Public Private Partnership Infrastructure Projects Research Articles

Mitigating Financial Risks in Sustainable Public–Private Partnership Infrastructure Projects: A Quantitative Analysis

Economic recession from the coronavirus outbreak continues to have negative rippling effects on local and international financial investments in public–private partnership (PPP) projects in Ghana, a developing country. Together with poor reports on operating cash-inflows for PPP projects such as those covering schools, hospitals, railways, fishing harbors, cocoa warehouses, recreational parks and affordable housing, there is an urgent need to develop and institutionalise sustainable and robust financial risk management measures. These measures are meant to mitigate financial losses, promote sustainability practices and prolong the longevity of infrastructure developments within PPP pacts. Therefore, this study aims to assess the mitigation measures of PPP infrastructure management in Ghana. Primary data from survey questionnaires were utilised in this study, with the data obtained from PPP practitioners and experts. Data were grouped into project type, sectors and practitioners of PPP projects to aid the analysis using tools such as the Kruskal–Wallis test, the Mann–Whitney U test and factor analysis. The results demonstrate sustainable and green finance, the innovative skills and competencies of project teams, green financial risk models and inclusive cost reduction strategies as crucial to minimising financial risks in PPP project delivery. These findings have significant implications for PPP practitioners and researchers in Ghana and similar developing countries to understand and develop measures to respond to financial risks for sustainable PPP project development and future research studies.

Framework Model for Financing Sustainable Water and Sanitation Infrastructure in Zimbabwe

Financing frameworks for Public–Private Partnerships (PPPs) are lacking in developing countries. This study aims to develop a financing framework for adoption for water and sanitation PPP infrastructure projects in Zimbabwe. Using data covering a 25-year period from 1996 to 2021, Tobit econometric models are applied to the secondary data collected from both international and domestic sources. The results of this study confirm that capital market variables, bank market development, and economic affluence drive the financing of water and sanitation Public–Private Partnership infrastructure projects in Zimbabwe. It was also established that both public and private sources of finance are instrumental in financing water and sanitation PPP projects. The results inform our eventual framework model, which integrates the Public–Private Partnership (PPP) models, sources of finance for water and sanitation PPPs, and the drivers of water and sanitation PPP finance. This study recommends the application of the developed framework in the water and sanitation Public–Private Partnership infrastructure financing policy of developing countries so as to capitalise on the strengths, resources, and networks of the respective stakeholders in the PPPs.

Deciphering the difference puzzle of risk-sharing: A comparative analysis of infrastructure PPP development within China and US

Appropriate risk sharing is crucial for the successful implementation of Public-Private Partnership projects. However, under different social systems, the international community lacks a clear risk-sharing framework in Public-Private Partnership research. This study employs a multi-case study method to examine the practice of risk sharing in infrastructure Public-Private Partnership projects within China and the US, aiming to provide a clear risk management framework for Public-Private Partnership projects. The research findings reveal common elements and similar characteristics in risk-sharing practices. Contrary to the goal of transferring all risks to the private sector, both countries actually allocate risks to the party with stronger risk control capabilities or share risks between the government and the private sector. The US benefits from more mature policies and has a comprehensive Public-Private Partnership model implementation framework; in contrast, as an emerging market for Public-Private Partnership models, China's current laws and regulations need further improvement. The results of this study not only contribute to optimizing risk-sharing arrangements and improving investment efficiency of the project, but also promote the development of cross-border infrastructure projects, and provide valuable experience and insights for the sustainable development of global infrastructure.

