Public Private Partnership Infrastructure Projects Research Articles

Financing constraints of public–private partnership projects in India

PurposeThe purpose of this paper is to identify the problems faced by banks, lenders, financial institutions, public authority, developers and concessionaires in course of financing of public–private partnership (PPP) road projects. Subsequently, the reasons that contribute to these problems were analyzed to come up with recommendations for mitigation of these problems.Design/methodology/approachThe methodology adopted is based on identification of financing problems and the reasons thereof, from a systematic and critical review of literature. Financing details including problems faced and reasons behind were extracted from details of one port, one airport and one road project. Data pertaining to financing of PPP road projects have been collected for completed (five projects) as well as projects under implementation (five projects) during a time interval of four months, starting from December 2018 to March 2019. The chosen three projects for case studies were executed in airport project at Kolkata in four years, offshore container terminal at Mumbai port in six years and Tuni Ankapali road project in three years. This period attains importance, as simultaneous progressive development and innovation in the PPP mode of project execution was taking place rapidly.FindingsThe commercial banks in India dominate in providing debt to the PPP infrastructure projects, especially in the road sector. The non-banking financial companies and other intermediaries were still in their infancy then, and a corporate bond market was growing steadily, though slowly. Financing problems faced by the developers resulted in unwarranted time and cost overruns emanating from delay in land acquisition and grant of approvals, with these being the two major barriers to private sector participation. Even schedule overrun finally resulted in increased construction and financing cost.Originality/valueDemand for upgradation, building and expansion of transportation infrastructure (roads) exists to keep pace with economic development. Problems like lack of a developed market for financing, inadequate institutional capacity, lack of personnel having domain expertise and absence of exclusive legislation to govern the implementation of PPP road projects are encountered by the sponsors and developers. Delay in land acquisition and environment clearance inhibits any decisive action by the lenders and investors, as these two are integrally linked to the decisions to be taken with respect to the financing of projects. Investors and bankers are generally apprehensive of their investment getting locked in or ending up as non-performing assets. Identification and proposed mitigation of these problems may likely smoothen the rough edges for the financing of projects, resulting in smoother implementation.

Possibilities of solving social problems of African countries by means of public-private partnership

The article considers the possibilities of the public-private partnership (PPP) in solving social-economic problems of African countries. The authors analyze the features and perspectives of the PPP mechanism in Africa for solving urgent social problems primarily in the sphere of public services. PPP means state-business cooperation in the spheres that are important for the population’s living standards and has large potential for the social development. Some African counties has already recognized the high efficiency of PPP and use this method for solving such problems as lack of social infrastructure and social development, low quality of the public utilities and poverty. The authors argue that the main sphere of implementing the PPP projects in Africa is the sector of information and telecommunication (IT). The majority of PPP infrastructure projects are implemented in the power economy (especially in Morocco and Egypt). Today, the African governments expand the PPP projects to the power networks development and construction, and to the renewable energy sources exploitation. The article provides some recent examples of the PPP projects in different spheres such as the development of social infrastructure in Africa, including education, public health and maintenance of public order. Due to the global trend of the infrastructure services digitalization and extension of information accessibility, African states take steps for the creation of electronic information portals for the PPP-projects (for example, in Nigeria and Ghana - with the World Bank assistance). Moreover, there are all-regional programs introduced to support initiative projects with the electronic platforms.

An Evaluation of Barriers obstructing the Applicability of Public Private Partnership (PPP) in Infrastructure Development

Shortage in funds after the declining in oil prices since 2014, made Iraq government encourage private sector engagement in financing infrastructure projects through PPP. However, private sector reluctance was notable. Therefore, this research is conducted to assess if Iraq is a supportive environment for PPP projects development. 25 risk factors of PPP projects have been listed and organized within a questionnaire that was conducted with a participation of 98 respondents from public, private institutions and academics. Means comparison was used to rank and identify respondent agreement on assessing the level of importance of these risk factors, also nonparametric tests were used. Findings indicated that all respondents groups have agreed on ranking corruption on the top of barriers that government should deal with to ensure the success of PPP projects. Afterward scarcity of private funds came in the first place followed by insufficient public administration processes and then by the lack of legal framework followed by the delays in acquisition of land and while the lack of sovereign guarantee came at the fifth place. The perceptions of survey groups’ respondents concerning the importance of risk factors differ , where both public and academics respondents have serious concerns regarding the private sector capacity to carry out the task and the availability of private funds. On the other hand the private sector concerns the availability of government incentives to support for infrastructure PPP projects. Overall findings indicated that government must work on building a solid enabling environment before the initiation of PPP approach in Iraq.

