Public Private Partnership

Have you ever heard about Public Private Partnership or PPP Indonesia before? Well, this kind of financing organization involves private sectors and government. The schemes are usually well known for PPP. The PPP is generally between the government and private party or sectors to finish a certain infrastructure project. Let’s find out the meaning and definition below!

What is Public Private Partnership?

A PPP or Public Private Partnership is a service of government or private business scheme which is financed through government partnership with one or more private companies in Indonesia. It involves a contract between the authorities of public sectors and also private party in which the private party will provide a project or services includes assuming the risk of operational schemes. In certain types of PPP, the cost is paid by the service users instead of the taxpayer. In addition, the PPP is created by the private sector with the government contract basis and the cost is in part or fully paid by the government. The contribution of the government in PPP is vital since some projects are creating infrastructure sector by providing subsidy in order to attract private investors. Moreover, in some cases, the government just provides the proceeds subsidies like removing guaranteed annual revenues or breaking the tax.

PPP Fundamental Drivers

The fundamental drivers for PPP are divided into two. The first one is that the PPP is assumed to enable the public sectors to harness the expertise and also delivering certain facilities obtained by the public sectors. The second one is that the PPP is structured so that the capital investment must be got by the private sectors. Generally, the private sectors form a special company called special purpose vehicle. It is used to develop and maintain along with operate the assets during contract periods. The SPV later signs a contract with government to maintain the infrastructure sectors and contracts and make sure that the PPP cash flow is used for financing the project. Generally, the public private partnership is individually negotiated. The PPP is organized between the public and private needs. The challenge may appear is when the fluctuations of the PPP are diminishing. Although, this kind of partnership is common, it is normal for both public and private sectors to be critical of the other’s method and approach. It can be merger also due to the partnership in the development of communities and the public services provision.

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