Hazard analysis on public-private partnership projects in developing Asia

Minsoo Lee ,Xuehui Han ,Pilipinas F. Quising ,Mai Lin Villaruel

doi:10.24294/jipd.v4i1.1165

Home - JIPD - Volume 4 - Issue 1

Submit to JIPD

Journal Browser

Volume | Year

Issue

• Current lssue

View All

News and Announcements

View All

Hazard analysis on public-private partnership projects in developing Asia

Minsoo Lee

Xuehui Han

Pilipinas F. Quising

Mai Lin Villaruel

Journal of Infrastructure Policy and Development 2020, 4(1), 1165; https://doi.org/10.24294/jipd.v4i1.1165

Submitted：12 Mar 2020

Accepted：18 Mar 2020

Published：01 Apr 2020

Download PDF(1.01M)

Cite

XML

Abstract

Developing Asia’s infrastructure gap results from both inadequate public resources and a lack of effective channels to mobilize private resources toward desired outcomes. The public-private partnership (PPP) mechanism has evolved to fill the infrastructure gap. However, PPP projects are often at risk of becoming distressed, or worst, being terminated because of the long-term nature of contracts and the many different stakeholders involved. This paper applies survival-time hazard analysis to estimate how project-related, macroeconomic, and institutional factors affect the hazard rate of the projects. Empirical results show that government’s provision of guarantees, involvement of multilateral development banks, and existence of a dedicated PPP unit are important for a project’s success. Privately initiated proposals should be regulated and undergo competitive bidding to reduce the hazard rate of the project and the corresponding burden to the government. Economic growth leads to successful project outcomes. Improved legal and institutional environment can ensure PPP success.

Keywords

References

Adejumo AO and Ahmadu AO (2016). “A study of the slope of Cox proportional hazard and Weibull models: Simulated and real life data approach,” Science World Journal, 11(3): 31–35.

AECOM Consult (2007). User Guidebook on Implementing Public-Private Partnerships for Transportation Infrastructure Projects in the United States. Arlington, Virginia: Federal Highway Administration.

Ahmad E, Bhattacharya A, Vinella A and Xiao K (2014). “Involving the private sector and PPPs in financing public investments. Some opportunities and challenges,” Asia Research Centre Working Paper 67. London, UK: Asia Research Centre.

Alano E and Lee M (2016). “Natural disaster shocks and macroeconomic growth in Asia,” ADB Economics Working Paper Series No. 503. Manila, the Philippines: Asian Development Bank. Available: https://www.adb.org/sites/default/files/publication/218461/ewp-503.pdf.

Albalate D, Bel G and Geddes RR (2015). “Do public-private partnership enabling laws increase private investment in infrastructure?” IREA Working Papers 201815. Barcelona, Spain: University of Barcelona, Research Institute of Applied Economics. Available: http://www.econ.pitt.edu/sites/default/files/Geddes.PPPlaws.pdf.

Allport R, Brown R, Glaister S and Travers T (2008). Success and Failure in Urban Transport Infrastructure Projects. London, UK: Imperial College London. Available: https://www.imperial.ac.uk/media/imperial-college/research-centres-and-groups/centre-for-transport-studies/Success-and-Failure-in-Urban-Transport-Infrastructure-Projects.pdf.

Asian Development Bank (ADB) (2008). Public-Private Partnership Handbook. Manila, the Philippines: Asian Development Bank.

———— (2017). Meeting Asia’s Infrastructure Needs. Manila, the Philippines: Asian Development Bank.

Bhattacharyay BN (2010). “Financing Asia’s infrastructure: Modes of development and integration of Asian financial markets,” ADBI Working Paper Series No. 229. Tokyo, Japan: Asian Development Bank Institute. https://doi.org/10.2139/ssrn.1654255.

Carrillo P, Robinson H, Foale P, Anumba C and Bouchlaghem D (2008). “Participation, barriers and opportunities in PFI: The United Kingdom experience,” Journal of Management in Engineering, 24(3): 138–145. https://doi.org/10.1061/(ASCE)0742-597X(2008)24:3(138).

Checherita CD (2009). A Macroeconomic Analysis of Investment Under Public-Private Partnerships and Its Policy Implications—The Case of Developing Countries. PhD dissertation, George Mason University, Fairfax, VA.

Chen C and Doloi H (2008). “BOT application in China: Driving and impeding factors,” International Journal of Project Management, 26(4): 388–398. https://doi.org/10.1016/j.ijproman.2007.07.002.

De Clerck D and Demeulemeester E (2014). “Towards a more competitive PPP procurement market: A game-theoretical analysis,” FEB Research report KBI_1408. Leuben, Germany: KU Leuven, Faculty of Economics and Business. https://doi.org/10.2139/ssrn.2464054.