Bundling/unbundling decision in PPP infrastructure projects – the case of Guwahati city, India

PurposeBundled mode of public–private partnership (PPP) procurement has been a widely advocated governance structure of infrastructure delivery. The purpose of this paper is to identify the various aspects of how this bundling phenomenon has to be played out in practice and examines the implications of such decisions.Design/methodology/approachA longitudinal case study with an Indian municipal solid waste (MSW) PPP project provides the necessary evidence on the identification of constructs which are deemed important in the decision making of bundling in PPP MSW projects. Transaction cost economics theory, agency theory and auction theory informed the development of theoretical constructs. The longitudinal case study used interviews, observations and documents analysis.FindingsThis study has highlighted the complexity inherent in bundling decision, arising out of the relatively scanty rationale by which stakeholders first developed. Not only they are very different from the practice, but also many assumptions are proved otherwise. Poor sectoral developments, hindrances arguably caused to innovation, increase in transaction cost and a decrease in the competition along with ex post characteristics such as unfavourable transaction attributes made bundling a too early proposition to Guwahati MSW project. This study suggests that strong liability of the bundling phenomenon was the above the rationale of typical PPP bundling benefits envisaged in the extant literature. It also shows that poor practice and decision making by immature clients would lead to project failure.Research limitations/implicationsA cognitive map emerged from the study on the failure of Guwahati project. An empirical generalisation can be attempted using multiple contrasting case studies to make the theory more acceptable.Practical implicationsThe case illustrated why naïve clients should not try PPPs in a bundled model. Accordingly, the developed framework would help the governments to create the right projects catalysing the bundling benefits and harness the full potential of private sector participation in future PPP projects.Originality/valueThe current study would be novel in advancing the theory of bundling in PPP projects. This would be of interest to academia and to industrial practice and policy.

Effect of promotion pressure and financial burden on investment in public–private partnership infrastructure projects in China

By identifying the political motives of officials and local governments, this study aims to provide a new political economic analysis framework for understanding China's incentives for investing in public–private partnership (PPP) infrastructure projects. Chinese urban panel data for the period 2013–17 were used to examine the mechanisms of promotion pressure and financial burden in relation to investments in PPP infrastructure projects. Based on our findings, the following policy recommendations are proposed: standardise the behaviour of local government officials in promoting PPP projects, establish a lifelong accountability mechanism for PPP project performance, establish a mechanism for local government debt risk assessment and prevention, and avoid the risk of local debt arising from over‐investment in PPP infrastructure projects. Moreover, a match should be formed between local economic infrastructure planning and investment plans to avoid over‐ or under‐investment.

Investigation of the challenges facing public-private partnership projects in Australia

The practice of implementing infrastructure projects through a public-private partnership (PPP) arrangement is widely employed around the world with successful outcomes. However, this practice is not without challenges related to cost, time and quality variations, which the public is forced to bear. This study aims to explore factors influencing the termination of the East West Link project in Melbourne and present time and cost variation challenges facing the Sydney Light Rail project. This paper utilizes literature, investigating the critical success factors (CSF) for PPP infrastructure projects in an international context, and other readily available data sources such as Australian government publications, the case projects’ reports, news articles, and websites as the sources of data. The data gathered from these sources was then analysed to understand the project challenges and to investigate the relationship between CSF and the challenges. Four challenges were identified, including insufficiency of the business case, political interference, non-independence of implementing organizations and insufficient risk profile identification. The findings can assist to cover the loopholes that might cause similar failures in project planning, risk management, and policy and guideline frameworks. However, efforts should be made in improving the existing policies to accommodate political interests as part of risk measures under the national PPP guidelines.