A DYNAMIC PERFORMANCE-BASED PAYMENT MECHANISM FOR PUBLIC-PRIVATE PARTNERSHIP PROJECTS: AN INTEGRATED MODEL FOR PRINCIPAL-AGENT AND MULTI-OBJECTIVE OPTIMIZATION MODELS

Performance-based payment mechanism is one of the key issues to ensure all stakeholders’ benefits in infrastructure Public-Private Partnership (PPP) projects. However, most existing research on performance-based payment with a fixed incentive coefficient can’t play a good incentive role. This study aims to the intrinsic mechanism between the performance appraisal score and the performance-based payment structure, so as to design the dynamic performance-based payment mechanism for infrastructure PPP projects. Firstly, the multi-objective optimal method is used to calculate the unit-payment. Second, principal-agent theory is used to construct the performance-based payment model with a changeable incentive coefficient. The findings of this study show that, the performance-based payment mechanism can effectively motivate participants to provide high-quality and efficient services, because their remuneration directly depends on their performance. When the outcome does not meet expectations, the amount paid can be adjusted accordingly, thus ensuring the maximum protection of public resources as well as the private sector’s profits. They serve a dual purpose, on one hand, they offer insights to rectify the shortcomings in the current unsatisfactory payment structure. On the other hand, the study provides a theoretical reference for the public sector to effectively incentivize the private sector in enhancing project performance.

Fuzzy Analysis of Financial Risk Management Strategies for Sustainable Public–Private Partnership Infrastructure Projects in Ghana

Public–private partnership (PPP) is a prominent tool for sustainable infrastructure development. However, the positive contributions of PPPs toward the attainment of sustainable, climate resilience and zero-carbon infrastructure projects are hampered by poor financial risk management. This problem is more prevalent in developing countries like Ghana where private investment inflow has plummeted due to the COVID-19 recession and poor project performance. Thus, this study aims to assess the key financial risk management strategies in ensuring sustainable PPP infrastructure projects in Ghana. The study utilised primary data from PPP practitioners in Ghana solicited through survey questionnaires. Factor analysis, mean scores and fuzzy synthetic analysis are the data analysis techniques for this study. The results revealed that sustainable and green funding models, effective cost-reduction initiatives, a competent team with committed leadership and emerging technologies and regulations constitute the key strategies for managing the financial risks of sustainable PPP infrastructure projects. Although future studies must expand the scope of data gathering, the findings of the study enrich the theoretical understanding of financial risks in sustainable investments in PPP infrastructures. Relevant remedies that will aid the development of practical financial risk management guidelines are also provided in this study for PPP practitioners.

Configuration analysis of asymmetric trust between infrastructure PPP project participants

PurposeTrust is the glue that holds cooperative relationships together and often exists in an asymmetric manner. The purpose of this study is to explore how to mitigate the issue of losses or increased transaction costs caused by opportunistic behavior in a soft environment where trust asymmetry is quite common and difficult to avoid.Design/methodology/approachThis study focuses on examining asymmetric trust between the government and the private sector in public-private partnership (PPP) projects. Drawing upon both project realities and relevant literature, the primary conditional variables influencing asymmetric trust are identified. These variables encompass power perception asymmetry, information asymmetry, interaction behavior, risk perception differences and government-side control. Subsequently, through the use of a survey questionnaire, binary-matched data from both the government and the private sector are collected. The study employs fuzzy-set qualitative comparative analysis (fsQCA) to conduct a configurational analysis, aiming to investigate the causal pathways that trigger asymmetric trust.FindingsNo single conditional variable is a necessary condition for the emergence of trust asymmetry. The pathways leading to a high degree of trust asymmetry can be categorized into two types: those dominated by power perception and those involving a combination of multiple factors. Differences in power perception play a crucial role in the occurrence of high trust asymmetry, yet the influence of other conditional variables in triggering trust asymmetry should not be overlooked.Originality/valueThe findings can contribute to advancing the study of trust relationships in the field of Chinese PPP projects. Furthermore, they hold practical value in facilitating the enhancement of trust relationships between the government and the private sector.

Infrastructure financing in Africa

We explore current development and constraints on infrastructure financing in Africa. We examine how infrastructure development in African countries affects ownership and capital structure choices of private and public–private partnership infrastructure projects. Using data from 33 African countries over 17 years, our findings suggest that infrastructure projects in African countries with better infrastructure development tend to have more private investment, more long-term investment, and they tend to use more debt financing, including more commercial debt, and less equity in their capital structure. For the least developed African countries, where debt financing is scarce, equity investment is vital for infrastructure financing.

