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6 The Investor

The basic intent of a PPP is to encourage the by providing revenue subsidies or guaranteed
private sector to capitalize on its capacity annual revenues for a fixed period.
to raise capital and its ability to complete
projects on time and to budget, for the The private-sector consortium establishes a
welfare of the community, without having company called a “special purpose vehicle”
to compromise on its profit-seeking motive. (SPV) to develop, build, maintain and
At the same time, the public sector would operate the asset for the contracted period.
retain its responsibility to provide goods and In cases where the government has invested
services to the public at affordable rates. in the project, it is allotted an equity share
in the SPV. The consortium usually includes
building contractor, a maintenance company
What is a Public-Private and lenders. The SPV signs the contract with
the government and with subcontractors to
Partnership (PPP)? build the facility and then maintain it.
According to Kuwait’s Partnerships Technical
Bureau (PTB), PPPs are “means for the state to
introduce private-sector capital and expertise Benefits of PPPs
in sectors traditionally under public control
without losing its supervision of output There are various benefits to implementing
quality and tariff levels”. PPPs describe a PPPs in Kuwait’s development initiatives. PPPs
government service funded and operated can reduce the financial burden on the state
through a partnership with private sector. It and limit growth in government spending
involves a contract between a public sector and the public sector. PPPs give the private
authority and a private party, in which the sector access to secure long-term investment
latter provides a public service or complete opportunities and attract private funding for
a project and assumes substantial financial, projects; they can generate business with the
technical and operational risk. In projects like relative certainty and security of a government
in the infrastructure sector, the government contract reducing the implications of market
may provide a capital subsidy in the form of uncertainty. For Kuwait, one of the core
a one-time grant, in order to make it more benefits of the PPPs is that they contribute in
attractive to private investors. In some other diversifying the economy and generate jobs
cases, the government may support the project by developing the private sector. Benefits are
as follows:

Issue 1 October 2017