Over the last few decades, public private partnerships (PPP) have increasingly become pivotal instruments in the creation, development and execution of large scale infrastructure projects across the globe. Their importance has been further highlighted by the recent United Nations plan to develop an international PPP centre of excellence to foster greater collaborations with governments and higher standards of execution.
The key benefits of PPPs are now widely known. The combination of public and private sector players creates a formidable platform which opens projects up to a wider array of talent and broader access to capital.
In addition, PPPs present several opportunities which have the potential to create economies of scale through reduced project costs and overruns, accelerated delivery through shorter time delays, and an overall better resource allocation. The government can channel or transfer a desired level of risk to private operators while focusing on its administrative duties without giving up all control as generally happens in a privatisation scenario. Furthermore, projects enabled through PPPs have a tendency of creating synergies by integrating a wider breadth of innovative ideas and ancillary services in a project’s scope. Finally there is also an element of knowledge transfer between the stakeholders which makes for increasingly efficient and effective PPP mechanisms over time.
Malta is undergoing a process of reform across several sectors of its infrastructure patrimony. The government is increasingly intervening to seek ways to finance the development of infrastructure in order to create jobs, establish new industries and move to an innovation-based economy.
Other pressures in urban transport, public health, regeneration, renewable energy and waste treatment, among others, are consistently leading policy makers to explore the social and economic opportunities arising from the better use of the existing infrastructure. An aging infrastructure means that the effective exploitation of these assets, together with funding and procurement issues have become hugely important issues to consider for the long-term benefit of the country.
PPPs present several opportunities which have the potential to create economies of scale through reduced project costs and overruns, accelerated delivery through shorter time delays, and an overall better resource allocation
In a world of competing interests and constrained resources, Malta should aim to be bold but at the same time act smartly on how to move forward. A potential solution is to bottom up our development needs by building smaller projects one step at a time. In addition, PPP projects we initiate should fit and complement our country’s overall economic strategy, which in turn needs to be consistent over the long-term to ensure we are always moving in the right direction.
At a global level, developing regions have recognised and embraced the importance of combining public and private sector initiatives to increase growth, efficiency, sustainability and competitive advantage. In turn, we do expect this trend to gain further traction locally across a range of economic sectors. The private sector is uniquely placed in leveraging expertise and effective management in executing projects together with the government to stimulate targeted economic sectors, and improve the quality of life of the targetted community.
Recent announcements made by the government, including the latest Budget speech, have put forward a number of ideas that could involve the private sector to varying degrees. That said, the trigger for creation of PPP projects cannot be a unilateral decision made by the government alone. The news so far, however, is good. Malta has already ventured into a number of successful PPP projects on the basis of the mutual trust that exists between the private sector and the government. These projects have shown how properly structured and thought-out PPPs can serve the interests of the country at large, as well as those of the principal stakeholders. All of this augurs well for the future.
Gilbert Guillaumier is a project finance leader at EY Malta Ltd.