Assessment Framework for Financing Public–Private Partnership Infrastructure Projects through Asset-Backed Securitization

AbstractInstitutional investors are considered reliable sources of financing for infrastructure due to their long-term investment horizon and asset/liability matching requirement. Asset-backed secu...

Public private partnerships (PPP) in the developing world: mitigating financiers’ risks

Purpose A major challenge for foreign lenders in financing public private partnerships (PPP) infrastructure projects in an emerging market (EM) is the bankability of country-related risks. Despite existing studies on country risks in international project financing, perspectives of foreign lenders on bankability of country-specific risks in an EM is yet to be explored. Hence, using a mixed methodology approach, three private finance initiatives/PPP projects in Sub Saharan Africa (Nigeria) were used to investigate political risk, sponsor, concession and legal risks in PPP loan applications. The paper aims to discuss these issues. Design/methodology/approach The study adopted mixed methodological approach comprising focus group discussions and analysis of loan documents obtained from foreign project lenders, in addition to the questionnaire survey distributed to local and international project financiers with experiences in PPPs within Nigeria. Findings Results identified seven topmost bankability criteria for evaluating country-related risks (political risk, sponsor, concession and legal risks) in EM PPPs. In addition, a “Risk and Bankability Framework Model” was developed from the study presenting critical parameters for gaining foreign funding approval for EM’s PPP loan applications. Research limitations/implications Since the study only explored bankability of PPPs in Sub Saharan Africa with the exclusion of other geographical regions, the proposed framework model should be taken in context of EMs as a mind-map for foreign lenders and local private investors seeking to finance PPPs in an EM. Practical implications Results from the study represent critical parameters for winning foreign loan approval for PPP infrastructure projects within an EM context. Originality/value Study proposed “Risk and Bankability Framework Model” relevant for evaluating PPP loan applications at the pre-approval stage for EM PPPs.

Identification of critical success factors for public–private partnership projects

Public–private partnership (PPP) is one of the popular mechanisms for the development of infrastructure worldwide; governments across the globe are engaged in discovering a range of PPP policies and strategies for growth of infrastructure.The growth of infrastructure is imperative of the sustainable development of an economy. Therefore, it is pertinent to identify key success factors for the development of infrastructure through PPP model. The current paper aims to explore significant factors for successful execution and completion of PPP projects in infrastructure. A total of 517 employees who had hand‐on experience on PPP projects located in India were interviewed through a structured questionnaire. Exploratory factor analysis yielded 14 components as a significant factor for the success of PPP in infrastructure. This study highlights that the development of infrastructure would be rapid through PPP if government considers these factors in the implementation phase.

Belt and Road Initiative and Islamic Financing: The Case in Public Private Partnership Infrastructure Financing

China’s One Belt and One Road (OBOR) is a global trade network across Asia, Africa, Europe and Oceania. Also known as Belt and Road Initiative (BRI), OBOR is an attempt to redraw ancient Silk Road to foster global trade and economic development. Nearly 30 Muslims-majority countries are part of China’s vision of BRI. The purpose of this paper is twofold: first, to investigate how public private partnership (PPP) has been applied in BRI projects; and second, to explore how Islamic finance can fit within a PPP context. This paper proposes a framework for using Islamic finance in infrastructure PPP projects. This paper also analyses two PPP projects where Islamic finance was deployed as project financing. It is hoped that the discussed risks and outcome of the study will assist in integration of Islamic finance in infrastructure projects that will create efficiency in processes in cross-border cooperation.

A SWARA-COPRAS APPROACH TO THE ALLOCATION OF RISK IN WATER AND SEWERAGE PUBLIC–PRIVATE PARTNERSHIP PROJECTS IN MALAYSIA

In a situation of growing water demand, inadequate public funding, poor asset condition and lack of maintenance in developing countries, public-private partnerships (PPPs) play an important role in the development of infrastructure, such as water supply and sewerage services. The purpose of this study is to develop a quantitative approach to appropriate risk allocation, with attention directed to the impact of positive and negative factors in water and sewerage projects. The paper presents a hybrid SWARA-COPRAS approach to examine risk allocation, particularly for PPP water supply and sewerage projects in the context of Malaysia. In addition to PPP infrastructure projects, the approach has the potential to be adapted to other applications. The proposed method enables decision makers to utilise qualitative linguistic terms in the allocation of risk between the public and private sector, and to select the best strategy for risk allocation in a contract. Finally, 24 significant risks were identified: six risks would preferably be allocated to the public sector, while seven risks would be assigned to the private sector, and eleven risks would preferably be shared by both parties. The finding from this study can help the government of Malaysia to determine an attractive political strategy for private investors to support a PPP water and sewerage infrastructure project.