Ex ante required rates of return and related factors in Indonesian PPP infrastructure projects

PurposeThis paper delves into the ex ante rates of return demanded by the private sector in Indonesian public–private partnership (PPP) infrastructure projects and the manifold factors emanating from project attributes that can influence these rates.Design/methodology/approachThis paper analyzes feasibility studies of 37 PPP projects across different sectors. The studies were carefully selected based on relevance, completeness and validity of data. The analysis uses statistical techniques, including Levene’s tests, t-tests, ANOVA tests, Cohen’s effect size and Pearson correlations, to explore differences in cost of capital and excess returns across various attributes.FindingsBased on the statistical analysis, no significant difference exists between the excess return of 200 basis points (bps) and the equity excess return of 0 bps. This suggests that the eligibility criteria for PPP projects require an internal rate of return (IRR) equal to the weighted average cost of capital plus 200 bps or an equity IRR equal to the cost of equity. The variations in the tested variables among diverse project attributes do not exhibit statistically significant disparities, even though specific attributes display moderate to high effect sizes.Originality/valueThis paper represents one of the first attempts to examine the rates of return demanded by the private sector in the context of Indonesian PPP projects. It comprehensively explores the factors that influence these rates, drawing on insights derived from feasibility studies.

A systematic review of artificial intelligence in managing climate risks of PPP infrastructure projects

PurposeRecent United Nations Climate Change Conferences recognise extreme climate change of heatwaves, floods and droughts as threatening risks to the resilience and success of public–private partnership (PPP) infrastructure projects. Such conferences together with available project reports and empirical studies recommend project managers and practitioners to adopt smart technologies and develop robust measures to tackle climate risk exposure. Comparatively, artificial intelligence (AI) risk management tools are better to mitigate climate risk, but it has been inadequately explored in the PPP sector. Thus, this study aims to explore the tools and roles of AI in climate risk management of PPP infrastructure projects.Design/methodology/approachSystematically, this study compiles and analyses 36 peer-reviewed journal articles sourced from Scopus, Web of Science, Google Scholar and PubMed.FindingsThe results demonstrate deep learning, building information modelling, robotic automations, remote sensors and fuzzy logic as major key AI-based risk models (tools) for PPP infrastructures. The roles of AI in climate risk management of PPPs include risk detection, analysis, controls and prediction.Research limitations/implicationsFor researchers, the findings provide relevant guide for further investigations into AI and climate risks within the PPP research domain.Practical implicationsThis article highlights the AI tools in mitigating climate crisis in PPP infrastructure management.Originality/valueThis article provides strong arguments for the utilisation of AI in understanding and managing numerous challenges related to climate change in PPP infrastructure projects.

A review of circular economy models and success factors on public-private partnership infrastructure development

PurposeThe application of circular economy (CE) has received wide coverage in the built environment, including public-private partnership (PPP) infrastructure projects, in recent times. However, current studies and practical implementation of CE are largely associated with construction demolition, waste and recycling management. Few studies exist on circular models and success factors of public infrastructures developed within the PPP contracts. Thus, the main objective of this article is to identify the models and key success factors associated with CE implementation in PPP infrastructure projects.Design/methodology/approachA systematic review of the literature was undertaken in this study using forty-two (42) peer-reviewed journal articles from Scopus, Web of Science, Google Scholar and PubMed.FindingsThe results show that environmental factors, sustainable economic growth, effective stakeholder management, sufficient funding, utilization of low-carbon materials, effective supply chain and procurement strategies facilitate the implementation of CE in PPP infrastructure projects. Key CE business models are centered around the extension of project life cycle value, circular inputs and recycling and reuse of projects.Research limitations/implicationsAlthough the study presents relevant findings and gaps for further investigations, it has a limited sample size of 42 papers, which is expected to increase as CE gain more prominence in PPP infrastructure management in future.Practical implicationsThe findings are relevant for decision-making by PPP practitioners to attain the social, economic and environmental benefits of transitioning to circular infrastructure management.Originality/valueThis study contributes to articulating the key models and measures toward sustainable CE in public infrastructure development.

