How to make PPP work in Russia: 2012 Overview
Advantages for the state
Among the key advantages of PPP mechanisms for the Russian state survey participants indicated the following:
- Elimination of problems in connection with insufficient budget funds
- Use of private investors’ experience in introducing technical innovations
- Improved quality of public services
Opinions on the potential of PPPs for making state expenditures more cost-effective differ between the public and private sectors and between Russian and foreign companies.
Representatives of foreign (as opposed to Russian) companies regard the following as key advantages of PPPs:
- Budget savings
- Use of private investors’ experience in project delivery
Note also that foreigners are less inclined to assume project risks than their Russian colleagues.
Opinion on the key advantages of PPPs for the Russian state
Public officials attach greater importance to off-budget financing and the transfer of liability for risks to a private partner than they do to such PPP opportunities as budget savings and new technologies.
By contrast, private investors and financial companies, especially foreign, believe that PPP mechanisms promote budget savings by means of:
- Effective work of a private investor and improved cost-effectiveness for the state
- A flexible and balanced allocation of risks between parties to a PPP agreement
- A partial transfer of costs to consumers.
A key advantage of PPPs
It can be concluded that market players view the effectiveness of PPPs more broadly than do public officials and base their evaluation on value-for-money criteria.
Note that representatives of the private sector are far less inclined to assume risks than the state expects. Banks take the most conservative position (which is natural, inasmuch as their chief task has traditionally been the preservation of capital).