Dr. Eyüp Vural Aydın, Chairman of PPP Research Centre
It is estimated that the global infrastructure investment need will reach a total of 94 trillion dollars by 2040. Increasing infrastructure and changing structure of public services, continuous increase in demands, global climate and environmental pressure lead all public administrators to find sustainable, modern, safe, flexible and perhaps most importantly fast solutions. Especially the development of technology and increasing engineering capabilities necessitate the integration of this development into public services. Private sector’s technology follow-up, speed, ability to create additional financing, engineering experience and skills are considered as an important alternative source for public investments today.
As the level of knowledge of civilisation develops, basic infrastructure needs such as healthier urbanisation, more qualified infrastructures, faster and safer transportation gain importance. This need is expected to be provided by the public sector to the users, in a sense to the taxpayers. Global climate change problems force us to find more robust, long-lasting and environmentally friendly solutions with fewer resources. These developments necessitate public administrators to reconsider their understanding of the development model. In addition, the inadequacy of public resources in financing high-cost infrastructure investments makes the use of Public Private Partnership (PPP) model widespread. (1)
The model establishes co-operation for a common goal. The effective aspect of the model is that public and private sector parties direct their different characteristics in the same direction in order to meet the increasing infrastructure need together. In summary, the PPP model does not set the parties against each other, but enables them to provide public services in the most appropriate way by using the different resources of both parties together.
Naturally, there are differences between the parties in terms of management. On the one hand, the public sector wants the project to be under strict control from start to finish, and on the other hand, the private sector wants the most favourable environment in which to carry out the project. These different perspectives ensure that the public service is realised as soon as possible, while the resulting new investments create jobs and have a social impact. For the public sector, the benefit of establishing cooperation is that it allows it to maximise the “public good” through effective competition. The private sector, on the other hand, embarks on an investment that will raise its standard of workability, gain global prestige and recognition, and secure long-term contracts. This common denominator, which is shaped by the different gains of the parties, contributes to the access of public services to users at a fast, predictable and measurable service level.
Hobbes defined freedom as living long, not looking for scars, not fighting and not being afraid of another individual(2). In order to realise this definition, which we all know, none other than the strong and powerful Levithan stated that it was necessary to establish a common entity (the state). However, in the modern era, the power of a state has gone far beyond its ability to prevent wars in its own country or to make people live without fear. Today, the capacity of a state goes far beyond a long list of objectives, a strategy document describing them in detail, or even the preparation of additional action plans. The capacity of states is now measured by their “ability to realise their objectives”.
In the first half of the new century, while the demands of modern man have become a measure of the capacity and competence of states, the pandemic offensive has put public resources to a severe test. The process that started with the global health crisis has radically affected people’s life expectations, their cultural norms and perceptions of the future.
For several decades, the visibility as well as the impacts of natural disasters and climate change at the global level have increased. The increase in the number of natural disasters in the world between 2000 and 2010 was 44 per cent compared to the number of natural disasters in the world between 1994 and 2000 alone. When we make this comparison with the years 80-89, this increase is 50 per cent. As long as the number and impact of climate change and natural disasters increase, it seems that crisis management competence and the stability of states in realising projects will continue to be tested.(3)
As such, climate change and other root causes make it imperative to strengthen infrastructures. While an equally important root cause is the increasing importance of mobilisation in world trade, compelling factors such as fast supply, safe transportation, increase in renewable energy sources, access to new resources have fundamentally changed the idea of infrastructure and project construction. The value of time and the return on public expenditure have been taken into consideration. Development and the fulfilment of needs have rapidly moved up the to-do list.