Asya'nın Karayla Çevrili Gelişmekte Olan Ülkeleri İçin Altyapı Finansmanı Alternatifi Olarak İslami Finans

Various infrastructure financing methods are being used worldwide, each with its own set of advantages and obstacles. Basically, the advantages and disadvantages of a financing method manifest differently depending on each country's economic system, geographical location, economic dependency, political conditions, cultures, and beliefs. Using a funding strategy in one country may be beneficial under certain situations but harmful in another. As a result, the usefulness and efficacy of financing methods should be studied in light of the countries' circumstances. The Asian Landlocked Developing Countries (LLDC), which share the same fate in terms of geographical constraints and economic reliance, are grappling with severe infrastructural gaps in all sectors. These countries have an emerging economy, are largely dependent on agriculture, have a poor management structure, are unorganised and have weak financial markets, and rely heavily on their neighbours’ transit routes to interact with the global economy. Some of these countries depend upon foreign assistance, and the lack of transparency and binding nature of this funding has had little impact on developing such countries' infrastructure. As a result, in order to finance their infrastructure projects, these countries must select the most acceptable financing option for their circumstances. The national budget constraint, inadequate local financial markets, the risk of foreign credits, and cultural and religious values in these countries are among the obstacles that contemporary financing methods present. Consequently, looking for alternative financing methods for these countries' infrastructure projects is critical. This paper intends to look at infrastructure financing methods and their challenges in Asian landlocked developing countries and evaluate Islamic finance as an alternative to conventional finance. The qualitative research method is used for this study. Furthermore, document analysis has been utilised as a data collection tool. First, the concepts of Islamic finance will be presented before moving on to the definitions and types of infrastructure. Afterwards, the conventional infrastructure financing methods, along with the shortcomings of these methods in Asian landlocked developing countries, will be discussed. Then the development of Islamic finance in Asian LLDCs will be studied. Finally, how Islamic finance addresses the challenges of conventional finance methods will be perused. The study found that the Islamic finance models, which are founded on the principle of shared income or risk sharing, can be implemented as an alternative to conventional finance in infrastructure financing. Public-private partnership (PPP) initiatives can be implemented effectively within the framework of Islamic financing concepts because the elements of the public-private partnership initiatives are congruent with Islamic finance principles. First of all, public-private partnership initiatives allow for risk sharing among project participants, including financiers. In addition, public-private partnership projects allow Islamic financiers to become project participants rather than just lenders. Following that, PPP infrastructure projects are by definition, free of speculation and gambling. Finally, project contracts are frequently well-specified and free of uncertainty. Besides this, creating financial inclusion and risk sharing in the framework of Islamic finance reduces the currency risk and the cost of financing and causes equitable distribution of wealth in society.

Factors influencing investment attraction in road infrastructure BOT projects: A comprehensive analysis in the southern key economic zone of Vietnam

Over the course of the last two decades, Vietnam has demonstrated a growing interest in public-private partnership (PPP) investments within the domain of road transport infrastructure. However, the overall success rate of these endeavors has remained constrained and, in fact, has displayed a propensity for decline. Understanding the primary determinants behind this phenomenon, particularly the internal factors within the management system, has been a perplexing and protracted process, hindering the development of viable solutions. This research employs a qualitative analysis approach, leveraging in-depth interviews conducted with 250 road traffic infrastructure PPP project managers and experts. The objective is to discern the factors that exert influence over the investment attractiveness of build-operate-transfer (BOT) projects in the vital Southern Key Economic Zone of Vietnam. Subsequently, utilizing the collated data, this study employs a quantitative methodology to measure the impact of these factors via a derived multivariate regression equation. The findings reveal the existence of five distinct groups of factors that affect the investment attractiveness of BOT projects in the Southern Key Economic Zone, classified by their respective levels of influence. These groups encompass factors relating to the role of the state, the legal framework, human resources engagement in PPP ventures, supportive financial instruments, and the allocation of risk. Notably, these outcomes align with previous research efforts, further substantiating the robustness and reliability of the findings presented within this study.