An Empirical Analysis of the Factors that Influence Infrastructure Project Financing by Banks in Select Asian Economies

A recent Asian Development Bank publication estimates the large infrastructure financing requirement in Asia for the period 2016–2030, which establishes the strong need to encourage private sector participation to meet investment requirements. This paper analyzes a critical aspect of expanding private finance to infrastructure by examining the role of bank lending to public–private partnership (PPP) projects through the project finance modality. The key empirical results suggest that project financing by banks to infrastructure PPP projects is still in its infancy in several Asian markets, and banks are guided more by macroeconomic factors and by the strength of their balance sheets. The key policy implications to unlock bank finance for infrastructure PPP projects lie in reducing macroeconomic risk factors and having well-capitalized banks. The latter assumes significance, given the higher capital requirements that banks are expected to fulfill, following the adoption of Basel III capital standards.

Development of Risk Assessment Framework for Political Risk Guarantee in Public-Private Partnership Projects

In Public-Private Partnership (PPP) projects, guarantees can be regarded as a government fiscal support. Due to its uncertainty, one of the key challenges in guarantee valuation is to define appropriate assumptions for underlying risk factors since infrastructure projects are not assets that can be explicitly linked to an observable market price. While very few governments formally measure them, it is also found that sometimes the assessment on political risk covered by the guarantees is highly subjective and ambiguous. This paper proposes a methodology that combined quantitative and qualitative approach for contingent liabilities assessment for PPP infrastructure projects with focus on political risk. It uses fuzzy sets based risk assessment that quantifies expert opinion on likelihood and impact of risk factors into an input to quantitative risk analysis. A particular developing country is chosen so that the proposed methodology can be applied according to the country and infrastructure sectors specific context.

Relationships among Value-for-Money Drivers of Public–Private Partnership Infrastructure Projects

AbstractValue-for-money (VFM) drivers and their interrelationships have large impacts on increasing the VFM of public–private partnership (PPP) projects. However, very few studies have explored the...

Development of Risk Assessment Framework for Political Risk Guarantee in Public-Private Partnership Projects

In Public-Private Partnership (PPP) projects, guarantees can be regarded as a government fiscal support. Due to its uncertainty, one of the key challenges in guarantee valuation is to define appropriate assumptions for underlying risk factors since infrastructure projects are not assets that can be explicitly linked to an observable market price. While very few governments formally measure them, it is also found that sometimes the assessment on political risk covered by the guarantees is highly subjective and ambiguous. This paper proposes a methodology that combined quantitative and qualitative approach for contingent liabilities assessment for PPP infrastructure projects with focus on political risk. It uses fuzzy sets based risk assessment that quantifies expert opinion on likelihood and impact of risk factors into an input to quantitative risk analysis. A particular developing country is chosen so that the proposed methodology can be applied according to the country and infrastructure sectors specific context.

Model for predicting the success of public–private partnership infrastructure projects in developing countries: a case of Ghana

ABSTRACTThis paper develops a practical tool for predicting public–private partnership (PPP) project success in developing countries using Ghana as example. The predictive model examines the causal relationship between CSFs and success criteria for PPP projects. First, a conceptual model for PPP projects success was proposed. Second, the theoretical model was tested by means of a questionnaire survey with experienced PPP experts. Using the regression analysis technique, a predictive model for PPP project success was developed. The regression model shows three best predictors of PPP project success in Ghana, these include; appropriate risk allocation and sharing, sound economic policy and right project identification. Various statistical tests including ANOVA, tolerance and variance inflation factor (VIF), homoscedasticity and Durbin–Watson tests confirmed the validity and goodness of fit for the model. The substantive model will enable PPP practitioners including designers, public clients and engineers in Ghana and other neighbouring developing countries particularly sub-Saharan Africa to predict the likely success of their PPP projects prior to their implementations.

