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Direct financial support | RMID

Direct financial support


Subsidies aim either to increase the level of revenue streams or to reduce costs. Both types of subsidies contribute to a stable cash flow reducing risks for lenders and project sponsors and, thereby, increasing their willingness to engage in PPP projects.Revenue streams are targeted through subsidies like: shadow tariffs for roads or topping up user fees and feed-in tariffs in the renewable energy sector. Subsidies could be linked to the availability of infrastructure facilities or key performance indicators (KPIs).Costs can be reduced by: contributions to interest rate subsidies during the loans’ amortising period; waiving fees, costs and other payments to public entities; or any form of tax incentives that reduces the tax burden of the infrastructure project. Tax incentives to encourage private investments in Public-Private Partnerships include: tax holidays, reduced corporate tax, accelerated depreciation, investment / infrastructure allowances, reduced/ exempt taxes on interest and dividends, carry forward loss provisions, and reduction of indirect taxes.


Grants, soft loans and co-investment from governments reduce capital contributions from private stakeholders, thereby leading to lower (financing) risks and potentially higher returns.

  • Grants reduce capital contributions of lenders and project sponsors to infrastructure projects, thereby leading to lower (financing) risks and higher returns for the private sector. Grants during the construction phase can be for free or could require the payment of a price (usually a concession fee) to compensate the public sector and typically are disbursed based on a milestones timeline and backed up by bank guarantees. The public sector can provide grants in form of Viability Gap Funding.
  • In Co-investments, the public sector contributes to the capital costs with the aim to get a level of return proportional to the risk taken in the project. The co-investment can take the form of equity, subordinated/mezzanine debt or a debt contribution provided directly to the infrastructure project or indirectly via investment vehicles for infrastructure projects. Common approaches include National Development Banks and Infrastructure Funds.


Land acquisition is a frequently mentioned risk in many ASEAN countries especially in case of large-scale infrastructure projects such as transportation or power plants. Governments recognize this challenge and ease (foreign) investors’ access to land by passing new land laws defining property rights and processes of compensation and resettlement. Public agencies are established to directly acquire land for infrastructure projects.


Assets: The government might provide assets to PPP companies.