Public-private Partnership Investment Research Articles

Deriving macroeconomic benefits from public–private partnerships in developing Asia

The provision of infrastructure and related services in developing Asia via public–private partnership (PPP) increased rapidly during the late 1990s. Theoretical arguments support the potential economic benefits of PPPs, but empirical evidence is thin. This paper develops a framework identifying channels through which economic gains can be derived from PPP arrangement. The framework helps derive an empirically tractable specification that examines how PPPs affect the aggregate economy. Empirical results suggest that increasing the ratio of PPP investment to GDP improves access to and quality of infrastructure services, and economic growth will potentially be higher. But this optimism is conditional, especially on the region’s efforts to further upgrade its technical and institutional capacity to handle complex PPP contracts.

A Comparative Analysis on Public Private Partnership Investment in BRICS Nations

Public Private Partnerships (PPP) have emerged as one of the major approaches for delivering infrastructure projects effectively and efficiently. In recent years it has created various success stories whether it is infrastructure sector, agriculture, education or health care sector in various countries. Various developed countries have implemented numerous projects via PPP in the development of infrastructure. Investors are now keen in investing in the developing nations like India, Brazil, Russia, China and South Africa, which is showing good track record in the last few years with respect to the trade and GDP. This paper has shown how investment and PPP projects are affecting the GDP of BRICS countries and the paper has also shown various infrastructure indicators of these five countries as well. A panel data has been taken for the analysis for last 22 years for BRICS countries and with the help of panel regression models the significant results are shown with the help of Eviews.

Government Support Programs and Private Investments in PPP Markets

ABSTRACT:Public-private partnerships (PPPs) have become an important tool for investing in and developing public infrastructure and services. However, many developing countries have failed to attract sufficient private investment from the PPP market. This article uses data from 4,484 PPP projects across 130 developing countries to investigate if and how distinct types of government support can attract more private investment. Results showed that capital, revenue, and in-kind subsidies directly provided from governments attract more private capital, while indirect supports through government guarantee policies do not. The institutional quality of a country enhances the positive relationship between direct government support and private PPP investments. Further, risk allocation plays a mediating role between government supports and private investment.

Do public-private partnerships benefit private sector? Evidence from an emerging market

PurposeWe extend the literature on Public-Private Partnerships (PPPs) to understand the benefits of these incentive-compatible contracting arrangements to the private sector firms. We argue that the unique structure of PPPs helps in mitigating information asymmetry problem that drives underinvestment in the private sector of emerging markets and thereby enhances their investment efficiency. We test this hypothesis on PPPs that occurred in India over the last one decade. MethodologyWe consider the investment-cash flow sensitivity. FindingsWe find that, compared to the matched non-PPP investments made by the private sector firms, PPP investments result in significant reduction of investment cash flow sensitivity in the post-PPP investment period. Also, in the long run, the operating performance of the private sector firms improves in the post-PPP investment period. However, these benefits are sensitive to the nature of firm, commitment level of private sector and Government concessions. Overall, our results concur with the rising popularity of PPPs. OriginalityOur paper is the first study that examines the benefits of PPP for private firms.

Teorie wyboru publicznego i wyboru społecznego a partnerstwo publiczno-prywatne w ujęciu heterodoksyjnym

The subject of this article is the interpretation of the definition of heterodox approach to public-private partnerships (PPPs) in public choice theory and in the theory of social choice. This is the part of the author’s broader research, aimed at identifying the potential convergence of selected elements from public finance theories and Islamic finance theories. PPP agreement falls into the main assumptions of both the theory of public choice and the theory of social choice. This may, therefore, provide opportunities for the transfer of selected public finances and Islamic finance to PPP investments, with the participation of international investors from different legal, economic and religious backgrounds. By creating a heterodox approach to PPPs, it is possible to achieve consistency between the main objectives of private-sector conventional investors: maximizing profitability, and the goals of Islamic investors: maximizing social well-being and profitability and the objectives of public entities: public service delivery. The article is theoretical, the basic research method was the literature studies.

