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In: Economics

For a country considering encouraging private sector involvement in the finance of its infrastructure prouname one...

For a country considering encouraging private sector involvement in the finance of its infrastructure prouname one benfit of having a legal framework for ppp in that country for each of the following stackholders:
1frkm the side of investor
2the side of ppp management unit in government
3From the side of the banks lending money to spv

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Expert Solution

A legal framework for PPP in the country will lead to the following benefits from the perspective of each stakeholder:

1. Private investors: A legal framework for PPP will instil confidence and undrstanding in the PPP process. For investors a legal framework is necessary for predictability and security reasons. Since they invest time and money in the agreement, a legal framework ensures adequate risk management. Institutional capability in the form of good legal and regulatory frameworks and policy coherence would encourage private sectors to invest funds. Risk-sharing and regulatory measures should be in place.

2. PPP management unit in government: Since the management unit takes on role of facilitator in such PPP agreements, a legal framework makes it easier to follow rules and comply with policies in place. A legal framework would strenthen the unit's capability to manage the partnership effectively. Reporting and information management systems need to be in place so the unit can effectively monitor and track progress. Also an important part of the legal framework would be dispute resolution systems.

3. Banks lending money to spv: The SPV is created to absorb some of the risk of the venture for the private company. It represents the financing wing and is used to attract funds from other lenders and investors. It is used for lender's protection and limits the bank's exposure to risk.

Rahul Sunny answered 2 years ago
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