Echelon - December 2017

Private money in infrastructure

Linking the deficit in infrastructure finance with private money ought to be the perfect solution to build new highways, seaports, and provide electricity and water. Such deals are now called Public Private Partnerships, and all over the world, they are a critical instrument through which governments build infrastructure.

However, PPPs are no panacea for chronic infrastructure shortages either. Alongside their many successes in middle-income and rich countries, there are also well-documented failures. While people tend to ignore successes, those that don’t live up to expectations are vilified as exemplifying the general unsuitability of private capital for infrastructure.
As it prepares to bridge the infrastructure deficit with private money, Sri Lanka should select its projects carefully. There are vast gray areas between what people view as PPPs and what constitutes privatisation. Anxieties about privatising essential services like electricity, water and transport are universal. In contrast, PPPs or the privatisation of seaports and airports aren’t as controversial as ones involving utilities and transport infrastructure almost anywhere. A lot ultimately depends on what the public has become used to.

Sri Lanka’s first successful deal, during an era before the PPP nomenclature was even established, should be a good place to start. Even more fortunately for the country, some of the key actors then are now readying to become a part of the PPP renaissance.