Di Lodovico A (1998). Privatization and Investment Under Weak Regulatory Commitment. PhD dissertation, University of California, Berkeley, CA.

Economist Intelligence Unit (EIU) (2015). Evaluating the Environment for Public-Private Partnerships in Asia-Pacific: The 2014 Infrascope. Manila, the Philippines: Asian Development Bank. Available: http://www.adb.org/publications/evaluating-environmentppp-asia-pacific-2014-infrascope.

Galilea P and Medda F (2010). “Does the political and economic context influence the success of a transport project? An analysis of transport public-private partnerships,” Research in Transportation Economics, 30(1): 102–109. https://doi.org/10.1016/j.retrec.2010.10.011.

Hammami M, Ruhashyankiko J-F and Yehoue EB (2006). “Determinants of public-private partnerships in infrastructure,” IMF Working Paper No. 06/99. Washington, DC: International Monetary Fund. https://doi.org/10.5089/9781451863598.001.

Harris C (2003). “Private participation in infrastructure in developing countries: Trends, impacts, and policy lessons,” World Bank Working Paper 5. Washington, DC: World Bank. https://doi.org/10.1596/0-8213-5512-0.

Ismail S and Harris FA (2014). “Challenges in implementing public-private partnership (PPP) in Malaysia,” Procedia—Social and Behavioral Sciences, 164: 5–10. http://doi.org/10.1016/j.sbspro.2014.11.044.

Jamali D (2004). “Success and failure mechanisms of public-private partnerships PPPs in developing countries: Insights from the Lebanese context,” International Journal of Public Sector Management, 17(5): 414–430. https://doi.org/10.1108/09513550410546598.

Jandhyala S (2016). International Organizations and Political Risk—The Case of Multilateral Development Banks in Infrastructure Projects. Mimeo. Available: https://ppi.worldbank.org/~/media/GIAWB/PPI/Documents/Misc/The-case-of-multilateral-development-banks-by-Jandhyala2016.pdf.

Lee M, Han X, Gaspar R, and Alano E (2019). “Deriving macroeconomic benefits from public–private partnerships in developing Asia,” Journal of Infrastructure, Policy and Development, 3(1). DOI: 10.24294/jipd.v3i1.1082.

Li B, Akintoye A, Edwards PJ and Hardcastle C (2005). “The allocation of risk in PPP/PFI construction projects in the UK,” International Journal of Project Management, 23(1): 25–35. https://doi.org/10.1016/j.ijproman.2004.04.006.

Li J and Zou P (2008). “Risk identification and assessment in PPP infrastructure projects using fuzzy analytical hierarchy process and life-cycle methodology,” Australasian Journal of Construction Economics and Building, 8(1). 34–48. https://doi.org/10.5130/AJCEB.v8i1.2996.

Maktabi T (2014). Reducing Risks in Public-Private Partnerships. Master’s thesis, The Sanford School of Public Policy, Duke University, Durham, NC.

Miguel E, Satyanath S and Sergenti E (2004). “Economic shocks and civil conflict: An instrumental variables approach,” Journal of Political Economy, 112(4): 725–753. https://doi.org/10.1086/421174.

Moszoro M, Araya G, Ruiz-Nuñez F and Schwartz J (2014). “Institutional and political determinants of private participation in infrastructure,” International Transport Forum Discussion Paper No. 2014/15. Paris, France: OECD Publishing. https://doi.org/10.1787/5jrw2xzj0m7l-en.

Ng A and Loosemore M (2006). “Risk allocation in the private provision of public infrastructure,” International Journal of Project Management, 25(1): 66–76. https://doi.org/10.1016/j.ijproman.2006.06.005.

Nijkamp P, Van der Burch M and Vidigni G (2002). “A comparative institutional evaluation of public-private partnerships in Dutch urban land-use and revitalization projects,” Urban Studies, 39(10): 1865–1880. https://doi.org/10.1080/0042098022000002993.

Nose M (2014). “Triggers of contract breach: Contract design, shocks, or institutions?” World Bank Policy Research Working Paper 6738. Washington, DC: World Bank. https://doi.org/10.1596/1813-9450-6738.

Organisation for Economic Co-operation and Development (OECD) (2012). Recommendation of the Council on Principles for Public Governance of Public-Private Partnerships. Paris, France: OECD. Available: https://www.oecd.org/governance/budgeting/PPP-Recommendation.pdf.

Pongsiri N (2002). “Regulation and public private partnerships,” The International Journal of Public Sector Management, 15(6): 487–495. https://doi.org/10.1108/09513550210439634.

PRS Group (2012). International Country Risk Guide Methodology. London, UK: PRS Group. Available: https://www.prsgroup.com/wp-content/uploads/2012/11/icrgmethodology.pdf.