Strategies for Minimising Failure of Public-Private Partnership Infrastructure Projects in North Central Nigeria

The global adoption of the public-private partnership (PPP) concept has been driven by the growing demand for public infrastructure. However, many PPP projects have faced challenges and yielded unfavourable outcomes such as failures, delays, and concession revocations. This research paper aims to investigate the key factors influencing private investments in PPP markets in developing countries like Nigeria. The study employed an empirical questionnaire survey, collecting data from PPP experts involved in six PPP construction projects in northern Nigeria. Based on previous research, a set of 19 success factors and 21 failure factors were identified and used as the basis for quantitative data obtained. The data were analysed using the Failure Mode and Effects Analysis (FMEA) methodology. The findings of the study revealed that three critical failure factors (CFFs) played a role in the varying degrees of failure in the studied PPP projects. These factors include public sector corruption, lack of competition and transparency in procurement processes, and political interference during project implementation. On the other hand, six critical success factors (CSFs) contributed to the success of the PPP projects to different extents. These factors encompassed the availability of suitable financial markets, a favourable investment environment, appropriate risk allocation, competition in the procurement process, a comprehensive and realistic assessment of costs and benefits, and trust among stakeholders. The results of this study can serve as a valuable reference for PPP stakeholders seeking to minimize failure in the implementation of PPP infrastructure projects.

Indicators, Strategies, and Rule Settings for Sustainable Public–Private Infrastructure Partnerships: From Literature Review towards Institutional Designs

Public–private partnerships (PPPs)-driven infrastructure projects frequently disappoint in terms of sustainability outcomes. This paper substantiates this. It develops and presents an institutional design that can integrate environmental and social sustainability principles into PPP infrastructure projects (sustainable PPPs). The institutional design includes principles for the planning processes (preparation, procurement, contracting) and outcome indicators. The paper builds upon and synthesizes extant research through a literature review that employs the Preferred Reporting Items for Systematic Reviews and Meta-Analysis (PRISMA) statements. The review covers the appropriateness of the used indicators for the investigation and measurement of environmental and social sustainability policy strategies designed to enhance sustainability and institutional intercalation. About the latter, a specific lens to focus on the relationships between the institutional design characteristics (the rule settings) of planning processes and the sustainability outcomes is developed based on three variables within the institutional analysis and development (IAD) framework of Ostrom. Consequently, rule settings that enable the investigation of the institutional process preconditions for sustainable PPPs and the evaluation of the sustainability outcomes are amalgamated. Our study indicates that the IAD framework provides a useful theoretical lens to harmonize and categorize process principles to achieve the rule settings that guide involved actors towards sustainable PPPs and place lenses on the envisioned environmental and social sustainability outcomes.

Assessment of factors influencing on the success of public-private partnerships infrastructure projects in Vietnam

Assessment of factors influencing on the success of public-private partnerships infrastructure projects in Vietnam

Оценка результатов внедрения гибридных моделей развития сферы социальных услуг в регионах России

In order to overcome the uneven consumption of social services and eliminate social development imbalances, Russian regions require measures to increase the output of such services with the existing resource base. To this end, the present study built a correlation model of the output indicator and parameters of the development intensity for regions characterised by hybrid models of social services. Data on state orders to private producers of social services, data on funds allocated for investment in fixed assets, including public-private partnership infrastructure projects, and data on grant funds directed to socially-oriented non-profit organisations for the period 2013-2020 were analysed. The obtained results show that adaptive redistribution of resources within hybrid models positively correlates with the output in most regions. Thus, a unidirectional positive relationship between changes in the sum of state orders to private producers and total output is characteristic for 34 Russian regions. A positive correlation between the output of social services and public-private partnership investment is observed in 64 regions. Grant support to socially-oriented non-profit organisations positively affects the output in most regions; this impact is significant for 51 regions. Simultaneously, the possibility of obtaining government funds by private producers is crucial for ensuring the growth of the output of social services. These findings largely contradict the original goal of developing a hybrid model, which is to attract private capital to the social sector in order to reduce budget expenditures for social services. The feasibility of the hybrid model, considering the provision of private participants with government funds, should be examined directly at the regional level.