Accelerating Energy Access Through Public-Private Partnership Investment in Zambia

Zambia has abundant renewable energy resources which could provide basic energy services to over 16 million Zambian citizens. Despite that only 25% of the population in Zambia have access to electricity and clean cooking facilities. This has led to a continued large scale usage of wood energy causing a strain on forestry stock. Further the country’s largest renewable energy generation potential exists through solar and hydro power. Although, Government efforts to invest in the solar and hydro energy sector has been slow, so far less than 30% of the available (6000MW) hydro potential has been harnessed and solar PV has been installed only on about 400 households, several schools and Chief’s Palaces in various parts of the country. Zambia aims to reach an electrification rate of 90% in urban and 51% in rural areas through its vision 2030. This will technically require policies and regulatory that build capacity for both public and private sector partnership with specific regard to promoting renewables energies. Therefore this paper seeks to address energy issue of access in Zambia and highlight the policy issues to harmonize the partnership of public and private sector investments in solving energy concern. This is done through an overview of the energy sector, review of the energy policies and private sector investments.

One Belt-One Road Infrastructure Investment: Motivations, Regional Imbalance and Public-Private Partnership (PPP) Models

The development of the One Belt-One Road (hereafter OBOR) initiative was swift and efficient, especially in infrastructure investment. This article discusses the motivations behind the countries participating in infrastructure investment and the current developments in OBOR projects. Considering the regional imbalance and disparities, China will still be a leading country in infrastructure investment and it is unlikely that a central governance body in charge of making universal binding decisions between the OBOR countries will be established in the near future. However, by flexibly adopting Public-Private Partnership (PPP) investment models, cooperation in the One Belt-One Road initiative will become more practical through the spreading of responsibilities, revenues, and risk between Chinese investors and local governments.

National strategic investment projects and project cycles in the Republic of Croatia

The Ministry of Economy, Entrepreneurship and Crafts (MINGPO) has presented the Act on Strategic Investment Projects of the Republic of Croatia for debate before the Parliament. The original Act was adopted in 2013 (NN 133/13) and has been amended twice. A new act has been presented in order to define, in a more concise manner, strategic investment projects and activities aiming at removing administrative obstacles for their implementation. More specifically, the aim is to shorten and accelerate the licensing procedure for public and private investment projects as well as for public-private partnership investment projects of strategic interest for the Republic of Croatia.

Deriving Macroeconomic Benefits from Public–Private Partnerships in Developing Asia

The provision of infrastructure and related services in developing Asia via public–private partnership (PPP) increased rapidly during the late 1990s. Theoretical arguments support the potential economic benefits of PPPs, but empirical evidence is thin. This paper develops a framework identifying channels through which economic gains can be derived from PPP arrangement. The framework helps derive an empirically tractable specification that examines how PPPs affect the aggregate economy. Empirical results suggest that increasing the ratio of PPP investment to GDP improves access to and quality of infrastructure services, and economic growth will potentially be higher. But this optimism is conditional, especially on the region’s efforts to further upgrade its technical and institutional capacity to handle complex PPP contracts.

Public-Private Partnership in Cultural Heritage Sector

Over the past few decades public-private partnership or PPP has become a new way for delivering and fi nancing public sector projects. It may involve investment in fully economic infrastructure such as highways, railways, airports, seaports, etc. up to the investments in social infrastructure projects, such as schools, hospitals, museums and other signifi cant and historic buildings of public interest. The main objective of this article is to analyze the situation in Croatia, Poland, Slovakia and Slovenia concerning the topic of public- private partnership (PPP) in order to provide grounds for possible future investments in cultural heritage in these countries. For this purpose, a comparative analysis of legal and institutional frameworks was carried out as well as structured interviews with key stakeholders (public and private sector representatives). Special attention has been paid to the use of PPP projects in the revitalization of cultural heritage. The results of the analysis showed the lack of PPP investments in the cultural sector, and also identifi ed possible obstacles in public sector administrative procedures. The results of the analysis may be further used to stimulate both public authorities to set strategic directions for heritage revitalization plans based on PPP schemes as well as private investors who may seek feasible business models complemented with social responsibility benefits.