Reside RE Jr (2009). “Global determinants of risk and stress in public-private partnerships (PPP) in infrastructure,” ADBI Discussion Paper No. 133 (March). Tokyo, Japan: Asian Development Bank Institute.

Reside RE Jr and Mendoza AM Jr (2010). “Determinants of outcomes of public-private partnership (PPP) in infrastructure in Asia,” UPSE Discussion Papers, 2010–2003 (March). Manila, the Philippines: University of the Philippines School of Economics.

Reyes-Tagle G and Garbacik K (2016). Policymakers’ Decisions on Public-Private Partnership Use: The Role of Institutions and Fiscal Constraints. Washington, DC: Inter-American Development Bank. https://doi.org/10.18235/0000555.

Riedl DF, Kaufmann L, Zimmermann C and Perols JL (2013). “Reducing uncertainty in supplier selection decisions: Antecedents and outcomes of procedural rationality,” Journal of Operations Management, 31(1–2): 24–36. https://doi.org/10.1016/j.jom.2012.10.003.

Rockart JF (1982). “The changing role of information system executive: A critical success factors perspective,” Sloan Management Review, 24(1): 3–13. https://doi.org/10.2307/248989.

Salzmann A and Mohamed S (1999). “Risk identification frameworks for international BOOT projects,” in Ogunlana S (Ed.), Profitable Partnering in Construction Procurement. London, UK: Routledge, 475–485.

Samii R, Van Wassenhove LN and Bhattacharya S (2002). “An innovative public-private partnership: New approach to development,” World Development, 30(6): 991–1008. https://doi.org/10.1016/S0305-750X(02)00015-3.

Scharle P (2002). “Public-private partnerships as a social game,” Innovation, 15(3): 227–252. https://doi.org/10.1080/1351161022000027630.

Shi S, Chong H-Y, Liu L and Ye X (2016). “Examining the interrelationship among critical success factors of public private partnership infrastructure projects,” Sustainability, 8(12): Article 1313. https://doi.org/10.3390/su8121313.

Soomro MA and Zhang X (2013). “Failure links between public and private sector partners in transportation public-private partnerships failures,” Journal of Traffic and Logistics Engineering, 1(2): 116–121. https://doi.org/10.12720/jtle.1.2.116-121.

Spackman M (2002). “Public-private partnerships: Lessons from the British approach,” Economic Systems, 26(3): 283–301. https://doi.org/10.1016/S0939-3625(02)00048-1.

Tah JHM, Thorpe A and McCaffer R (1993). “Contactor project risks contingency allocation using linguistic approximation,” Computing System in Engineering, 4(2–3): 281–293. https://doi.org/10.1016/0956-0521(93)90052-X.

Tiong RLK (1996). “CSFs in competitive tendering and negotiation model for BOT projects,” Journal of Construction Engineering and Management, 122(3): 205–211. https://doi.org/10.1061/(ASCE)0733-9364(1996)122:3(205)

Trebilcock M and Rosenstock M (2015). “Infrastructure public-private partnerships in the developing world: Lessons from recent experience,” The Journal of Development Studies, 51(4): 335–354. https://doi.org/10.1080/00220388.2014.959935.

World Bank. Private Participation in Infrastructure Database. Washington, DC: World Bank. Available: https://ppi.worldbank.org/data (Accessed 28 March 2017).

———— (2002). “Unsolicited proposals: Competitive solutions for private infrastructure,” Public Policy for the Private Sector, Note no. 258. Washington, DC: World Bank. Available: https://openknowledge.worldbank.org/handle/10986/11357.

———— (2007). Public-Private Partnership Units: Lessons for Their Design and Use Infrastructure. Washington, DC: World Bank.

———— (2016). The State of PPPs: Infrastructure Public-Private Partnerships in Emerging Markets and Developing Economies 1991–2015. Washington, DC: World Bank.

———— (2017). Public-Private Partnerships: Reference Guide, Version 3.0. Washington, DC: World Bank. Available: https://openknowledge.worldbank.org/handle/10986/20118.

Yun S, Jung W, Han SH, and Park H (2015). “Critical organizational success factors for public private partnership projects—A comparison of solicited and unsolicited proposals,” Journal of Civil Engineering and Management, 21(2): 131–143. https://doi.org/10.3846/13923730.2013.802715.

Zhang X (2005). “Critical success factors for public-private partnerships in infrastructure development,” Journal of Construction Engineering and Management, 131(1): 484–494. https://doi.org/10.1061/(ASCE)0733-9364(2005)131:1(3).

Zouggari M (2003). “Public-private partnership: Major hindrances to the private sector's participation in the financing and management of public infrastructures via delegated management,” International Journal of Water Resources Development, 19(2): 123–129. https://doi.org/10.1080/0790062032000089257.

Previous
article in this issue

Next
article in this issue