Public-private partnerships in Iceland : advantages, challenges, and opportunities

Abstract

This thesis investigates the role that public-private partnerships (PPPs) could play in Iceland by examining their primary advantages, the main challenges that limit their use, and opportunities for future development. While PPPs are well established internationally and have become a standard for building and operating infrastructure, their implementation in Iceland has remained limited, highlighting the need to better understand PPPs and how partnerships operate within the specific conditions and constraints of a small economy.The research employs a qualitative methodology, based on semi-structured interviews with four professionals from both the public and private sectors with experience in infrastructure and finance. The interview data was analysed through thematic analysis to identify recurring patterns related to PPP performance, feasibility, and development potential.The findings show that PPPs could offer several advantages in Iceland, including improved efficiency, clearer risk allocation, long-term financial flexibility, and access to private sector expertise. These benefits are particularly relevant for municipalities facing increasing demand and limited fiscal capacity. However, the study also identifies significant challenges, such as Iceland's small market size, a limited number of suitable projects, high preparation costs, economic instability, political uncertainty, and a lack of PPP-related expertise within the public sector. Despite these challenges, the interviewees expressed cautious optimism that PPPs could play a greater role if supported by a more transparent, standardised framework, stronger political consistency, and the gradual introduction of small pilot projects.Overall, the study concludes that meaningful opportunities exist for PPP development in Iceland, but realising them will require structural improvements, long-term policy commitment, and enhanced institutional capacity.