Boosting Private Investment Through Public-Private Partnerships: Insights from 140 Economies

The World Bank’s 2024 report highlights how regulatory reforms in 140 economies have significantly improved public-private partnerships (PPPs), attracting private investment and enhancing contract management, procurement practices, and transparency. However, challenges remain in project preparation, unsolicited proposals, and transparency, particularly in low-income regions.

The World Bank's 2024 report evaluates the legal and regulatory frameworks governing public-private partnerships (PPPs) across 140 economies. Prepared by the World Bank’s Infrastructure Finance Practice Group, the report explores how regulatory reforms can enhance PPP programs globally. The analysis draws on data from June 2019 to June 2022, identifying trends in contract management, procurement practices, and unsolicited proposals (USPs). The findings underscore the importance of robust regulatory environments in attracting private sector investment, particularly in infrastructure sectors such as transport, energy, water, and ICT. The report reveals that stronger governance structures and reforms contribute significantly to improving the investment climate for PPPs, demonstrating a clear correlation between regulatory changes and increased infrastructure investments.

Reforms Drive PPP Investments Across Economies

One of the key insights from the report is the strong link between regulatory reforms and PPP investment. Countries that have implemented major regulatory reforms in their PPP frameworks saw an average increase of 488 million dollars in infrastructure investments. While causality cannot be definitively proven, the correlation suggests that reforms provide the private sector with a more predictable and stable investment environment. These reforms often focus on enhancing transparency, improving contract management, and streamlining procurement processes, which are critical for attracting private sector participation in long-term infrastructure projects. The report particularly highlights progress in the Middle East and North Africa (MENA) region, where several economies have implemented significant reforms, leading to improved scores in various areas of PPP management.

Contract Management Systems See Major Improvements

Contract management emerged as a significant area of reform, with 30 economies making improvements to their oversight systems. Effective contract management is essential for ensuring that PPP projects deliver value for money over their lifecycle, particularly given the long-term nature of such agreements. In this context, countries like Ghana, Saudi Arabia, Panama, and Ukraine stand out for introducing new PPP laws or amending existing ones to strengthen their contract management frameworks. These reforms include measures such as establishing dedicated contract management teams, improving monitoring and evaluation mechanisms, and requiring third-party approvals for contract modifications. The report emphasizes that robust contract management systems not only ensure accountability but also help mitigate risks associated with long-term projects, such as unforeseen changes in market conditions or shifts in the political environment.

Advanced Procurement Methods Still Underutilized

Procurement practices also saw considerable improvements, although the report notes that more advanced procurement methods, such as competitive dialogue, remain underutilized. While traditional procurement methods like open and restricted tendering are widely practiced, only 50% of surveyed economies offer competitive dialogue as an option. Competitive dialogue allows governments to engage with bidders in a structured manner to develop innovative solutions for complex projects, which can enhance the overall quality and cost-effectiveness of PPPs. The report highlights reforms in countries like Brazil, Ghana, and Ukraine, where governments have introduced competitive procurement methods as part of their broader efforts to modernize PPP frameworks. However, the report also stresses the need for greater flexibility in procurement processes to allow governments to adapt their strategies based on the specific needs of individual projects.

Challenges with Unsolicited Proposals Remain

Unsolicited proposals (USPs) remain a challenging area for many economies, with significant room for improvement in terms of regulation and transparency. USPs allow private sector entities to propose infrastructure projects without government solicitation, but they are often criticized for lacking transparency and competitive safeguards. The report finds that only 13% of economies have adopted regulations that mandate a minimum of 90 days for potential bidders to prepare alternative proposals for USP projects. This is a critical gap, as insufficient time for competition can lead to suboptimal project outcomes. The report calls for stronger regulatory frameworks to govern USPs, ensuring that such proposals are subject to the same transparency and competition standards as government-initiated projects.

More Transparency and Project Preparation Needed

Despite the progress made, the report emphasizes that there is still significant room for improvement, particularly in lower-income regions like Western and Central Africa. Project preparation remains a critical bottleneck in these areas, with many economies struggling to develop pipelines of well-structured and bankable projects. The report highlights the importance of strengthening project preparation processes, particularly through the establishment of project development funds (PDFs), which can provide financial and technical support to governments in the early stages of project development. These funds are crucial for ensuring that only viable projects reach the procurement stage, reducing the risk of project failures and increasing the likelihood of attracting private investment.

Transparency is another area where further progress is needed. While many economies have made strides in improving transparency during the procurement and contract management phases, the report finds that only 19% of economies disclose operational performance information online. Public disclosure of such information is essential for holding private partners accountable and ensuring that PPP projects deliver the intended public benefits. The report calls for more economies to adopt best practices in transparency, particularly in terms of publishing contract amendments, performance data, and financial commitments.

Overall, the report highlights the crucial role of regulatory reforms in creating an enabling environment for successful PPPs. While regulatory quality is a key driver of PPP success, the report emphasizes that it must be complemented by broader factors such as political stability, mature financial markets, and strong institutional capacity. The findings call for continued efforts to strengthen regulatory frameworks, particularly in low-income regions, to ensure that PPPs can deliver sustainable infrastructure solutions that meet the needs of growing populations.