A cool symbiosis: Public-private partnerships are win-wins for investors and economic growth

The current interest rate environment presents an opportunity for the public and private sectors to combine resources to finance and enhance productive economic growth through smart investments.

Public-private partnerships (PPPs) can be crucial drivers of long-term investment in infrastructure. Indeed, a PPP investing USD 1 in infrastructure would return USD 3 in GDP output in a low-growth environment. A best practice PPP transaction provided by an advanced economy can set a positive precedent and allow other countries to adopt similar approaches.

The mechanics of it

A public sector takes on the construction risk of a project, with the private sector carrying the investment risk once the project is up and running. PPPs for long-term investments are typically set up for “greenfield” and “brownfield” projects – greenfield being undeveloped land and brownfield formerly developed land no longer in use. For the latter, the public part of the PPP structure could be financed by recycling existing government assets through privatisation. As far as the investors are concerned, the fact that the assets already exist mitigates the political risk of intervention or change in government during the construction phase. This is just one example of a structure that could be highly beneficial not only for long-term investors, but more broadly for also global economies.

 


Supporting financial resilience

Re/insurance supports financial resilience by acting as a shock absorber and promoting growth through its core businesses. This is particularly important in a challenging and volatile macro-economic environment.

Read the whole story