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Sukuk certificates can provide adapted solutions to the financing of PPP (Public Private Partnership) projects.
A major trend of today’s public projects financing is the increasing use of PPP contracts, where contractors are not only expected to provide technical performance, but are also in charge of raising and structuring the finance of the project. Almost all European countries and now also countries outside Europe are proposing this scheme in order to maintain public deficits under control.
This has created of course new opportunities for the private sector, but has also generated new constraints and obligations for contractors. As a consequence, it becomes more difficult for some companies to participate to public tenders, as they have not always the financial power and contacts network to engage in those PPP projects.
Therefore, governments may end up with a smaller choice of partners, increased prices and even unfulfilled projects.
In order to address this issue, a solution could be for a government to raise a global financial capacity, through the issuance of Sukuk certificates, and to make those funds available to the PPP projects participants. The central feature of a Sukuk bond being the link to the asset (project) itself, it becomes relatively simple then to transfer the title to the private sector, and thus to improve radically the effectiveness of PPP operations. |
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