IMPACTS OF RISK FACTORS ON THE PERFORMANCE OF PUBLIC-PRIVATE PARTNERSHIP TRANSPORTATION PROJECTS IN VIETNAM

The rapidly increasing demand and the inefficacy of financing transportation infrastructure project investments have contributed to various challenges for Vietnam in recent decades. Since the country’s budget is inadequate for investing in all necessary infrastructure projects, the Vietnam government has been inviting other economic sectors, especially the private sector, to participate in infrastructure development. The cooperation between the government agencies and the private entities, called PublicPrivate Partnership (PPP), must encounter various challenges leading to difficulties in attracting private investors. A main reason is that private investors must deal with critical risks concerning PPP investment environment. It is a challenging task for the government to optimally manage such risks to enhance the attractiveness of PPP projects for private investors. This paper examines the critical risk factors that influence the private sector’s investment decisions on PPP transportation projects in Vietnam. Risk factors inherent in typical PPP projects were compiled by comprehensive literature review. To reflect unique characteristics of PPP projects in Vietnam, the compiled risk factors were reviewed by a group of PPP experts from both the public and private sectors in Vietnam through indepth interviews and questionnaire surveys. In addition, ten PPP project case studies in Vietnam were analyzed to derive the risk profile of PPP transportation projects of the nation. These risk factors were quantitatively assessed based on their probabilities and impact levels. We found that the critical risk factors of PPP infrastructure projects in Vietnam are acquisition/compensation problems, approvals and permits, inadequate feasibility studies, finance market issues, subjective evaluation methods, and change in laws and regulations. By performing factor analysis, these critical risk factors were grouped into four categories: (1) bidding process, (2) finance issues, (3) laws and regulations, and (4) project evaluation issues. These critical risk factors represent the obstacles that repel private investors from PPP transportation projects in Vietnam. Thus, the Vietnam government agencies should meticulously address these issues to attract both domestic and foreign private investors in PPP projects.

The Linkage between Public, Private Investment and Economic Growth—Evidence for the Developing ASEAN and Asian Countries

<p><em>This study used a quantitative method to assess the impact of public investment on private investment and economic growth based on data from 18 developing countries over a 21-year period (1995-2015) by applying PVAR model combined with GMM. The findings show that all public investment and public-private partnership investments affect private investment as well as affect economic growth but the effects vary cyclically, by time period, and by group of countries.</em></p><p><em>For the ASEAN developing countries, public investment crowds out private investment in short term and crowds in private investment in the medium and long term, but it crowds out public-private partnership investment. For the developing countries in Asia, public investment has a positive impact on economic growth with the inverted U-shaped pattern which stimulates growth in the short and medium term, but in the long-term effects of stimulation growth tend to decrease.</em></p>

The favourability of U.S. PPP enabling legislation and private investment in transportation infrastructure

The capacity of individual U.S. states to utilize public-private partnerships (PPPs) is influenced by the existence and nature of PPP enabling laws. We examine the nature of PPP enabling legislation and how it varies across states. Although commentators stress the importance of enabling laws, the relationship between the favourability of legislation and the transportation PPPs completed in each state remains unclear. We study three states where substantial PPP investment has occurred. That experience sheds light on the type of legislation required to remove obstacles to PPP investment but also the constraints remaining in each state. We uncover a relatively weak connection between enabling laws and PPP investment activity. We conclude that the existence of enabling legislation is a helpful but not necessarily sufficient condition for PPP investment.

