A primary objective for many municipalities is to attract private investment capital into their efforts to improve urban services. But this intention is closely linked to the ability to ensure that there is a stream of revenue available for paying investors back. Policy on cost recovery and user willingness to pay is thus vital to any partnership framework.
Unfortunately, many governments vastly underestimate the time, energy and money they will have to invest in order to attract substantial amounts of private investment, particularly foreign investment. There are many different types of private investors: local and foreign, active providers of urban services and passive providers of money. They have different levels of comfort with different types of investments over different time periods. They also have alternatives. They make an investment when they conclude that it offers better opportunities for profit than their other alternatives. Finding the right balance between satisfying the needs of private investors and meeting the needs of the municipality and users is a time- and resource-intensive process. Depending on the size and complexity of the proposal, evidence suggests that the process (for network services) can take over two years and can incur significant (perhaps in the order of millions of dollars) transaction costs for the public sector.