Concessions and partnerships in recovery

Public-private partnership is the instrument most frequently proposed in reconstruction discussions and least frequently suited to the project being discussed. The criteria for when it works are well established.

When a concession makes sense

The asset generates revenue from users, in an amount that can be forecast: a port terminal, an airport, a toll road with a genuine alternative route, a waste treatment facility with a gate fee, a parking system.

The service can be specified in a contract, so that performance is measurable and a dispute is resolvable.

The private party can influence the risk it carries. A concessionaire can manage operating cost and service quality; it cannot manage whether a region's population returns.

And the contract period is long enough to recover the investment, which for infrastructure means decades.

When it does not

Schools, clinics, housing, municipal roads: no user revenue, so any partnership is the state paying over time rather than up front. That can still be useful — it converts capital expenditure into an operating commitment — but it is borrowing, and it should be recognised as borrowing rather than presented as private investment.

The port precedent

Terminal concessions transferred operation to private operators while ownership remained public, with investment obligations and performance standards in the agreement. Throughput rose and the state retained the asset.

That is the model working as intended and it is the reference case for reconstruction.

The practical filter

Ask who pays the operator and whether the payment depends on demand. If the answer is the state and no, it is a financing structure, not a partnership.

Assessing a public-private partnership I ask one question: who pays the operator, and does that payment depend on demand. If it depends on demand, private capital carries risk; if it depends on the budget, this is not a partnership but a purchase by instalments and should be priced as one. Every structure in reconstruction that skips this distinction comes back to the renegotiation table within a few years.