In summary, infrastructure is the pillar of development. Infrastructure investments such as road and rail transport system, tunnels, bridges, ports, energy facilities, airports are important for rapid economic growth in countries and integration with other economies of the world. Optimal provision to users and proper management of infrastructure assets stimulate economic growth and competition. Today, infrastructure development continues to play an important role in improving quality of life and participation in modern societies.(4)
Although the PPP model was much debated before the increase in natural risks, it was an important alternative project production model that governments used to fulfil their objectives. The model is noteworthy not only for its contribution to capacity building but also for its contribution to channelling domestic and foreign private sector resources towards
public investments. PPPs constitute a meaningful pathway for the orientation of investments especially in developing countries. Of course, in a short time, it is clear that PPPs are not only capable of directing investments or attracting foreign investments to countries. In addition, it is used as a mechanism where a number of important parameters such as calculating and monitoring possible crisis possibilities, managing crisis processes and even preventing crises are activated by the private sector. It is clear that this result provides an important capacity building opportunity for developing country managers.
All public administrators, not only in developing but also in developed countries, aim to find sustainable, modern, safe, flexible and most importantly fast solutions to the increasing need for infrastructure, the changing structure of public services, the increase and continuity of demands, global climate and environmental pressures, even if they are based on different root causes. In the last four decades, the PPP model has played a pivotal role in the realisation of major infrastructure projects across the globe, including Australia, the United Kingdom, Canada, Singapore, Turkey, the Philippines, China, Colombia, Brazil, Australia, the United Kingdom, the United Kingdom, Canada, Singapore, Turkey, Turkey, the Philippines, the Philippines, China, Colombia, Brazil. The model is used in many different phases including design, construction, financing, maintenance and operation of infrastructure assets. In short, the PPP model is committed to improving project outcomes at every stage by utilising the knowledge and skills of the parties. To date, more than five thousand PPP projects with an investment amount of 1.5 trillion USD have been implemented in 134 countries. This statistic continues to increase day by day, both in terms of the number of countries where the model is preferred, the number of projects and the investment amount. In 2021, 240 projects worth USD 76.2 billion were implemented in developing countries.
Figure 1: Investment Commitments in Infrastructure Projects with Private Sector Participation in Emerging Markets and Developing Countries, 2011 – 2021, (Source: World Bank 2021 Annual Report)
Although the history of the PPP model is very old, the first versions of the co-operation agreements we use today in the modern sense date back nearly three centuries to the construction of motorways, water infrastructure and turnstile access systems by the private sector(5). Many contracts that we define as PPP today were formed in 17th century France(6). The projects of the Périer Brothers, who carried out the water distribution business in Paris at the turn of the century, are among the first examples of the fulfilment of public services by the private sector.(7) Today, many projects have been implemented with the PPP model in tens of countries on seven continents, regardless of whether they are developed or developing countries, in a wide range of fields, particularly in transport, energy, health and social services.(8)
In Turkey, the history of the first Public Private Partnership applications dates back to the Ottoman period. Inaugurated in 1874, the Galata – Beyoğlu Tunnel, the second oldest underground transport unit in the world, was built with the Build – Operate – Transfer model for 42 years. (9)
In the modern sense, in the mid-1980s, the model regained importance in public infrastructure investments such as electricity distribution, airports and harbours. The expansion of the application areas and co-operation of the PPP model in Turkey coincides with the post-millennium period. A total of 262 PPP projects were completed in Turkey between 1984 and 2022, mainly in health investments, motorways, bridges, tunnels, airports and ports, and their investment amount reached USD 85.5 billion.(10,11)
Many different definitions have been developed according to the way the model is handled, the project structure, the need structure and the situation of the analysing institution, thus many definitions have been developed that address the model from different angles. The World Bank has handled the PPP model comprehensively and placed it on an important denominator.(12) The following definition developed on the basis of this definition is very important in terms of bringing a holistic approach to the model. “It is a strong collaborative project development method between a public agency and the private sector to deliver a public infrastructure project or service to best meet public needs, clearly demonstrating the expertise of each partner, where the construction, financing, management and operational responsibility, as well as significant risks, are largely assumed by the private partner under a long-term contract with specific conditions, and where the public pays the private partner on a performance-based basis for the provision of the service, with the asset being transferred to the public in an operational state at the end of the contract.”(13)
|Box 1: World Bank PPP Definition(14) The PPP model is a public investment model that envisages the transfer of the asset to the public entity at the end of a long-term contract between a public entity and the private sector for the provision of a public service or the construction of a public asset, where the private sector assumes significant risks during construction and operation and the payments to be made from the public sector depend on service performance and quality, free of all commitments and debts.
