Private players definitely have a role to play. They are at the centre of innovations and can deploy considerable analytical, financial and marketing resources in developing them. The example of the monolines, again, shows that it can be done with very significant results.
However, it would take another major break-through in financial engineering to achieve a comparable result. It is not impossible, but not likely either. Although coordination from all market players will be necessary, the "catalyst" role is unlikely to be taken on by the PPP market or at least not in sufficient scale and in an accept-able time frame.
Bringing the core institutional markets -investment banks, insurers, sponsors and advisers- to the table, would therefore more likely require a significant public sector "push", whether through procurers, governments, or multilateral organizations.
The public sector is indeed the best actor to provide the necessary policy incentives to the market. In addition it is the stakeholder which, in the final analysis, stands to lose the most from the absence of an active financing market for PPPs, as it implies a shortage of funds to deliver their key infrastructure and a lack of competition in the finance markets, leading to high prices and monopoly positions for banks.
Actions the Public Sector could take to encourage the capital markets include: Adjust the procurement processes toward easier in-tegration of capital market solutions: ■ Use of advisers conversant with capital market techniques, to assist in establishing the terms of their tenders ■ Procurement processes which allow bonds to compete with bank debt (for example, taking into account the specific process by which bonds are committed) ■ Contract terms as much in line as possible with accepted "international standards", to facilitate cross-border investments ■ Specification of dual bank debt/bond routes in the tender terms (e.g. with different underlying project ratings) ■ Performance by the authority, as a standard procedure, of a cost-benefit analysis of potential capital market solutions, in order to analyse the trade-off between the constraints imposed by bond solutions and the improved terms it may offer. Facilitate dialogue between the various stakeholders under its leadership Potential direct public support measures: ■ Public guarantees or partial public guarantees for bonds ■ A public infrastructure bonds agency, which could intermediate for private investors or facili-tate liquidity ■ Fiscal incentives 1)
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1) An historical example is the US tax-exempt bonds market, which played a key role in financing infrastructures in the US over the last 30 years.