Abstract
Developing Asia’s infrastructure gap results from both inadequate public resources and a lack of effective channels 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 competitive bidding to reduce the hazard rate of the project and the corresponding burden to the 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
Developing Asia’s infrastructure has improved rapidly, yet over 400 million Asians have no access to basic infrastructure needs and countries needs to invest an estimated $26 trillion from 2016 to 2030, or $1.7 trillion per year to maintain the growth momentum, eradicate poverty and respond to climate change (ADB 2017)
Governments have been turning to the private sector to build and operate public infrastructure and led to the use of partnerships between the public and the private sectors
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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