Highlight 19/2024 – Development of Cross-border Infrastructure Projects via Cross-border PPPs
Yesui Bayar, 21 May 2024
The concept of Public-Private Partnerships (PPPs) is already quite new, yet there are emerging cross-border PPPs. Cross-border PPPs have different stakeholders and goals. Their constant focus is on cross-border infrastructure, which is characterized as an entire collection of technically related and interconnected facilities that are divided physically by a state border between two or more nations. Following PPP principles, the number of cross-border infrastructure projects are increasing due to the growth of regional economic integration, strengthening of international trade and investment relations. These have its own cross-border PPP track record and more projects are underway where cross-border infrastructure projects may eventually adopt the PPP model.
The evolution of PPP trends has been characterized by global dynamics including shifting economic trends, increasing complexity of infrastructure projects, demand for innovative solutions and financing mechanisms. The modern concept of PPPs has been re-envisioned in 20th century when governments began looking for alternative ways to deliver infrastructure projects as they face fiscal restrictions and increase of demand for quality services.
Cross-border PPPs underscore the natural progression of such evolution, driven by rapid globalization, regional integration, and growing economic cooperation. These partnerships entail international cooperation between public and private entities from different countries to develop, finance, and operate infrastructure projects that transcend national borders. Thus, the emergence of cross-border PPPs is underlining new perspectives in international cooperation, trade and investment.
The development of cross-border infrastructure facilities via use of the cross-border PPP mechanism is presently embedded into international transport corridors and routes, operation of hydroelectric power plants, construction of new pipelines, and development telecommunication networks. It ultimately allows the countries to accelerate its socio-economic development, decipher public financing shortages to finance the construction and operation of cross-border PPPs for infrastructure projects, pursue common interest, leverage international best practices and success stories, as well as attract private capital and improve risk management.
Cross-border infrastructure projects involves fixed-asset investments that establish physical connection between two or more countries through infrastructure such as digital infrastructure as well as facilitating the flow of people, goods, commodities, or data. Cross-border infrastructure projects are characterized by their scale and complexity, which set them apart from typical projects within a single country.
Ultimately, cross-border and domestic infrastructure, combined, can lower trade costs which lead to enhanced trade and investment. Lower trade costs can also indirectly lead to higher foreign direct investment (FDI), primarily through cross-border vertical integration with intrafirm trade, which takes advantage of each location’s comparative advantages. Increase in FDI eventually boost regional and international trade, which amplifies the direct impact of trade expansion. Consequently, a positive feedback loop is established between trade, investment, and the development of cross-border infrastructure. The ultimate results of this loop are increased economic growth and, provided that the required institutions and policies are in place to guarantee that the impoverished participate in this growth, a decrease in poverty. Growth and increased commerce also increase the budgetary resources that governments have at their disposal, opening up additional options. Therefore, Cross-border PPPs emerge as an efficient process for implementing such projects.
Yesui Bayar, Highlight 19/2024 – Development of Cross-border Infrastructure Projects via Cross-border PPPs, 21 May 2024, available at www.meig.ch
The views expressed in the MEIG Highlights are personal to the authors and neither reflect the positions of the MEIG Programme nor those of the University of Geneva.