Question

Private finance is not a panacea for the funding of all public projects’’ Discuss the statement above and identify the various types of project s which would be better value for money if funded by the public sector alone

Answer 1

Private finance is not a panacea for the funding of all public projects because of the limitations of private financing such as-

1. Agreements are bought about through complex negotiations in private financing methods and government is not keen on negotiating much.

2.The attitude of government can complicate the problems in such private methods.

3.The cost of finance is quite high and government can borrow money more cheaply than private firms,They chose for public methods.

4.It is often observed that during the procurement,the Private financing process takes too long to take management decisions so these are time taking financing methods.

5.Risk allocation is higher through Private financing so it is not preferred by all the public projects.

6.Lack of expertise: There are still many public professionals not experienced with Private financings as it is so complex to cope with such methods .

7.High Cost- It has high procurement costs such as,high tender cost,complicated negotiations,innovation costs bearing negative impact to the profitability of the projects.

Project funded exclusively by public sector are as follows-

1.Projects requiring Government Expenditure of public authorities

2.Subsidization incentive projects

3.Projects Related to federal finance

4.Social Security payments projects

5.Public Pension Programmes.