Every sovereign government planning a major infrastructure programme confronts a structural question that shapes every subsequent decision: should the project be delivered through a government-to-government (G2G) bilateral framework, or through a public-private partnership (PPP) involving competitive tendering and private capital? The choice is rarely straightforward, and the consequences of choosing the wrong structure can add years to a project timeline and billions to its cost.

In practice, the decision is often driven by political convenience or the preferences of whichever bilateral partner or development bank is first through the door. This is a failure of advisory process. The optimal structure depends on five identifiable variables that can be assessed systematically before any commitment is made to a particular procurement path.

Two Models, Different Risk Architectures

A G2G framework involves one sovereign government entering into a bilateral agreement with another -- typically for the delivery of infrastructure using the partner country's EPC contractors, equipment, and financing. The canonical example is a Chinese SOE-led project financed by China Exim Bank with Sinosure political risk insurance, delivered under a framework agreement between the host government and the People's Republic of China. Similar structures exist with Japanese, Korean, Turkish, and Indian bilateral partners, each with their own ECA and contractor ecosystems.

The G2G model offers speed, certainty of financing (since the bilateral lender is pre-committed), and a single point of accountability. Its risks include limited competitive tension on pricing, tied procurement that may not optimise for lifecycle cost, and contingent liabilities that can be opaque to host-government finance ministries.

A PPP, by contrast, involves the host government tendering a concession or availability-payment contract through a competitive process. Private capital -- from project finance lenders, institutional investors, and equity sponsors -- finances the project in exchange for a revenue stream over a defined concession period. The PPP model introduces competitive discipline, allocates construction and operating risk to the private sector, and can mobilise capital without adding to the sovereign balance sheet. Its disadvantages are complexity, longer procurement timelines (typically 18-36 months from tender to financial close), and the need for robust institutional capacity within the host government.

Five Variables That Determine the Right Structure

The choice between G2G and PPP should be driven by a systematic assessment of five variables. In our experience advising governments and sponsors across emerging markets, these five factors explain the structural outcome of the vast majority of infrastructure procurement decisions.

  • Sovereign credit profile. Governments with investment-grade or near-investment-grade credit can access PPP capital markets on competitive terms. Those with weaker credit profiles often find that G2G frameworks -- backed by bilateral ECAs and concessional lending -- deliver lower all-in financing costs than PPP structures requiring sovereign guarantees or credit enhancement.
  • Sector maturity and revenue visibility. PPPs perform best in sectors with established demand profiles and measurable revenue streams: toll roads, power purchase agreements, water treatment with municipal offtake. G2G structures may be more appropriate for greenfield projects in sectors where demand risk is difficult to quantify or where the revenue model is untested in the local market.
  • Domestic institutional capacity. A PPP requires a functioning procurement authority, a legal framework for concession agreements, and the ability to manage a competitive tender process. Where these institutions are nascent, the G2G model's simplicity may be the only viable path to delivery within a reasonable timeframe.
  • Geopolitical alignment and bilateral relationships. G2G frameworks are instruments of foreign policy as much as infrastructure delivery. Governments must assess whether the bilateral relationship supporting a G2G structure serves their long-term strategic interests, and whether the tied procurement requirements align with their industrial development objectives.
  • Fiscal space and contingent liability tolerance. PPPs can be structured to keep project debt off the sovereign balance sheet, but only if risk allocation is genuine -- availability-payment PPPs with extensive government guarantees may provide little fiscal advantage over direct government borrowing. G2G structures typically create explicit sovereign obligations. Finance ministries must model the contingent liability implications of each structure against their debt sustainability frameworks.

The Blended Path: Hybrid Structures Gaining Traction

An increasing number of jurisdictions are pursuing hybrid structures that combine elements of both models. The most common hybrid involves G2G procurement of the EPC package -- leveraging a bilateral partner's contractor and ECA financing -- wrapped inside a PPP-style concession framework that introduces private sector participation in operations and maintenance, and potentially in equity co-investment.

This approach has gained traction in Southeast Asia and East Africa, where governments seek the speed and financing certainty of bilateral frameworks but recognise the operational efficiency benefits of private sector involvement. The structuring complexity is significant -- aligning a Chinese ECA's disbursement requirements with a PPP concession agreement's milestone payments, for example, requires careful coordination -- but the results can deliver the best of both models when executed properly.

Implications for Advisors and Sponsors

The advisory role in this decision is critical and often undervalued. Governments that commit to a procurement path before conducting a rigorous structural assessment frequently find themselves locked into suboptimal outcomes -- overpaying for speed in a G2G, or investing years in a PPP process that fails to attract bidders because the underlying project economics do not support private capital returns.

The most effective advisory engagements begin with a structured assessment of the five variables outlined above, conducted before any procurement path is selected. This assessment should produce a clear recommendation on structure, an honest evaluation of the trade-offs, and a realistic timeline for each option. In a market where infrastructure needs are urgent and political cycles are short, the discipline to make this assessment before acting is what separates successful programmes from expensive disappointments.