There are many ways to provide public infrastructure.(15) Today, the PPP model, which is widely used in sectors such as transport, education, health, energy, irrigation, urban transformation, mass housing, agriculture in many socio-economically different countries around the world, should be considered as an umbrella concept applied with many sub-models such as build-operate-transfer (BOT), build-operate (BO), build-lease-transfer (BTR), transfer of operating rights and revenue sharing, which differ from each other depending on various factors.(16) In summary, the PPP model can be defined as a relationship in which public and private sector resources are blended to achieve a set of objectives that are considered mutually beneficial for both the private and public sectors.(17)
Infrastructure is broadly divided into basic infrastructure investments covering areas such as roads, tunnels, bridges, health, education and super infrastructure investments (18)covering areas such as production, mining and agriculture.(19) Recently, the classification of social, economic, physical and non-physical (20)infrastructure investment has also been accepted following the increase in the participation of the private sector in public services. These infrastructure investments are considered to have positive externalities due to their welfare-enhancing characteristics for households.(21) In summary, examples of physical economic infrastructures are roads, bridges, ports; physical social infrastructures are hospitals, schools, sewerage, prisons. Non-physical economic infrastructures include vocational training, financial institutions, R&D, technology transfer and non-physical social infrastructures include social security, communication services and environmental agencies.(22)
|Motorways – Bridge – TunnelPorts
|Vocational training – Financial institutionsTechnology transfer
|Hospital- School- Sewerage
|Social security – Communication servicesEnvironmental agencies
Table-1: Classification of infrastructure investments(23)
Infrastructure forms the backbone of the development of societies around the world. Therefore, by its very nature, public administrators are always interested in improving infrastructure investment, whether implemented by the public or private sector, for reasons such as its strategic importance, its profound impact on other sectors, public safety issues and the utilisation of natural resources. Basically, what they seek is to maximise the return on expenditure when using public resources, i.e. to provide cheaper and better quality services to users.
If the public authority does not have the technology itself or the human resources to realise the construction of the project, it prefers to specify the service output it requires on a long-term basis (15 – 30 years) rather than developing technical specifications for the service. The PPP model is built on three sophisticated foundations: finance and law.
The PPP model is built on three sophisticated foundations: finance and law.(24) Project finance is an important element of the model, but in essence it enables the public to buy a service with pre-defined standards, rather than buying an asset.(25) The PPP model is therefore a harmonised contractual arrangement that requires long-term commitments for each stakeholder at each stage, where public incentives are necessary to achieve successful outcomes. Financing, on the other hand, refers to a revenue stream spread over time and is the conversion of that revenue flow into the present.
In other words, with the PPP model, the public spreads its payments over very different time periods. Between PPP project financing and traditional public financing, there is a clear difference in the payment obligations of the public sector. For the public sector, there is no upfront capital requirement for infrastructure investments in the PPP model. Guarantee payments and other obligations may come into effect in the first years after the projects become operational. On the contrary, during the service procurement phase, it makes a payment in accordance with the performance outputs it determines. However, in the following years, due to factors such as the natural maturity of the project and the increase in utilisation revenues, projects finance their investments largely with their own revenues. On the other hand, while traditional public investments require a large upfront capital financing, they incur relatively lower operating expenditures during the operation period.
Risk management is a key element in an effective PPP project. A good balance in risk sharing between the parties reduces costs and enables one or both parties to realise their full potential. For example, by opting for a PPP investment, the public authority is relieved of the risks associated with the investment. With the start of the service, it purchases a product that is free from risks and meets a certain performance criterion.
The main objective of the public sector is to create an investment environment in which it can share risks in the most effective way by taking into account many different factors. At this point, it manages a series of factors such as planning the environment in which the risk will be best managed, selecting the best partner, etc., instead of fully attributing the risks to the private sector in order to achieve the best result. Thus, it increases the public benefit compared to traditional public procurement models.
