Financing Mechanisms of Public-Private Partnership Projects in the Regional Economy

Abstract

Public-private partnership is one of the most promising tools for financing projects, which includes benefits for both the state (improved fiscal, economic and social benefits of infrastructure projects) and the private sector (the guaranteed cash flow for a long time). The choice of financing mechanisms is a key issue of joint investment projects between state and private sector. Another important issue is a financial security in the implementation of public-private partnership projects that pre-determines the level of its investment potential and cost-effectiveness. Since capital investment requires rational, economically profitable placement, it is necessary to find such solutions which would provide proper business profitability of the investment at a reasonable risk allocation and resolve issues within the competence of the state. The equity investment and credit resources of private banks are considered to be the main financing sources of the public-private partnership projects. The state support provides guarantee and direct budget investments in order to encourage investors and develop the market. Combining different funding sources of the project allows the state and municipal authorities to improve fiscal, economic and social effectiveness of the project and attract a large number of potential investors and lenders. The state can vary the proposed financing model for each project, which makes it possible to supervise its attractiveness for both the society and investors. The types and forms of the state and private sector participation in financing the projects on the base of mutual interests for both parties are considered in the article.