during the HSC Brussels Roundtable in April concentrated on mobilising private capital for transport projects, particularly in Global Gateways Transport Corridors. Participants stressed the critical role of private sector engagement in resolving infrastructure deficits and propelling socio-economic development.  

Supporting effective governance is crucial for encouraging private sector investment in transport infrastructure. Robust governance ensures stability, predictability, and transparency, instilling confidence among investors. In environments with strong governance, private sector actors are reassured that their investments will be protected, contracts honoured, and regulations consistently enforced. Effective governance expedites project approvals, permits, and land acquisition, streamlining overall project delivery. Predictable policies further bolster investor confidence, enabling them to assess long-term viability without sudden regulatory changes. Prioritising governance is vital for attracting private investments and constructing sustainable transport networks, benefiting both citizens and investors. Enhancing governance capacities at both local and national levels is critical for fostering private sector participation and ensuring sustainable infrastructure development. Additionally, legal clarity, including transparent land acquisition procedures and dispute resolution mechanisms, is essential for providing the certainty that encourages investment and facilitates private sector engagement in infrastructure projects.  

Developing financially sustainable revenue models for public transport is critical, especially in the Global South, where cities heavily subsidise fares. However, high government debt levels pose political and revenue risks for private sector involvement, limiting infrastructure investment opportunities. This challenge makes it difficult for private operators to cover costs and generate profits, highlighting the need to balance affordable fares for passengers with financial viability for investors. Addressing the funding gap, especially in projects with repayment limitations, necessitates innovative financing mechanisms and risk-sharing arrangements. Private sector actors require a stable and predictable environment to commit to long-term capital, underlining the importance of revenue models ensuring profitability while offering accessible and affordable transportation options for citizens.  

Strengthening local governments' risk allocation capacity is crucial, especially in public transport projects perceived as riskier investments. Investors are concerned about political interference, changing demand patterns, unforeseen shocks like pandemics, and financial risks such as upfront costs, delays, and revenue uncertainties. Allocating these risks, including climate factors, necessitates robust governance frameworks and risk-sharing mechanisms. Defining these mechanisms is challenging yet essential for successful public-private partnerships. Additionally, risk allocation must consider social equity, ensuring public transport benefits low-income populations. Balancing profit motives with social impact is necessary. Thus, enhancing local government capacity involves addressing financial and operational risks while integrating social equity considerations into risk allocation decisions, fostering sustainable and inclusive public transport systems for all.  

Land acquisition and right-of-way challenges hinder public transport infrastructure expansion. Acquiring land for projects is complex and costly, often involving disputes. Investors need clarity on land rights and compensation, while early community involvement is crucial for addressing concerns. Transparent procedures are vital, ensuring stakeholders understand their rights, fair compensation, and prompt payments mitigate disputes. Transparency fosters trust and reduces conflicts, and a holistic approach involving government policies and community engagement is needed to attract private sector investments, driving socioeconomic development.  

Addressing the infrastructure deficit in the Global South demands collaboration between public and private sectors. The workshop emphasised the crucial need for effective governance, sustainable revenue models, risk allocation, and transparent land acquisition. By prioritising these elements and facilitating an enabling environment for private sector investment, Global South nations can bridge the infrastructure gap, spur socioeconomic development, and enhance the lives of millions.