Whether the project is financed by direct public financing or PPP method, the private sector primarily adds the cost corresponding to the risks to be undertaken to its financing. However, the private sector does not only focus on the return, it may avoid investment if the risk is too high.
In summary, the main objective in PPP projects is to resolve the risk in the most cost-effective way. Transferring the risk to the private sector by the public authority increases the cost of financing, since each risk has a corresponding cost. For this reason, it is an accepted practice that some risks, which are costly to transfer to the private sector, are optimised and managed by the public authority. The reason for public guarantees is the provision of this optimisation. In PPP projects, it is essential that the risks are shared correctly, not transferred. Identifying the party that best manages the risk reduces the cost of the risk.
PPP projects with long-term contracts should also have a flexible structure to keep up with current developments, changes and market conditions. However, public and private sector commitments existing during the project period should not be affected by this flexible structure. Careful maintenance of such a fine balance point throughout the project period can be ensured by the existence, strength and effectiveness of secondary legislation as well as primary legislation. For this reason, it is necessary to constantly revise the legal basis to keep up with a long list of reasons such as current developments, revisions, periodic adaptations, force majeure. The functioning and success of the projects and the continuation of the public service provided without interruption, and the harmonisation of PPP contracts with other existing laws and regulations can only be made possible by the existence of a strong institutional and legal structure.
In summary, the benefits of a well-designed PPP law can be summarised as follows:(26)
Establishment of an overall PPP institutional framework
The traditional public procurement model and the PPP model are not interchangeable and both have an indisputable role for the public. Both types should complement each other, not compete with each other. The long-term objective of public organisations is to identify which type of procurement they can benefit more from and choose the procurement model for each concrete product (not only economically, but also in terms of innovations, delivery time, etc.)
The involvement of the private sector in the project (ideally from the preparatory phase to the final implementation of the operation of the project) often brings know-how and innovation resulting in higher material value, higher quality of service and higher efficiency of project implementation. The public sector using the PPP model provides more efficient control over future costs, more evenly distributed risk and greater transparency compared to a traditional public procurement contract.
The distinct advantage of the PPP model is that it can effectively realise investments, which are difficult to be rapidly realised by the public sector in terms of technical, financial and legal infrastructure, with the dynamism and management skills of the private sector. Undoubtedly, the existence of widespread and effective infrastructures directly affects the five basic factors of a country.(28) It increases production capability, development of human resources, logistics costs, foreign trade, mobilisation capability of goods and services. Moreover, it contributes to regional and strategic development targets. It puts the country in an advantageous position in global development competition. In this framework, it has been observed that PPP projects have a significant regional and development impact. Infrastructure investments, by their very nature, require a high volume of investment, have long-term contracts and have sophisticated engineering structures. The PPP model is preferred worldwide in terms of providing a predictable road map to the administration and project developer investors in terms of construction (construction) durations and project budget, which are directly related to the engineering structure. In this way, the public sector has the opportunity to include both national and global private sector investors in the investment while achieving a predictable budget and time. Thus, the innovative and competitive dynamics of the private sector provide an alternative source of funding for the public sector. In addition, the concept of people-first PPP is gaining importance. The number of environmentally and socially orientated projects that provide new benefits to the user is increasing. A successful PPP project provides both a return on expenditure benefit for the public and can provide public service quality at a consistently determined quality.
While the number of PPP projects continues to increase on the one hand, criticism of the model continues at the global level on the other. This is extremely important for the betterment of the model as a project development method. Because, while many basic assumptions and ideas are changing at the global level, the way the model provides services is constantly evolving and improving. Even in France, where the first examples of PPP contracts used today (the Perrier Brothers’ development of the water infrastructure of Paris) are seen, debates and criticisms have been going on for 200 years.
