Abstract
Developing Asia’s infrastructure gap results from both inadequate public resources and a lack of effective channel to mobilize private resources toward desired outcomes. The public–private partnership (PPP) mechanism has evolved to fill the infrastructure gap. However, PPP projects are often at risk of becoming distressed or worst being terminated because of the long-term nature of contracts and the many different stakeholders involved. This paper applies survival time hazard analysis to estimate how project-related, macroeconomic, and institutional factors affect the hazard rate of the projects. Empirical results show that government’s provision of guarantees, involvement of multilateral development banks, and existence of a dedicated PPP unit are important for a project’s success. Privately initiated proposals should be regulated and undergo a competitive bidding to reduce the hazard rate of the project and the corresponding burden to government. Economic growth leads to successful project outcomes. Improved legal and institutional environment can ensure PPP success.
Highlights
The United Nations Sustainable Development Summit in 2015 set 17 Sustainable Development Goals, a 15-year global agenda to reduce poverty, fight inequality, and tackle climate change
Public–private partnership (PPP) is broadly defined as “a long-term contract between a private party and a government entity, for providing a public asset or services, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance” (World Bank 2017)
The Private Participation in Infrastructure database shows that 259 PPP projects in developing countries worldwide were cancelled, and 67 were distressed, out of 6,273 PPP projects from 1991 to 2015
Summary
The United Nations Sustainable Development Summit in 2015 set 17 Sustainable Development Goals, a 15-year global agenda to reduce poverty, fight inequality, and tackle climate change. PPP can be an innovative policy tool to improve the performance of the public sector by reducing government budgetary constraints through accessing private capital for infrastructure investments (Jamali 2004). This paper estimates the hazard rates of PPPs in developing Asia using survival time hazard analysis It examines project-related factors (type of PPP, contract award method, and level of government support, for example); macroeconomic factors (growth, debt levels, and the occurrence of natural disasters); and institutional factors (whether there is a dedicated PPP unit, law and order issues, and degree of corruption, for example). The empirical results suggest policy makers should carefully assess these factors to determine the expected efficiency gains of proposed PPP projects, because their success will depend just as much on well-designed contracts as on economic and political conditions, and the institutional capacity.
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