Project Financing Research Articles

The Urgency of Implementing Step-In Rights Clauses in Project Financing Contracts in Indonesia

The increasing infrastructure development in Indonesia today is directly proportional to the growing need for funding to support such projects. The funding model commonly used in infrastructure development is project finance, where risk management and cost allocation are shared among the project participants. As infrastructure projects become more complex and long-term, they often face various issues such as cash flow problems and losses incurred in the event of default. These issues can actually be addressed by implementing the Step-In Rights Clause, which grants the employer the right to intervene in the work of the contractor. However, the regulation of the step-in rights clause has not yet been explicitly governed by Indonesian legislation. This paper aims to explain the urgency of applying the step-in rights clause in construction contracts. The article employs a normative legal research method with a statute approach and a conceptual approach. In practice, the application of the step-in rights clause offers many advantages and has been implemented in several countries, including Australia. Meningkatnya pembangunan infrastruktur di Indonesia saat ini berbanding lurus dengan meningkatnya kebutuhan pendanaan untuk mendukung proyek-proyek tersebut. Model pendanaan yang umum digunakan dalam pembangunan infrastruktur adalah project finance, di mana pengelolaan risiko dan alokasi biaya dibagi di antara para peserta proyek. Seiring dengan semakin kompleksnya proyek infrastruktur dan berjangka panjang, proyek-proyek tersebut kerap kali menghadapi berbagai permasalahan seperti masalah arus kas dan kerugian yang timbul jika terjadi wanprestasi. Permasalahan tersebut sebenarnya dapat diatasi dengan penerapan Step-In Rights Clause yang memberikan hak kepada pemberi kerja untuk melakukan intervensi terhadap pekerjaan kontraktor. Akan tetapi, pengaturan mengenai step-in rights clause belum diatur secara tegas dalam peraturan perundang-undangan di Indonesia. Tulisan ini bertujuan untuk menjelaskan urgensi penerapan step-in rights clause dalam kontrak konstruksi. Artikel ini menggunakan metode penelitian hukum normatif dengan pendekatan perundang-undangan dan pendekatan konseptual. Dalam praktiknya, penerapan step-in rights clause memiliki banyak keuntungan dan telah diterapkan di beberapa negara, termasuk Australia.Kata kunci: Proyek infrastruktur, Hak campur tangan, Pembiayaan proyek

Environmental Injustice and Multilateral Financing: Conflicts Between International Financial Institutions and Communities in Latin America

In the context of the crisis of multilateralism following the 2008 financial crisis, projects financed by multilateral organizations have exacerbated socio-environmental conflicts in the Global South, particularly in Latin America. The conflict mediation processes conducted by Accountability Mechanisms are expected to result in socio-environmental reparations, a claim that has been disputed by affected communities. This article analyzes the conflicts surrounding International Financial Institution (IFI) Financing in development projects for cities and regions in the Global South. The question is: how have Independent Accountability Mechanisms (IAMs) addressed environmental injustices resulting from projects financed by International Financial Institutions? To understand this issue, the objective of the research is to understand the accountability strategies of the Independent Mechanisms and the sustainability discourse of Multilateral Organizations. The research focus was defined based on the activities of Independent Accountability Mechanisms (IAMs), which organized several virtual meetings with civil society during 2020 and 2021. The methodology employed participant observation, with findings documented in a field notebook. The theoretical framework draws on the concept of environmental justice, both in its American version, as articulated by Dr. Robert Bullard, and its Latin American counterpart, often referred to as the 'environmentalism of the poor,' by Joan Martínez Alier. The results revealed the limitations of IAMs in mediating and investigating violations of social and environmental safeguards. Socio-environmental reparations for communities affected by projects funded by International Financial Institutions (IFIs) fall outside the scope of IAMs' activities. Additionally, the IFIs have not established socio-environmental reparation funds for these affected communities. The data collected through participant observation and recorded in the field notebook were interpreted and analyzed within this theoretical framework. These findings can provide valuable insights to improve decision-making processes, promoting greater equity and sustainability in the relationships between IFIs and communities impacted by large-scale projects in Latin America.