Social Dimensions in Ex-Post Evaluation of Public Private Partnership Infrastructure Projects: A Scoping Review

Although public private partnerships (PPPs) have been in existence for decades as a procurement tool for infrastructure projects, a dearth of studies on ex-post evaluation of Public Private Partnership Infrastructure Projects (PPPIPs) exists globally. Additionally, the contribution of scholars to the inclusion of social dimensions in ex-post evaluations is not fully known. Due to the existing gap, this study aimed at identifying and mapping the literature on the ex-post evaluation of PPPIPs and reviewed its contribution to the assessment of social impacts through the inclusion of social dimensions. The Arkesy and O’Malley five-stage framework was used to conduct a scoping review grounded in 27 articles focusing on the ex-post evaluation of PPPIPs. The selection of articles for review used the PRISMA framework and data were analysed through content analysis. The key findings revealed that mutual relationships existed among the theoretical foundation of the review, the themes, and identified social dimensions. Additionally, diversity was seen in the needs and interests of stakeholders, and finally, the low research output in the ex-post evaluation of PPPIPs was observed. A huge research potential has been revealed with specific focus on the social dimension of the triple bottom line concept of sustainable development to achieve PPPIPs’ social sustainability.

Credit risk in infrastructure PPP projects under the real options approach

The purpose of the paper is to provide a method to estimate the credit risk in infrastructure public–private partnership (PPP) projects by using a structural model, the Real Options approach, and the Monte Carlo simulation technique. To do that, previous models are extended under a structural framework for credit risk where the embedded options in the credit agreement such as the option to renegotiate and the option to exit are introduced as well as the uncertainty of the cash flows. In that sense, all the components of expected loss (EL) such as the probability of default, the exposure, and the recovery rate for lenders are modelled and estimated in a PPP toll road project by considering the embedded options as well as the default events. Consequently, it is found that the embedded options improve the recovery rate for lenders and their EL. Additionally, practical insights about the effects of the embedded options in the credit agreement and the probability of default are provided.

When bigger is better: Investment volume drivers in infrastructure public-private partnership projects

This research studies the factors that favour the establishment of high-investment infrastructure public-private partnership (PPP) projects. We analyse 9121 PPPs, hosted in 107 developing countries, in the period 1997–2017. We find that PPP projects adopting contractual forms in which the private party takes more risks, awarded through competitive methods and benefitting from indirect government support programmes, are characterized by a larger investment volume. A more business-friendly economy and robust institutions configure the most conducive environment to establish larger investment PPPs. Furthermore, multilateral development banks’ support of the projects relates positively to their investment volume.

Operational Risk Management of Public–Private Partnership Infrastructure Projects: A Bibliometric Literature Review

Public–private partnerships (PPPs) are widely applied in the procurement of capital infrastructure, encompassing phases such as financing, design, construction, operation, and transfer. Of these, the operational phase of PPPs is particularly critical to project success given this is when revenues are generated, and costs recouped. However, the revenue stream will be exposed to numerous risks over the relatively long period of infrastructure operation. Management of PPP operational risk is therefore critical. Despite this importance, research dedicated to PPP operational risk management remains limited. Thus, this paper addresses this deficiency by systematically reviewing related studies and proposing an operational risk management framework. A qualitative bibliometric literature review is conducted on 60 papers pertinent to operational risk management, published across 12 peer review journals. Findings reveal that the industry lacks a systematic operational risk factor list, while the impacts of risks are rarely considered when allocating operational risk factors, and moreover that the research on the selection and efficacy of operational risk management strategies remains undeveloped. This study reveals where further efforts in the research of operational risk management of PPP infrastructure projects could be more fruitfully applied.