However, in general, the discussions revolve around the output of an ideological approach and do not reach the root causes of the model. Above all, the model is a method of project development separate from politics. It is implemented by governments around the world and criticised by the opposition. Each administration applies the model with different methods in different sectors. From time to time, there have been examples of highly successful project implementations in some sectors, as well as examples of unsuccessful projects. Different examples of negative projects such as water and sewerage management in Argentina, metro renovation and additional investments in England, airport projects in another country have been encountered. From time to time, wrong model applications have been encountered in the right project design. The best example of this is the adoption of the “shadow payment” method used in toll motorways in the UK in the early nineties. Namely, when the United Kingdom, which did not switch to a toll motorway system until 1990, completed many infrastructure investments with the “shadow payment” model in the London and Manchester regions between 1986-1994, while everything was fine and good for the users of the region, the residents of the Liverpool region started a serious criticism campaign against these free motorways, which did not contribute to the economic development of their region, did not bring convenience to their lives, and even benefited people who used these motorways in other cities. In the face of these criticisms, the UK government decided to build the M6 motorway, the first toll motorway in the country, and this toll road was transferred to the private sector for 55 years through the PPP model and the concession to collect tolls together with all demand risk was transferred to the investor. On the other hand, the investor company received from the public sector the possibility not to build an alternative road for the route and to develop all kinds of additional connection roads to increase traffic when necessary.
Not every project on a global scale is suitable for the PPP model. First of all, different factors such as the need for qualified private sector, project investment volume, construction period, sophisticated coordination and speed are the main reasons for the preference of the PPP model. From this point of view, it is generally seen that projects with relatively high investment size tend to be carried out with the PPP model. For example, in 2021, the average project size was close to 350 million USD.(29) There is a tendency for the size of projects to increase for the post-pandemic period. Likewise, investments in small projects (<100 million USD) decreased from 66 per cent in the first half of 2020 to 46 per cent in the first half of 2021. Mid-scale projects (USD 100 million to USD 500 million) increased from 26 per cent to 39 per cent in the first half of 2021, while the share of projects between USD 500 million and USD 1 billion almost doubled, from 6 per cent to 11 per cent. The share of mega projects (>US$1 billion) increased from 2 per cent to 5 per cent (Figure 2).
Figure 2: Investment Size Breakdown of Infrastructure Projects in Developing Countries, Comparison of 1st Half 2020 and 2nd Half 2021 (Source: World Bank 2021 First Half Report)
According to the World Bank data, the trend in the world is towards mega projects. In line with this trend, the projects realised in Turkey have been implemented in projects requiring sophisticated engineering and coordination. However, another important point that will show Turkey as an example to other countries is that many of these projects are being carried out with great success in the operation phase today and public services are being provided completely and uninterruptedly. As a small example, the Eurasia Tunnel, which connects the two sides of Istanbul under the Bosphorus, is used by approximately 25 million vehicles annually and provides a great public service.
From another perspective, it is possible to categorise PPP projects into two main groups. While some projects respond to an existing need, some projects are used to create demand for a region, a centre or another macro target. For example, the Northern Marmara, Yavuz Sultan Selim Bridge, 1915 Çanakkale Bridge were implemented rapidly and within certain budgets with the PPP model as infrastructure investments that create demand and trigger regional development and economic development, while the Eurasia Tunnel project was preferred to develop a response to the traffic problem, one of the most important problems of Istanbul. The Istanbul New Airport project, which was realised within the framework of a macro strategy in Turkey and even a global strategy, is also a good example.
As mentioned above, the model is constantly evolving. The best example of this is the UK’s evolution from the PFI-1 to the PFI-2 model. The UK has not abandoned the model after 2018, on the contrary, they have developed the model and preferred to attract private sector financing to their infrastructure with different methods. For example, the private sector capital requirement, which was 10 per cent in PFI-1, has been increased to 20 per cent in some projects and 25 per cent in some projects, thus ensuring a balanced risk distribution system. Likewise, in the UK, the model has continued to be applied by differentiating private sector participation and risk distribution in projects in the health sector.
Again, as a good example, even though the PPP model preferences in Portugal, which is one of the countries most affected by the 2008 global financial crisis, were interrupted due to the inaccuracy of the preferred methods between 2009-2013, many successful PPP model applications have been seen in Portugal after 2015. Such that after 2018, PPP hospital projects, bridge and motorway projects have been emphasised and highly effective risk management practices have been observed.
