At present, the greatest example of co-financing is the observation of Asian Development Bank projects and contracts, which involves not only regional countries in the partnership of co-financing projects, but also other countries. In this way, a partnership will be established with many different supporting organizations and thus become bilateral or even multilateral funding. This becomes an extended part of the co-financing. Several projects and programmes were supported by the management and funding bodies. For example, the Asian Development Bank is actively involved in financing projects in that country by bringing prosperity to ordinary people through its projects. BOX 5.7: Examples of pure or non-renewable co-financing can generally be classified into three categories in situations where the State provides outright co-financing; Direct grants are the most common form of co-financing. Funds are provided during construction on a non-reimbursable basis, usually accrued and paid as a percentage of the value of the work in progress or provided certain milestones are met. They can also be paid in part or in full during construction. “Improving access to health services reduces financial hardship for families, improves their health outcomes, and strengthens the human capital of societies,” said Annette Dixon, Vice President for Human Development at the World Bank.
“Partnership and the introduction of new models of health financing are the key to better serving our client countries and ensuring affordable, quality health care for all.” Trade co-financing facilitates investment, trade and capital flows to developing countries. Private and public bodies offer this type of co-financing. It is usually bought from the financial markets and valued on commercial terms. These agreements are particularly effective for projects and programmes that would consider business partners risky without ADB`s participation. Read more about commercial co-financing As a structuring decision, the government must consider whether to increase risk tension by making co-financing subject to milestones or conclusion and whether payments should be repaid. As with any structuring decision, this is a matter of VfM: more risk means more incentive to cross milestones, but it brings more uncertainty to lenders and a higher price in terms of financing costs. In addition, more time (deferral of payments) means financial costs that are generally higher than the cost of public debt, but lower than the cost of the private part of financing the financial structure, deductions or adjustments in terms of volume or performance. The direct public co-financing demonstrated in co-financed PPP projects is generally between 30 and 40% of the cost of capital (e.g. B for urban PPP programmes in Spain, 30% represents the usual percentage for the financing part of the project). However, depending on the specific characteristics of the project and/or ppp, a greater degree of co-financing may be useful (see the Spanish high-speed rail PPP model and other examples in Box 5.7). In the case of the Zaragoza tramway, the project was the subject of a call for tenders from the local government (Municipality of Zaragoza) and the co-financing came from the regional government (the Government of Aragon). When a government is considering co-financing, it should carefully assess the risk of compromising VfM.
If public funding is too large as a financing component of the project, the risks and motivations for the private partner to properly carry out the project will be reduced. Risk allocation and incentives can be converted into ordinary purchases….