Критерії відповідності фінансового менеджменту емітента зелених облігацій

Introduction. A fundamental principle in the green bond market is the financing of projects that have a positive impact on the environment. Socially responsible investors want to be sure that the proceeds from the issuance of these securities are used as intended, and that the projects being financed contribute to the achievement of environmental goals. For this purpose, the relevant international standards have already been adopted on the green bond market. Problem Statement. In the green bond market, manipulation often occurs when the proceeds from the issuance of these securities are allocated to projects that are not actually environmentally friendly, although they are portrayed as such. Compliance of the financial management of the issuer of green bonds with generally accepted standards is always in the focus of attention of socially responsible investors. An urgent task is to measure the compliance of financial management with generally accepted standards, which will affect the future results of the issuer of green bonds in the distribution of income to achieve environmental goals. Purpose of the article is to identify the criteria for compliance of the green bond issuer's financial management with internationally recognized standards. Methods. The following research methods were used: the generalization method (when studying theoretical sources, scientific works of famous scientists and researchers on selected issues); methods of comparisons and synthesis (during the review of international acts, existing practices and standards), the method of analysis (to identify the criteria of compliance of financial management in the green bond market); logical method (for forming conclusions). Results. The article reveals the concept and features of financial management in the green bond market, examines global practices and standards for managing proceeds from the issuance of these securities. The principles and requirements that issuers of green bonds on the global and European markets should follow are summarized. On the basis of the conducted research, the criteria of compliance of financial management in the market of green bonds are singled out. Conclusions. The principles and methods contained in international standards and recommended acts on the green bond market provide a basis for measuring the compliance of the issuer's financial management with internationally recognized practices. The conducted research made it possible to single out the following criteria: 1) the ability to properly select and evaluate projects; 2) confirmation of the targeted direction of income; 3) availability of separate accounting of receipts; 4) organization of control over revenue management; 5) involvement of an independent third party in the control. Identified financial management compliance criteria make it possible to identify the green bond issuer's strengths and weaknesses for further improvement of its internal practices, increase transparency, and improve management processes and foundations. Checking the issuer of green bonds according to each of the criteria on a point basis allows establishing the general level of compliance of its financial management with the expectations of socially responsible investors.

The Financial Risks in Toll Road Development in Indonesia: Challenges and Development Strategies for the Probowangi Toll Road

Probolinggo-Banyuwangi toll road, which crosses mountainous areas in East Java. Toll road construction in areas with varying topography often faces significant technical and environmental challenges, which can affect costs, completion time, and project sustainability. This study uses a quantitative approach with a descriptive method to evaluate risk factors that impact project finances, such as construction costs, dependence on funding sources, interest rate fluctuations, and traffic volume predictions. Primary data was collected through questionnaires, while secondary data was obtained from financial planning documents and related project topography. Data analysis was conducted using multiple linear regression with a path analysis model. The results of this study are expected to identify key variables that influence financial risk and provide recommendations for effective mitigation strategies. This research is expected to contribute to the development of policies and financial risk management practices for similar infrastructure projects in the future.

Assessment and management of costs for renewable energy investments in Zambia using a novel mixed method.

This paper investigates strategies for managing costs in low-CO2 renewable energy (RE) projects, with a focus on enhancing investment efficiency. The study develops a novel mixed-method framework that integrates Shapley rates, TOPSIS, and Pythagorean fuzzy (PF) DEMATEL to identify effective cost-control tactics. Data is sourced from financial reports, project records, and expert evaluations involving three managers from the energy sector with over two decades of experience in renewable energy investments and CO2 emission reduction. The framework's precision is tested through the VIKOR technique and sensitivity analysis, using five scenarios where the weighting outcomes of criteria are adjusted. Findings reveal that solar energy consistently offers the most cost-effective solutions, while consumer prioritization significantly improves the viability of wind energy investments. The results also emphasize the importance of workforce development in solar energy projects and collaborative cost-control strategies to enhance project success. The study recommends that investors focus on high- or low-level collaborative approaches for solar energy due to its lower associated costs compared to other options. These insights can guide policymakers and investors in optimizing renewable energy investments and enhancing collaboration to reduce CO2 emissions.

