Financing the Future: Can PPPs Help Close the School Infrastructure Gap?

When schools become overcrowded, the obvious answer is to build more schools.

But that is easier said than done. A new school needs land, funding, planning, equipment and, just as importantly, money to keep it running and properly maintained for the next 20 or 30 years.

For countries with growing student populations and many competing infrastructure needs, this can be a real challenge.

This is what made me start looking at public private partnerships, or PPPs, as one possible way to approach school infrastructure.

So, what would a PPP actually look like?

There is no single PPP model in education.

Private companies can be involved in running schools, governments can fund students to attend private schools, or private companies can take responsibility for building and maintaining public school facilities.

For the infrastructure side of the problem, the last option is particularly interesting.

A private partner could finance, design, build and maintain a public school for a set period. The government would still be responsible for education itself, including teachers, curriculum and access.

In return, the private partner could receive regular payments from the government as long as the school is available and meets the agreed standards.

This means the private company is not just being paid to build a school and leave. It has a reason to keep the building in good condition over the long term.

But why would a private company want to invest?

This is the part that is sometimes left out of the conversation.

A PPP is not a private company putting money into a school simply because it wants to help. There needs to be a business case.

The private partner may use its own money together with bank financing to build the school. The government then makes regular payments over the life of the contract, as long as the agreed conditions are met.

For the company, this can mean a long term and relatively predictable source of revenue. Depending on the contract, it can earn returns not only from construction, but also from maintenance and facility management.

There is also a longer term business benefit. A company that successfully delivers a large public infrastructure project can build experience and a track record that may help it win similar projects in the future.

So the private partner needs to see a reasonable return for the money and risks involved.

This is also why the contract matters so much. If government payments are uncertain, the risks are too high or the project does not offer enough return, a private company may simply not be interested.

The interesting part of a PPP is finding the point where a public need also makes commercial sense.

A case from Croatia

One example I found particularly interesting comes from Varaždin County in Croatia.

By 2006, schools were so overcrowded that they were operating morning and afternoon sessions six days a week.

The county needed one new school, the reconstruction of 21 existing schools and ten new gymnasiums.

Instead of handling each project separately, the county put them together into one PPP programme.

Private partners financed, designed, constructed or reconstructed and operated the facilities. The contracts lasted 25 years, after which the facilities would be transferred to the county.

The private partners received availability payments from the county and municipalities. There were also performance standards, with deductions if the agreed service levels were not met.

Construction started in 2006 and the facilities opened in 2008. The project was completed without the reported delays or additional costs.

What I find interesting is that the county was able to deal with a large number of school infrastructure problems through one programme rather than trying to solve them one school at a time.

Uzbekistan feels even closer to the problem

Another example that caught my attention is Uzbekistan.

In 2021, the IFC began supporting the government in developing a pilot PPP for up to 15 new schools.

The reasons sound familiar: a young and growing population, overcrowded classrooms, schools operating in shifts, children travelling long distances and schools that needed rehabilitation and new equipment.

The proposed private partner would finance, design, construct and maintain modern, energy efficient schools.

The project was expected to create more than 10,000 new school places.

This is where I think PPPs become particularly interesting for countries experiencing rapid population growth.

The government still has to provide education. But does it always have to finance and manage every part of the infrastructure needed to deliver it?

But does a better school mean better education?

Not necessarily.

This is something that should not get lost when we talk about PPPs.

Research reviewed in the World Bank Research Observer shows that the evidence on PPPs improving learning outcomes is limited and mixed. Some PPP models have helped expand access, particularly in underserved areas, but private involvement does not automatically mean better learning.

And that makes sense.

A modern classroom can provide better conditions for students, but it cannot replace a good teacher.

For school infrastructure, the stronger argument may therefore be about access and capacity.

If students are learning in overcrowded classrooms or schools are running several shifts a day, simply having enough classrooms and better facilities can already make a difference.

But what happens in places where there is no business case?

This is probably one of the biggest challenges.

The places that need new schools most may not be the places where private companies want to invest.

A company will naturally look at whether a project is financially viable. Government, on the other hand, may need to build a school precisely because an area is remote, low income or commercially unattractive.

That is where public interest and private interest can pull in different directions.

A PPP does not remove the government’s role. Government may need to provide land or other support to make a project viable. It also needs to choose the right private partner, set clear standards and monitor the contract for many years.

This requires strong public sector capacity.

In fact, one of the interesting things about PPPs is that they do not necessarily mean less government involvement. They mean a different kind of involvement.

So, could this work in Azerbaijan?

This is where I think the discussion gets particularly interesting.

Azerbaijan already has a PPP framework, and education has been identified as one of the priority areas for PPP projects.

School infrastructure could be an interesting area for a small pilot.

The focus could be on schools facing clear infrastructure pressure: overcrowding, rapidly increasing student numbers or major rehabilitation needs.

A private partner could take responsibility for financing, construction and long term maintenance, while the government continues to run the education side.

Then the pilot could help answer some very practical questions:

Can schools be delivered faster?

Does the model provide better value over the full life of the building?

Does long term maintenance improve?

Can it work in regions where private investment is less attractive?

And perhaps most importantly, does the government have the capacity to manage these contracts well?

For me, these are more useful questions than simply asking whether PPPs are good or bad.

The point is not to privatise education

Looking at these examples, I think PPPs are more interesting when they are seen as a way of dividing responsibilities rather than handing education over to the private sector.

Government can remain responsible for access, education policy, teachers and standards.

Private partners can bring capital, construction experience and long term facility management.

The Croatian example shows how several infrastructure needs can be brought together. Uzbekistan shows how PPPs can be considered when the demand for school places is growing quickly. At the same time, the wider evidence reminds us that PPPs come with risks and only work well when government has the capacity to manage them.

So I do not think the main question is whether private companies should be involved in education.

A more interesting question is whether governments can use private capital and expertise in carefully chosen areas to build and maintain the infrastructure that public education systems need.

For countries dealing with overcrowded schools, growing populations and limited public resources, I think that is a question worth exploring.

Sources:

This article was written by Aida Asgarli, a graduate of PMO.az’s Public-Private Partnership Training Programme.