While there is a general consensus that capital markets are best placed to become significant funders of PPPs, it is not happening or, at least, not happening in the way it should.
The main obstacles are described in detail in the preceding sections, but can be analysed in the following way: most of the key stakeholders in the PPP market do not have a strong incentive to make it happen:
■ Commercial banks still see capital markets as competitors. Project finance has been traditionally a banks' preserve and a major source of fee business for them. They are interested in capital markets mostly to the extent that it allows them to refinance their existing long term commitments and roll over their portfolios.
■ Institutional investors have many other opportunities, which appear simpler and often present a better risk reward/ratio. Because PPPs are complex, they generally prefer to be intermediated, but at the same time, find it difficult to get comfortable with the lack of direct control on their investment.
■ Sponsors, are generally more comfortable with banks (over which they can exert a much stronger commercial control) and fear the "uncertainties" associated with capital markets (lack of early commitments, inflexibility of a "market" dictating its conditions).
■ Procurers, are often not familiar with capital market and not always prepared to change their habits to fit the specific requirements of capital markets investors
■ Investment bankers and advisers, in some cases may be keen to develop this business, but will only invest the considerable up-front costs necessary to arrange complex project bonds if they see a real prospect of repeated successes.
There is a tendency for each category of player to expect a solution to come from others. Private players look at the public sector to create the right incentives or support mechanisms. Many in the public sector are of the view that it is up to the private sector to come up with new solutions.
Can this be changed? Can the incentives be turned around in a way conducive to a more positive attitude of all PPP stakeholders toward the capital markets?