How Public-Private Partnerships (PPPs) can boost the economy

Data from the Ministry of Development Funds and Regional Policy from the end of 2023 shows a decline in the number of PPP contracts concluded last year. The deterioration of the economic situation in 2022 and 2023 had a significant impact on the functioning of the entire construction sector, where more than 2,000 company restructuring procedures were initiated in the first two quarters of 2023 alone.

Main obstacles in the current PPP system

The obstacles to increasing the number of PPP projects are mainly related to the possibilities and profitability of their financing.

Private partners, who obtain financing to cover their investment costs on market terms, do not benefit from PPP preferential treatment, which means that the cost of such financing may be higher than for traditional projects, given the specificities of PPPs.

Moreover, the cost of obtaining financing from banking institutions is increasing, and this is expected to continue in the coming years.

Benefits of working in a Public-Private Partnership

From the perspective of the private sector, new PPP contracts can help to ensure the continuity of operations of construction companies, which have been experiencing a decline in capacity utilisation. PPPs can function to leverage the stable financing of investments and reduce the number of bankruptcies and restructurings.

From the perspective of the public sector, which is faced with diminishing access to the system of financing infrastructure investments, PPPs will enable the smooth implementation of projects, provide support in terms of fundraising and legal services, and enable the sharing of the risk of carrying out investments.

As long-term commitments, PPP contracts can reduce public expenditure in the investment phase and allow risk sharing in the operational phase.

In addition, with appropriate risk sharing between the parties involved, such projects may also be considered as being outside public debt.

PPPs can boost the economy

PPPs can be a model of cooperation and allocation of public and private resources that will revitalise the market for infrastructure projects and provide an answer to the problem of access to finance for the public sector, especially local authorities.

Source: Biznesalert.pl

Date: 26.01.2024

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Kamila Jachnik-Czarnecka 

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Kamila Jachnik-Czarnecka

Kamila Jachnik-Czarnecka

Attorney at Law, Senior Associate

+48 788 474 359