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Appropriate Financial Instruments for Public-Private Partnership to Boost Cross-Border Infrastructural Development-EU Experience

Author

Listed:
  • Geest, Willem van der

    (Asian Development Bank Institute)

  • Nunez-Ferrer, Jorge

    (Asian Development Bank Institute)

Abstract

The member states of the European Union (EU) and the EU institutions have increasingly been using public-private partnerships (PPPs) to accelerate the development of (ambitious) trans-national infrastructure. This paper argues that in the EU (i) private sector partners remain risk-averse; and (ii) risk-pooling across a larger number of tax-payers tends to reduce the cost of risk to zero, making EU funds highly desirable and sought after for public infrastructure development. This paper argues that private equity has not been forthcoming to the extent that had been expected by those propagating this method of finance. In those instances where private non-publicly guaranteed resources have been used, the distribution of risks between public and private partners remained asymmetric, with public governmental bodies carrying the financial risks, which ultimately may become a contingent liability for the country’s public finances. However, EU and European Investment Bank (EIB) public funding is used not simply because the risks are spread more widely, but rather because EU rules and regulations for using such funds lead to better preparation of projects and greater efficiency gains in project implementation and delivery.

Suggested Citation

  • Geest, Willem van der & Nunez-Ferrer, Jorge, 2011. "Appropriate Financial Instruments for Public-Private Partnership to Boost Cross-Border Infrastructural Development-EU Experience," ADBI Working Papers 281, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0281
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    Citations

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    Cited by:

    1. Biswa Nath Bhattacharyay & Masahiro Kawai & Rajat M. Nag (ed.), 2012. "Infrastructure for Asian Connectivity," Books, Edward Elgar Publishing, number 14819.
    2. Bhattacharyay, Biswa, 2010. "Financing Asia’s Infrastructure: Modes of Development and Integration of Asian Financial Markets," ADBI Working Papers 229, Asian Development Bank Institute.
    3. Willem van der Geest & Jorge Nú-ez-Ferrer, 2012. "Managing regional infrastructure: European Union institutional structures and best practices," Chapters,in: Infrastructure for Asian Connectivity, chapter 9, pages 301-346 Edward Elgar Publishing.
    4. Biswa Nath Bhattacharyay, 2012. "Modes of Asian financial integration: financing infrastructure," Chapters,in: Infrastructure for Asian Connectivity, chapter 10, pages 349-401 Edward Elgar Publishing.
    5. Biswa Nath Bhattacharyay, 2010. "Financing Asia’s Infrastructure : Modes of Development and Integration of Asian Financial Markets," Finance Working Papers 21883, East Asian Bureau of Economic Research.
    6. ., 2012. "Public–private partnerships for regional infrastructure: lessons from the European Union," Chapters,in: Infrastructure for Asian Connectivity, chapter 12, pages 432-483 Edward Elgar Publishing.

    More about this item

    Keywords

    public-private partnerships; trans-national infrastructure; european union institutions; european union; public infrastructure development;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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