Использование механизмов государственно-частного партнерства негосударственными пенсионными фондами Российской Федерации

The purpose of this paper is to analyze investments of Russian non-state pension funds (NSPF) into financial instruments for public-private partnership (PPP) projects. The scope of the study refers to basic models of PPP, pension resources investment models using PPP and State regulations of investment pension resources in PPP projects. The theoretical framework of research relates to the Russian normative legal acts, regulating the activities of NSPFs and PPP applications, and works of foreign and domestic organizations and scientists in PPP, NSPFs and pension resources investment areas. The results of the study can be used by NSPFs, public and private partners to attract investment, Bank of Russia for oversight functions and federal authorities responsible for infrastructure projects realization.

Getting back on track: the expanded use of PPPs in Ireland since the global financial crisis

ABSTRACTThe global financial crisis that took hold in late 2008 resulted in a major slowdown of activity in the global market for public-private partnerships (PPPs). Ireland was one of the countries most affected with over 20 major infrastructure PPP projects postponed or abandoned. Since 2012 however, the Irish government has adopted a number of initiatives to make PPP more attractive to bidders and private sources of finance. This paper describes these initiatives and shows that they have been associated with a renewal of PPP activity. It suggests that some of the adopted measures may involve trade-offs between encouraging PPP investment and achieving standard PPP objectives such as economic efficiency and better innovation. However, the attraction of public sources of finance from sources such as the European Investment Bank should result in a relatively lower cost of finance and enhance value for money if providers adopt rigorous risk management strategies.

Institutional Quality, Investment Efficiency and the Choice of Public-Private Partnerships

By using a sample of 625 Public-Private Partnership (PPP) private sector firms that covers the years from 1980 to 2015 and straddles nine countries at varying degrees of economic development and PPP markets, we find that the motivation of the firms that undertake PPP investments varies. While private sector firms in economies with low institutional quality opt for PPPs to alleviate capital constraints attributed to underinvestment, those in economies with high institutional quality opt for PPPs to solve the problem of overinvestment caused by abundant cash flow. In the long run, the benefits of lower capital constraints through PPP investments are more pronounced in the economies with high institutional quality. Hence, our paper contributes to the extant debate on the role of institutional quality by stating that the “law-finance-growth” hypothesis is more plausible than the “political tie” hypothesis for understanding why private sector firms undertake PPP investments.

Monte Carlo Simulation–Based Assessment of Risks Associated with Public–Private Partnership Investments in Toll Highway Infrastructure

The demands for delivering highway services keep growing worldwide. However, funding from government and public agencies alone cannot cover the capital needed to operate and maintain existing highway systems, much less to construct new ones. Public–private partnerships (PPPs) are an innovative funding mechanism for highway agencies to use private capital and expertise in transportation infrastructure projects so as to increase funding options to bridge the budget gap. Even though parties involved in PPPs take different roles and responsibilities, there are still risks taken or shared by the public and private sectors. In particular, assessing risks associated with the potential returns of investments is of great importance to the private and public sectors. This paper presents a methodological framework for assessing the investment risks of PPP toll highway projects, which may help decision makers. The financial viability associated with the components of a project is considered and analyzed, and the Monte Carlo simulation technique is applied to evaluate the overall project risks. Finally, a numerical case study is conducted to demonstrate the application of the proposed method. The risk analysis provides statistical distribution of investment returns for the project under analysis, which will supply decision makers with direct information to estimate the project’s overall financial risks and develop corresponding risk control measures. The risk simulation results are interpreted so that quantitative information can be provided to agencies to establish investment decision criteria.