The main reason for the renegotiations seen in Portugal after the financial crisis was not the opposition to PPP, but the change in the project management model. Namely, the main reason for the renegotiation of PPP projects in the Portuguese case is not directly related to PPP projects. Portugal requested assistance from the European Union to get out of the financial difficulties it fell into after 2008. The European Union (Troika), on the other hand, stipulated “cut to the bones” in all areas in order for the bailout package (€78 billion) to work. The scope of services has been narrowed, periodic maintenance periods have been extended and even minimum road lighting standards have been enforced in order to achieve savings that can be made in PPP projects. To summarise, the Portuguese case is not an example of an indefinite renegotiation of PPPs, but an example of ensuring the continuity of services with savings pushed to minimum standards under the principle of preserving the existence of contracts.(30)
The issue of transparency in PPP projects in all countries is hotly debated among many academics, bankers, financial and tax experts, lawyers, engineers and similar specialists. Some address tendering processes, some implementation, some construction, some financial transparency. These projects stand out as important instruments to promote the institutional quality, transparency levels, efficiency and traceability of public services and the improvement of the investment climate in countries. In order to ensure external transparency of the projects, it is very important to ensure “internal transparency”, including the sharing and access to information between the parties involved in the projects. All accounting information, profitability, guarantee payment amounts, revenues generated, commercial inventory and all financial documents of the companies implementing the projects are open to sharing due to their relationship with the public. Since the parts of the PPP contract that bind the parties and related to solutions containing patents, know-how and copyrights belong to their owners, it has been preferred not to share these parts worldwide.
On the public side, the tender processes for PPP contracts are carried out transparently within the principles due to the international nature of the projects, the tender is opened to all bidders, both domestic and foreign, on an equal footing, and the contract terms, duration, expectations and the facilities provided by the public are equally specified. Another fundamental element that reinforces the transparency of the projects is the receipt of opinions and assessments requested separately from all stakeholders, especially banks, legal, financial, insurance and technical experts.
PPP projects have recently had to cope with the pandemic threat caused by the Covid-19 virus. During the pandemic, closures and restriction of mobilisation, the public has the obligation to continue the services it has to provide without interruption and to fulfil its contractual requirements. In this period, Turkey fulfilled all its contractual obligations in full with an attitude that reassured investors and successfully passed the process with a negotiating approach.
PPP contracts, which are generally spread over long periods of time, encounter very different economic, financial and political processes during the operation period. For this reason, the most important issue is the successful continuation of the life of the contracts. In case of radical changes in the economic conjuncture, flexibilities in price mechanisms that provide public subsidies are of great benefit to the continuation of contracts and the success of projects. Often contracts include public subsidies and positive interventions in times of crisis. Essentially, projects belong to the public and provide public service. Complete and successful continuity of the projects benefits the administration first and foremost. For this reason, no project is intended to fail and an effective co-operation is maintained between all actors for the success of the project.
The decisions to be taken regarding the method to be used for the projects determine the quality and success of the works. During the project development phase, it is of great benefit for the public to multiply alternative scenarios and make their decisions accordingly. The more the number of scenarios, the more successful their predictions for the future will be. It saves time for all processes. Every decision has two basic thought processes. Identify possible alternatives and select one of them. PPP projects promise to produce a solution for a future full of uncertainties. However, an important aspect that affects the accuracy of the decisions made regarding such projects is that one of the stakeholders of the projects is the debt providers. Banks, credit institutions, fund providers try to foresee a long-term forecast for such projects that require large investments. Therefore, they present many scenarios based on the available information. In summary, each PPP project is selected as a result of analyses among alternatives. The private sector decides whether or not to be involved in the project by looking at the information and models put forward by the public sector regarding its alternative from its own perspective. The lenders, on the other hand, work out many alternative scenarios with the data and information provided by both the public and private sectors and put forward their own view. Thus, as a result of a multi-layered value for money analysis, the PPP model is selected as a method of producing infrastructure. This sophisticated structure ensures that each PPP project is preferred after detailed feasibility studies. The success of a PPP project without feasibility is very difficult.