The Impact of Financial Innovation on Environmental Protection:Literature Review and Case Study

This study explores the relationship between financial innovation and environmental protection, focusing on how financial innovation can contribute to sustainable development and ecological conservation. Through a comprehensive literature review, this paper identifies various forms of financial innovation, including green finance, socially responsible investing, and impact investing. These have emerged as significant tools in promoting environmental sustainability. The literature suggests that financial innovation plays a crucial role in directing capital towards environmentally friendly projects and companies, thereby reducing the funding of polluting industries. The implementation of green bonds, green banks, and other financial instruments has been instrumental in channeling investments towards renewable energy, clean technology, and other eco-friendly initiatives. These financial mechanisms not only encourage corporate responsibility but also stimulate innovation in clean technologies by providing necessary funding and risk management solutions.The Case study is presented to exemplify the practical application of financial innovation in environmental protection. The case focuses on the development and impact of a green bond issuance by a major financial institution, highlighting the positive environmental outcomes achieved through the financing of specific sustainable projects. The analysis reveals that such financial products have led to measurable reductions in greenhouse gas emissions and improvements in resource efficiency. By synthesizing theoretical insights and empirical evidence, this research contributes to a deeper understanding of the nuanced interplay between finance and environmental preservation, suggesting that financial innovation can be a powerful ally in the global effort toward ecological conservation and sustainable development.

Exploration and Practice of Cross School Credit System Teaching Reform in Engineering Project Financing Course

Exploration and Practice of Cross School Credit System Teaching Reform in Engineering Project Financing Course

Analysing the European Defence Fund’s financing distribution across EU countries: what drives national participation in defence-industrial integration projects?

The establishment of the European Defence Fund (EDF) marks a significant shift in how EU Member States approach the integration of the defence industry as it aims to systematically promote inter-European defence-industrial cooperation across national defence sectors. However, there is a lack of empirical evidence of the actual dynamics regarding EDF implementation. While there are accounts of EU countries’ varying political positions on defence integration, including its industrial aspect, it remains unclear whether Member States’ actual participation in integration projects aligns with these positions. Are national motives consistent once effective defenceindustrial integration is underway? The findings, based on Masson’s (2024) data on by-country distribution of EDF project financing (2021–2022), present a more nuanced picture of EU countries’ effective engagement with defence-industrial integration than anticipated by the political perspective. While there is a positive relationship between participation in the EDF and defence market size, strategic culture does not influence EU members’ involvement in the Fund. Furthermore, while liberal economicindustrial governance is negatively associated with national participation in EDF projects, a country’s institutional quality has a significant positive relationship with it. This article reveals more complex dynamics of EDF implementation than suggested by the political perspective on defence-industrial integration pre-EDF.

Credit Appraisal On Kotak Mahindra bank- A Comprehensive Study

This study aids in comprehending the credit appraisal process used by Kotak Mahindra as well as the methods for lowering various parameters, which are broadly categorized as financial risk, business risk, industrial risk, and management risk related to making any loans, advances, or project financing. The research was analytically conducted. For this experiment, only secondary data were collected. Analysis work was done throughout the area using the data that was gathered. The following factors were discovered after this study's analysis, and they will be taken into account by banks when doing credit appraisals. They are the following: financial performance, business performance, industry outlook, management caliber, and account conduct. When considering the factor of financial performance, the operational and financial viability of the proposal were found. This study helps to know the credit appraisal process and understand the credit appraisal process and understand the operating and financial viability of the proposal in KOTAK MAHINDRA bank

Research on the Risk Management of International Engineering Project Financing

Abstract: Against the backdrop of the "Going Global" strategy's continuous advancement and the rapid integration of the international economy, China's development prospects in the realm of international engineering contracting and investment appear highly promising. Currently, in the implementation of international engineering projects, construction contracting enterprises regularly participate in project financing to alleviate funding challenges faced by project owners. Within the context of international engineering project financing, an array of risks is inevitably encountered. Among these, the most prominent risks include political, legal, market, performance, economic, construction, and operational risks, among others. Through the analysis of various risk factors presented in this paper, the aim is to enhance the understanding of international engineering contractors regarding the intricacies of these multifaceted risk elements. Subsequently, corresponding mitigation strategies are proposed to empower project operators in effectively managing and guarding against these multifaceted risks.