PPPs as Innovations: Insights from Diffusion Theory

Public-private partnership (PPP) represents the cooperation between the government and the private sector for the delivery of public infrastructure and/or public utilities/services, drawing on their relative strengths, expertise and capacity of both to establish complementary relationships between them. The public and private parties function as partners throughout project development and delivery and often in operation and maintenance. PPP can be viewed as an innovation in infrastructure development/delivery. In the Indian context, PPP has witnessed tremendous growth over the lastdecade. This study analyses the growth of PPP in India for the period 1990–2012 using the logistic model for diffusion of innovations. The results of the study present some interesting insights on PPP in Indian infrastructure development as an innovation, indicating that the logistic model is appropriate for explaining the growth of infrastructure investment in India. The model provides a projection of the total market potential for the total infrastructure investment, as well as for the PPP investment and the latter was found to be 36.94% of the former. Interestingly, the adoptionrate for PPP investment was higher than that for total investment, which indicates that PPP investment is spreading relatively faster than total investment. The study proposes that diffusion models can be used tomonitor the rate of adoption and market potential of different schemes and/or programmes, for different subcategories of infrastructure development. For new schemes, the Bass (1969, Management Science, Vol. 15, No. 5, pp.227) model may be more appropriate, as the diffusion of new schemes is determined by both early adoption/innovation and imitation, while for more established and on going programmes, the innovation rate is negligible so that the result is a pure imitation process, i.e. the logistic model. Another important aspect of diffusion modelling that would be useful for policy makers is to examine the factors affecting the adoption rate and the market potential.

IMPACTS OF RISK FACTORS ON THE PERFORMANCE OF PUBLIC-PRIVATE PARTNERSHIP TRANSPORTATION PROJECTS IN VIETNAM

The rapidly increasing demand and the inefficacy of financing transportation infrastructure project investments have contributed to various challenges for Vietnam in recent decades. Since the country’s budget is inadequate for investing in all necessary infrastructure projects, the Vietnam government has been inviting other economic sectors, especially the private sector, to participate in infrastructure development. The cooperation between the government agencies and the private entities, called Public-Private Partnership (PPP), must encounter various challenges leading to difficulties in attracting private investors. A main reason is that private investors must deal with critical risks concerning PPP investment environment. It is a challenging task for the government to optimally manage such risks to enhance the attractiveness of PPP projects for private investors. This paper examines the critical risk factors that influence the private sector’s investment decisions on PPP transportation projects in Vietnam. Risk factors inherent in typical PPP projects were compiled by comprehensive literature review. To reflect unique characteristics of PPP projects in Vietnam, the compiled risk factors were reviewed by a group of PPP experts from both the public and private sectors in Vietnam through in-depth interviews and questionnaire surveys. In addition, ten PPP project case studies in Vietnam were analyzed to derive the risk profile of PPP transportation projects of the nation. These risk factors were quantitatively assessed based on their probabilities and impact levels. We found that the critical risk factors of PPP infrastructure projects in Vietnam are acquisition/compensation problems, approvals and permits, inadequate feasibility studies, finance market issues, subjective evaluation methods, and change in laws and regulations. By performing factor analysis, these critical risk factors were grouped into four categories: (1) bidding process, (2) finance issues, (3) laws and regulations, and (4) project evaluation issues. These critical risk factors represent the obstacles that repel private investors from PPP transportation projects in Vietnam. Thus, the Vietnam government agencies should meticulously address these issues to attract both domestic and foreign private investors in PPP projects.

Should Private Sector Participate in Public Private Partnerships? Evidence from China and India

In this paper, we investigate whether Public Private Partnerships (PPPs), with readily pledgable Government assets, reduce the underinvestment problems faced by private sector firms in emerging markets. We analyse investment-cash flow sensitivity and its determinants for the partnering private sector firms in China and India. We find that, PPP announcements create wealth to the partnering private sector firms in both countries. However, the nature of firm that undertakes PPP projects varies. In China, older, matured, better valued firms with high cash inflows engage in PPPs while in India, younger, higher debt burden, cash-constrained firms engage in PPPs. This indicates that underinvestment problem is more significant reason for PPP investments in India compared to China. In the long run, PPP involvement reduces investment-cash flow sensitivity in both countries’ private sector firms, however, higher reliance on Government and political connections are more beneficial in China compared to India.