FRAMEWORK FOR ASSESSING SERVICEABILITY AND SOCIO-ECONOMIC RISK ASSOCIATED WITH PPPS PROJECTS IN LIBYA

On a global scale, limited financing for the development and operation of infrastructure projects has pushed authorities to encourage private investors to enter public-private partnerships (PPPs). In this respect, procurement of infrastructure projects such as bridges, water plants, airports, and roads has been adopted through PPPs. This has also applied to the oil-rich country of Libya which experienced severe economic and political problems in the past decade. This paper presents a systematic framework for risk assessment and appraisal of PPPs infrastructure projects. This framework is capable of identifying probable adverse effects that represent key influential factors on the private sector in a socio-economic environment and related to key performance indicators (KPIs) in order to assess the operational efficiency in developing and financing infrastructure projects. This framework proposes a new integrated system that comprises of the following: fault tree, artificial neural networks, and analytical network process. The aim of this system is to ensure sustainable availability of finances that are considered essential for the development of PPPs infrastructure projects in Libya. considering different alternative funding models, it suggests a means of auditing PPPs structure to carry out improved performance for PPPs projects in Libya.

Procurement of low carbon municipal solid waste infrastructure in India through public-private partnerships

Purpose The Low carbon (LC) agenda has captured interest across governments and research communities. But such focus is not addressed so far in the operation of municipal solid waste (MSW) infrastructure in India. The purpose of this paper is to draw focus on the promotion of low carbon infrastructure by improving the procurement process of the public–private partnership (PPP) approach. Design/methodology/approach The current study employed a case study methodology. This paper develops and validates a “five-fold framework,” comprising of selection, financial, operational, standards and targets measures, for integrating LC principles in the procurement of infrastructure projects. Findings The public sector fails to understand the importance of the need to incorporate climate change mitigation strategies due to poor procurement competencies. With respect to the operationalization of the framework, funding of viability gap in operations instead of construction, allowing renegotiation clauses to cater possible future LC technological improvements and incorporating emission reduction targets at the local and national levels were highlighted. Research limitations/implications LC principles presented in this paper are not exhaustive and are verified using a single Indian PPP case. Future research endeavor can focus on the relevancy and operationalization of these principles using a more elaborate set of indicators and extend the study to other sectors and countries. Originality/value This paper seeks to act as guidelines for governments on how to create and improve LC MSW PPP infrastructure projects to facilitate simultaneous achievement of both climate change mitigation and infrastructure delivery goals. The current study could add value to the current emphasis on LC transitions by policymakers, government agencies and regulators.

Sustainable Winner Determination for Public-Private Partnership Infrastructure Projects in Multi-Attribute Reverse Auctions

Selection of a sustainable private partner (contractor) is significant to ensure the success of public-private partnership (PPP) projects. In recent years, multi-attribute reverse auctions (MARAs) are widely used in public procurement to select the desirable contractor. However, the MARA mechanism is neglected in the existing studies. The purpose of this paper is to present a MARA framework for selecting a sustainable contractor in PPP infrastructure projects, in which the MARA rules and an integrated winner determination method are involved. In particular, the sustainability considerations are incorporated in the MARA rules, which can make the potential contractors have incentives to improve their sustainable performance. Within the MARA rules, based on the trapezoidal fuzzy linguistic representation model and the classical two-additive Choquet (TAC) integral operator, a winner determination method is developed to evaluate and rank potential contractors, in which both the bid evaluation and the interrelationships among bid evaluation attributes are considered. Finally, the potential of the proposed method is shown through an illustrative case of a PPP project of a subway construction in China. The MARA framework investigated helps governments make reliable decisions in sustainable procurement and thereby facilitates successful project delivery.

Fuzzy Integral–Based Risk-Assessment Approach for Public–Private Partnership Infrastructure Projects

AbstractAdequate assessment of risk is essential to assist the stakeholders in planning for efficient risk allocation and mitigation and to ensure success in business and projects. However, it is p...