Global Determinants of Stress and Risk in Public-Private Partnerships (PPP) in Infrastructure
Renato E. Reside, Jr. | March 2009
Abstract
This study analyzes the determinants of stress in public-private partnerships (PPPs) in infrastructure investment. While project failures seldom occur, there are many stresses that hinder success. One of these is broad political risk: the prerogative of government executives to make sweeping changes in investment rules or regulations—through measures such as protracted tariff freezing—that undermine a project’s market value. Broad political risk can constitute the biggest threat to project outcomes. However, this is usually only realized after other risks, such as currency risk, have materialized first. Thus, broad political risk can be controlled. The empirical analysis in this study yields a number of surprising results: (i) strong growth and rigid currency regimes heighten risk by leading to adverse selection of proponents and moral hazard in project design; (ii) many of the World Bank’s indices of governance quality lead to perverse outcomes, suggesting that new governance standards must be used to judge PPPs; and (iii) except for political risk guarantees, loans and equity from multilateral institutions have no effect on outcomes; however, political risk guarantees are rarely utilized, suggesting that they may need to be redesigned or marketed better to be more useful. The paper concludes with suggestions for policy improvements.
Citation
Renato E. Reside, Jr.. 2009. Global Determinants of Stress and Risk in Public-Private Partnerships (PPP) in Infrastructure. © Asian Development Bank. http://hdl.handle.net/11540/3721. License: CC BY 3.0 IGO.Keywords
Comprehensive Development Framework
Development Challenges
Development Planning
Millennium Development Goals
Policy Development
Program Evaluation
Performance Evaluation
Evaluation Criteria
Capital Market Development
Development Economics
Financial Sector Development
Technology Development
World Development Indicators
Evaluation Methods
Development assistance
ADB
Curriculum development
Development assistance
Development aid
Development indicators
Development potential
Development models
Project appraisal
Performance appraisal
Economic development
Economic indicators
Government programs
Economic growth
Economic policy
Industrial development
Industrial policy
Technology assessment
Economic evaluation
Economic forecast
Input output analysis
Communication in rural development
Communication in community development
Infrastructure
Central planning
Endowment of research
Partnership
Joint venture
Nation-building
Risk assessment
Economic development projects
Economic forecasting
Industrial research
Participatory monitoring and evaluation
Economic policy
Economic forecasting
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http://hdl.handle.net/11540/3721Metadata
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