Who funds whose infrastructure? Country dyadic analysis of global project finance loans

Global project finance investments have become one of the primary funding mechanisms for large infrastructure projects worldwide over the past few decades. This paper examines the country-level dynamics of global project finance loans from 1981 to 2018, using data from all project finance deals reported in the DealScan database. Our analysis reveals that most international project finance loans originate from banks and financial institutions in advanced democracies, while the recipient countries vary widely in terms of regime type and economic development. Through systematic visualization and statistical analysis, we find that transnational capital flows for infrastructure projects are more likely to occur between countries with similar political systems or between those with starkly different regimes. This finding indicates significant lending and borrowing between full democracies and closed autocracies, suggesting that investments raised in liberal democracies enable some of the most closed dictatorships to finance their infrastructure development. The study suggests that closed and repressive regimes might substantially benefit from the globalized project financing system, warranting increased attention from scholars in International Political Economy on political implications of the globalized project finance market.

Innovating Through Public–Private Partnership

The article titled Innovating through Public-Private Partnership, explores the potential of public-private partnerships (PPP) as a means to foster innovation, economic stabilization, and sustainable community development. It highlights how the collaboration between public administration authorities and private or non-governmental sectors can address pressing societal challenges, including global warming, healthcare modernization, and technological advancements. The research outlines the essential components of PPPs, including financial models, management frameworks, and project evaluation criteria, with a particular focus on innovation-driven initiatives. Various stages of establishing a successful PPP are examined, from project conceptualization and partner selection to implementation and performance monitoring. Furthermore, the paper delves into the importance of funding methods and risk management, demonstrating how a well-structured PPP can combine public and private resources to deliver public goods effectively. The article also provides insights into sector-specific innovation strategies, such as digitalization and renewable energy projects. The case for renewable energy production through PPPs, involving solar and wind energy, is highlighted as a sustainable development model that strengthens collaboration between public and private sectors. By analyzing a five-year history of PPP projects in Europe and providing forecasts for the future, the paper underscores the growing relevance of PPPs in achieving long-term goals for economic and infrastructural development. The study concludes with recommendations for fostering a conducive environment for PPPs, such as legislative reform, the creation of national databases, and investment in education and training to enhance the success and innovation potential of PPPs.

A risk sharing model for old community renewal project based on bargaining game model

To ensure the successful implementation of the old community renewal project (OCRP), it is essential for the participants to allocate the project risks reasonably. Firstly, this study comprehensively identifies the 20 key risk factors of the OCRP. Secondly, an index system is established from three dimensions to evaluate the risk allocation ability of participants, including a total of nine evaluation indexes. Furthermore, a risk-sharing model based on TOPSIS method and bargaining game model is proposed to determine the optimal risk bearer and risk-taking ratio between the government and the private sector in OCRP. Finally, an OCRP in Chongqing is taken as a case study to verify the applicability of the developed model. The results indicate that in OCRP under PPP mode, the government need to independently bear 7 risks related to politics, law, policy, while the private sector needs to independently bear 8 risks mainly from project financing, design, construction, operation, and maintenance stages. In addition, the risk-taking ratios of 5 risks that require both parties to share are divided. The research findings provide references for ensuring the smooth implementation of urban renewal and sustainable development.

