Developing Public Private Partnerships

Public Private Partnerships can contribute to economic recovery and the sustainable development of the European Union (EU). The combination of public and private capacities and money is essential in the context of the economic crisis. The Commission presents the obstacles to PPPs being set up and the means to encourage them.

ACT

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 19 November 2009 - Mobilising private and public investment for recovery and long term structural change: developing Public Private Partnerships [COM(2009) 615 final – Not published in the Official Journal].

SUMMARY

Public Private Partnerships (PPPs) are innovative financing solutions promoted by the European Union (EU). In particular, they can contribute to:

facilitating projects in the public interest, notably infrastructures and cross-border public services;
sharing financial risks and reducing the costs of infrastructure which are normally fully funded by the public sector;
supporting sustainable development, innovation, research and development through competition and commitments from private enterprise.
enlarging European companies’ market shares in government procurement in countries outside the EU.

PPPs within the EU

These partnerships must be compatible with the rules of the EU as regards:

the operation of the internal market;
the Stability and Growth Pact;
Community legislation on public procurement and concessions;
competition rules, insofar as PPPs carry out economic activities.

EU financing can be used to co-finance PPPs. National public and private stakeholders can benefit from:

structural funds associated to PPPs, and the JASPERS, JESSICA and JEREMIE initiatives;
European Investment Bank (EIB) funds and the European Investment Fund (EIF). The EIB has also established a European PPP Expertise Centre (EPEC) to assist in creating PPPs;
the financial instruments of the trans-European transport network (RTE-T network), which encourage the contribution of private financing, risk capital and the granting of bank loans;
the 7th Framework Programme for Research and Development and the Joint Technological Initiative (JTI).

The EU also recommends the use of instruments for innovation:

the Risk Sharing Finance Facility (RSFF), set up by the Commission and the EIB in order to facilitate access to loans. The European Economic Recovery Plan foresees an accelerated implementation of the RSFF;
the instruments of the Competitiveness and Innovation Framework Programme (CIP), which support PPPs in the areas of research, technological development and innovation.

PPPs outside the EU

PPPs can be set up as part of enlargement strategy and external cooperation actions. The EU also contributes to the Global Energy Efficiency and Renewable Energy Fund, an international PPP for investors in developing countries.

Finally, the EU promotes improved transparency and operation of PPPs in its international trade relations.

Obstacles to the creation of PPPs

The economic crisis has limited access to financing due to:

the increase in the cost of credit;
a reduction in bank maturities to reduce the duration of loans;
a lack of financing at the outset for public procurement processes.

It is for this reason that the Commission has presented a temporary Community framework for State aid to support access to finance in this period of economic crisis.

Setting up PPPs often involves:

considerable financial resources;
expertise and specific training in the public sector;
complex financial arrangements;
long-term commitments from the authorities.

PPPs in the field of technological innovation are essential for EU competitiveness. The Commission is to build a specific framework to:

facilitate their creation and ensure that risks and responsibilities are shared between public and private stakeholders;
guarantee access to finance through grants, public procurement or investment.

Measures taken by the EU

The economic crisis has a negative impact on public finances and on projects requiring long-term investment. Thus in 2010, as part of the Economic Recovery Plan, the Commission plans five specific actions to foster the setting up of PPPs:

the creation of a group for dialogue and exchange between the stakeholders involved in a PPP;
an increase in available financial resources through existing European instruments and by developing specific instruments;
an assurance that public and private management bodies are to be treated equally with regard to European funding;
the promotion of innovation, in particular by allowing the EU to participate in private law bodies and directly invest in projects;
a proposal for a new legal instrument relating to public service concessions awarded to the private sector.

The Commission is also to evaluate a series of additional measures before the end of 2011. These concern:

extending the scope of European financial instruments;
completing the impact assessment concerning the initiative relating to the award of service concessions;
improving accounting practices;
disseminating specialised knowledge and know-how;
promoting information and communication technologies and innovation.

See also