SGs are likely to be more efficient in achieving their goals if they are limited in scope and duration. The need for SGs will change over time:
(i) At SG programme level, a Government may need to provide wide ranging SGs to support a PPP initiative in its early stages. As the initiative matures and uncertainties are reduced, SGs may no longer be necessary or could be confined in scope;
(ii) At PPP project level, not all the project phases necessarily require Government support. For instance, the LGTT protection set out in Box 2 is limited to the traffic risk in the critical initial operating period of eligible transport projects.
Guidance: SGs should therefore ideally be temporary and reversible. At PPP programme level, the Government should clearly state the features of the SG scheme at the outset in order to guide the market and manage expectations. Ideally, the Government should indicate a start date and an end date for the granting of the SGs and indicate the circumstances under which it envisages that an SG will no longer be necessary. At PPP project level, the SG structures should address the periods of the project cycle that require Government support. SGs should contain provisions for the expiry of the cover once the critical project phase is over. Financial benefit sharing mechanisms can incentivise the PPP company and its lenders to step down an SG when it is no longer needed for the economics of the project.