Promising Directions of Economic Development of Rural Areas: The Case of the Republic of Crimea

Introduction. Rural areas represent significant strategic potential for the socio-economic development of the country. In recent years, the role of the state in planning territorial development has increased significantly. This is due to successful experience in designing territorial and sectoral development in difficult periods of macroeconomic and geopolitical crises, financing and monitoring infrastructure projects that are important for the economy and society. The subject of the study are rural areas localized in the space of one of the constituent entities of the Russian Federation, which recently became part of the state – the Republic of Crimea. The purpose of the article is to substantiate promising directions for the economic development of rural areas of the Republic of Crimea based on the construction of a structural and sectoral profile. Materials and Methods. The research materials were the scientific results of leading scientists studying the problems of the economy of rural areas, structural and sectoral transformations on a regional and municipal levels. The information base of the study was made up of official statistical data of Rosstat and Crimea, official websites of governmental bodies of the Russian Federation, and archival materials. The research was conducted using content analysis of scientific literature, retrospective and structural analysis. Results. Structural and sectoral profiles of the economy of rural areas of the Republic of Crimea for 2017 and 2022 were developed, which allowed to prove the presence of processes of structural and sectoral changes, identify key factors and justify promising directions for further development. The authors prove that against the background of ongoing changes in the economic space of rural areas of Crimea, the dominance of agricultural production based on the use of unique natural factors, resources and conditions (climate, soil fertility, availability of centuries-old technologies for growing agricultural products, etc) remains. Discussion and Conclusion. The decrease in the share of agricultural production in the sectoral structure of the economy of rural territories (municipalities) of the Republic of Crimea is the most significant for the period 2017–2022, which is primarily due to the following factors: strengthening of transport, logistics and recreational and resort functions of the region, development of other types of material production. Analysis of the structural and sectoral profile proves the sustainability of the development of rural municipalities of the Republic of Crimea, due to the focus on the needs of both visitors and local population. It is advisable to use the research results in the development of strategies, plans, projects for the socio-economic development of rural territories, municipalities and regions.

Research on investment and financing risk problems and countermeasures of PPP construction projects

This study analyzes financing costs, capital liquidity, policy changes and contract execution risks in PPP project investment and financing, and puts forward strategies such as optimizing financing platforms, reducing costs, strengthening regulations, regulatory coordination and improving prevention capabilities. By exploring the causes and effects of risks, combined with domestic and foreign cases to verify the effectiveness of the strategy. This study enriches the theory of PPP risk management, provides guidance for the practical operation of the project, and promotes the healthy development of the PPP project.

ФОРМУВАННЯ НА СУЧАСНОМУ ЕТАПІ РИНКУ ФІНАНСОВИХ ТЕХНОЛОГІЙ В СВІТОВІЙ ЕКОНОМІЦІ

The current stage of development of the world economy is characterized by the process of increasing the role of the financial sector, as well as the transition to a new phase of development - innovation. Globalization in financial innovations is critical in international innovative development in today's conditions. The rapid spread of financial innovations under the conditions of financial globalization has become the main driver of the formation of the world economic system, contributing to the deepening of financial globalization. The formation of the financial services market is uneven because various factors influence it, including the level of development of information and communication technologies, the stability of the financial sector, and others. These factors have been studied by researchers, but the development of specific segments of the fintech market has its peculiarities. Fintech is a complex system that unites the sectors of new technologies and financial services, startups, and the relevant infrastructure. The financial services sector is increasingly actively using new technologies and tools to perform its functions and implement fundamentally new solutions in which consumers of services are interested. New technologies inherently changed not only the historically formed landscape of providing financial services, giving it freshness and dynamics, but also changed the attitude to such a concept as "money", realizing the transition from cash to virtual money in a reasonably short period. The industry provides subjects of financial relations with a wide range of innovative technologies, among which robotics, biometrics, remote banking, P2P lending, and many others have become vital. The fintech industry is expected to grow due to increased market penetration rates for existing services and their international expansion. The transition from the traditional financial services system to a digital one provides excellent opportunities for large financial companies and FinTech startups to work with banks or financial organizations. As more critical financial infrastructure projects come into production, more players will be interested in implementing digital financial technologies.

