Question

When a government transfers the rights and obligations of an asset to another legally separate governmental or private sector entity, the transaction is referred to as?

1) A special assessment arrangement.
2) An infrastructure agreement.
3) A service concession arrangement.
4) A sale-leaseback agreement.

Answer 1

The transaction in which a government transfers the rights and obligations of an asset to another entity is known as a service concession arrangement.

Step-by-step explanation:

When a government transfers the rights and obligations of an asset to a legally separate governmental or private sector entity, the transaction is referred to as a service concession arrangement. This type of transferal is complex and is a form of privatization where the government collaborates with a private entity to finance government programs or infrastructure. For instance, a special-purpose vehicle may be created to take ownership of the asset and is empowered to access private financial markets for borrowing. This method is often utilized for financing large infrastructure projects, such as government office buildings or military housing.