Besides, another important benefit of PPP projects is their ability to accelerate economic development and provide new finance. With PPP projects, the public does not incur financial liabilities during the investment period. Guarantee payments and other liabilities may come into effect in the first years when the projects become operational. However, in the following years, due to factors such as the natural maturity of the project, the increase in utilisation revenues and the improvement of the macroeconomic situation of the country, the projects finance their investments largely with their own revenues.
Another important topic discussed at the global level is the refinancing of PPP projects. However, refinancing and financing restructuring are two different concepts that are often confused with each other. While restructuring indicates an unfavourable financial picture, refinancing represents a period in which there is an opportunity to borrow cheaper from the market in a situation where the risks of the project are reduced. PPP projects usually involve a long and difficult construction period. There is financing to be found before construction starts. Usually, debt providers price these risks and impose high financing costs. However, once the successful construction period of the PPP project is completed and the project is put into operation, the project has a cash flow from both public payments and user revenues. With each passing day, the risks of the projects decrease and when the operation reaches a stable process, it becomes possible to create cheaper cost financing from the market. Successful examples of this structure have been observed in Turkey. While projects that are refinanced become more profitable, it also means that successful enterprises are sustainable.
In the aftermath of the pandemic, the active players in the world infrastructure market have initiated more discussions than ever on sustainability, environment, climate change and stronger infrastructures. Development banks in particular have made it clear that they will not finance projects that do not contribute positively to these concepts. These structures, which rely heavily on international financial resources, attach much greater importance to the environmental and social aspects of projects. Environmental impacts that are overlooked in the traditional model are not easy to find in these projects. On the contrary, they also serve as an important lever for the adaptation of global standards to other public procurement systems. In terms of the social, environmental and other third party impacts of infrastructure investments, PPP projects are quite comprehensive, inclusive and compatible with governance principles. The fact that these reports, whose short name is ESIA (Environmental and Social Impact Assessment), are managed and controlled by global consultancy firms and that financing is dependent on these reports effectively shapes the relationship of projects with other stakeholders. In the future, when global climate change will be discussed more, the impact of these reports will increase for everyone and PPP projects at the local level will be important in terms of presenting good practices to country administrations. In 2022, the removal of legal barriers for municipalities to undertake PPP projects in Turkey and the addition of the terms environment, energy and waste management to the law is an extremely important development and creates a very strong expectation for the development of municipal projects in these areas in the near future.
To make a general assessment, PPP projects should be directed more towards strategic sectors in the new period, should be designed by anticipating the needs of the future rather than the needs of the present, and it should be ensured that resources are used well and existing resources are transformed into productive investments. In the future, public infrastructure investments will be orientated towards more environmentally friendly and high-tech services. For this reason, the issue of technology transfer will also be very important for the development and efficiency areas of PPP projects. Renewable energy projects will create a leverage effect for the development of the economy. PPP projects are of great importance not only in terms of realising the infrastructure investments that countries need, but also in terms of increasing production competence in products where import dependency is high and/or production competence needs to be developed. Areas such as the transformation of industry, the use of data and the optimisation of services will also determine the future areas of the PPP model.
As a final word, the PPP model is a project production method. It will come to the forefront as a method that attaches importance to investment in people, economy and environment, centres public service in investments and enables countries to have fast and predictable infrastructures in strategically needed areas. Global changes also improve project development methods. The PPP model will always continue to be developed as a mechanism of economic science and development tools. It will continue to help countries develop, create finance, provide efficient and quality services, and create synergy from the co-operation of the private and public sectors.
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Some academicians prefer to include operating expenses in the total investment amount. However, in some investments where the transfer of operating rights is in question, it would be a better approach not to include service expenses in the calculation of total investments in terms of rent and service income of the public sector. This is because lease payments made to the public are not investments. Otherwise, as a result of an incorrect calculation of the investment amounts, there is a danger of showing a higher investment amount than it actually is. For this reason, transfer of operating right payments are not included in the investment amounts given above. The given investment amounts cover projects in sectors such as energy, transport and health.
koi.sbb.gov.tr Presidency Strategy Budget Directorate, PPP Department Statistics,
Box-1: World Bank PPP definition
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