Crucial factors for decision-making in international real estate development projects: Evidence from Chinese developers

This study aims to investigate the crucial factors influencing decision-making in international real estate development projects. The identification of these factors was initially derived from a comprehensive literature review and further refined through expert input from Chinese real estate developers. Subsequently, questionnaires were administered to these experts in three focus groups. The key determinants for decision-making in international real estate development projects were identified as follows: political stability condition of the host country, international diplomatic relations between the host and home country, macro-economic situation of the host country, maturity of real estate market in the host country, project financing, and international experience of the enterprise. The most significant categories encompassed political, economic, and project factors. This study addresses the scarcity of literature on international real estate development, with a specific focus on developers originating from developing nations. It has the potential to enrich the discourse surrounding international real estate practices and contribute valuable insights for future academic investigations.

Determining the critical factors for realising successful post-disaster reconstruction projects in the Caribbean

Business as usual project management practice may not be applicable in the recovery of the built environment following a disaster. Unfortunately, little research has been undertaken to understand the nature of post-disaster recovery projects and the requirements for their success in the Caribbean. The Caribbean islands' exposure and susceptibility to natural hazards make it essential to understand what constitutes successful post-disaster reconstruction. By drawing on end-users’ perspectives in four Caribbean islands (Antigua, Dominica, Grenada, St. Vincent) through a quantitative survey and factor analysis, this paper identifies critical factors that determine successful outcomes with post-disaster Caribbean recovery projects. The factor analysis results from the survey responses on 24 empirical success factors suggests four composite Caribbean specific critical success factors, namely, 1) effective management of project knowledge, 2) environment and ecosystem stewardship, 3) stakeholder engagements at multiple levels, and 4) efficient management of financial, social and human resources. The findings from this research can assist with minimising the recurring post-disaster reconstruction projects, project financing donors and managers with an understanding of the issues that matter most to the region success, and realising the end-users’ (the beneficiaries) expectations. Mainstreaming these factors into project planning and execution, and adopting resilience-oriented project management practices, augers well for managing Caribbean disaster reconstruction projects for greater success.

Post-project financial auditing as a continuous improvement tool for SMEs

Post-project financial auditing is a critical tool for ensuring transparency, accountability, and financial accuracy within small and medium-sized enterprises (SMEs). As SMEs navigate project-based operations, it is essential to assess the financial outcomes of completed projects to inform future decision-making and resource allocation. This review explores the role of post-project financial auditing as a continuous improvement tool in SMEs, highlighting its ability to enhance financial discipline, improve cost control, and promote long-term financial sustainability. By examining key aspects of project revenues, expenditures, and profitability, post-project financial audits provide insights into financial performance that are essential for strategic planning. These audits help identify budget deviations, resource misallocations, and cost inefficiencies, enabling SMEs to adjust future financial planning and project management practices. In doing so, audits contribute to refining budgeting processes, promoting data-driven decision-making, and reducing financial risks in subsequent projects. The review also emphasizes the benefits of post-project auditing in fostering a culture of financial responsibility within SMEs. Through the audit process, SMEs can strengthen internal controls, monitor compliance with financial regulations, and ensure that project outcomes align with organizational financial goals. Additionally, the integration of audit findings into future financial strategies enables SMEs to continuously improve their profitability, mitigate risks, and enhance overall financial stability. Despite the clear advantages, challenges such as resource constraints, data management issues, and limited audit expertise can hinder the adoption of post-project audits in SMEs. The review offers practical recommendations to address these challenges, advocating for the use of scalable audit frameworks, digital tools, and ongoing staff training to support effective auditing practices. Ultimately, post-project financial auditing represents a vital mechanism for driving continuous improvement and ensuring the financial resilience of SMEs in an increasingly competitive marketplace.

Development of Green Finance and Sustainable Investment: A Case Study of the Issuance and Operation of SF Holdings' Green Bond Financing Project

Development of Green Finance and Sustainable Investment: A Case Study of the Issuance and Operation of SF Holdings' Green Bond Financing Project