May 17, 2011 - 11:10 AMT
WB recommend ECA governments to rethink private sector role

The recent global financial crisis has set back ambitious infrastructure development plans in several Eastern Europe and Central Asia (ECA), the World Bank (WB) said in Public-Private Partnerships in Europe and Central Asia new study.

Governments facing tight budgets were unable to fund these projects alone, while private investors were also severely affected and became increasingly selective about which projects and countries they chose to invest in. Total private sector investment in the region decreased by more than 40% between 2008 and 2009.

Yet, while projects in some countries have been delayed or cancelled, others, supported by strategic choices by governments, have achieved more success. Notably, the report finds that despite the challenges of the past three years, public-private partnerships (PPP) globally, and in the ECA region in particular, can still bring value to the economy. However, getting access to private funds requires that governments adapt to the “new normal” of the post-crisis environment.

The report recommends that governments should rethink the role of the private sector beyond simple off-balance sheet accounting and carefully assess the underlying investment on economic and social grounds.

It also calls on governments in the ECA region to look not just at private investors; but to also seek a larger role for international partners. International Financial Institutions (IFIs) and the European Union (EU) will likely play a more crucial role in helping the design and financing of projects, strengthening institutional capacity and mitigating risks.