Public Sector Finances as Determinants of Private Investment in PPP Projects – Experiences from Select Countries
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Published
May 15, 2019
Page:
1-17
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Satinder Bhatia
Indian Institute of Foreign Trade, New Delhi, India.
Abstract
Public-Private Partnership (PPP) projects have been gaining in popularity in many developing countries along with developed countries. While there has been sufficient research on private sector capacity to make the partnership successful, not much research exists on the importance of the financial health of the public sector in PPP projects. The premise of the current research is that strong public sector finances instil confidence in the private sector of governments’ ability to honour PPP commitments and that, in turn, increases the attractiveness of PPP projects. Through a number of case studies relating to government finances of Indian states and other countries, it is seen that governments which have checks and balances to issuance of guarantees and other forms of indirect support for PPP projects are actually able to attract higher levels of PPP investment.
Keywords:
PPP projects, government guarantees, contingent liabilities
Article Details
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Section
Original Research Article
References
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Wibowo A, Kochendoerfer B. Selecting BOT/PPP infrastructure projects for government guarantee portfolio under conditions of budget and risk in the Indonesian context. Journal of Construction Engineering and Manage-ment. 2010;137(7):512-522.
Bilal A. Stimulating the Bankability of PFI/PPP Infrastructures through the UK Government Guarantees: Prospects and Challenges. CIB Proceedings 2015: Going north for sustainability: Leveraging knowledge and innovation for sustainable construction and development. 2015;115.
Owolabi H. Public accountability: The case of Government Guarantee Scheme in PFI/PPP Projects. PhD, University of the West of England; 2018.
Available:http://eprints.uwe.ac.uk/34567
Rulliadi D. Guarantee Fund in Indonesian Public-Private Partnership (PPP): International Design as Domestic Innovation'; 2014.
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Schur M. Public-Private Partnership Funds: Observations from International Experience; 2016.
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Available:https://www.adb.org/sites/default/files/publication/468626/ewp-564-risk-mitigation-sovereign-
guarantees-ppps.pdf
Rhee CY, Hangyong L. Public-Private partnerships in infrastructure and macroeconomy: The experience of Korea. Performance Evaluation and Best Practice of Public-Private Partnerships. Seoul: Korea Development Institute; 2007.
Tvarnø CD. Legal, financial and governmental PPP initiatives. Management. 2016;9(7):5-17.
Grilo L, Hardcastle C, Akintoye A, Silva S, Melhado S, Edwards P. Challenges and opportunities for the Brazilian public private partnerships program. Procurement Public Private Partnerships–Opportunities and Challenges. 2005;19-31.
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Ter-Minassian T. Fiscal rules for subnational governments. OECD Journal on Budgeting. 2007;6(3):1-11.
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Available:https://www.kdevelopedia.org/mnt/idas/asset/2017/10/24/DOC/PDF/
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Nose M. Enforcing public-private partnership contract: How do fiscal institutions matter? International Monetary Fund; 2017.
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Adarkwa O, Radovic M. Investing in the Nation’s Infrastructure-the Role of Institutional Investors & Public-Private Partnerships; 2016.
Available:http://www.civildatanalytics.com/uploads/4/6/2/5/46259103/investing_in_the_
nation%E2%80%99s_infrastructure-_the_role_of_institutional_investors_&_public-private_
partnerships.pdf
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Available:https://openknowledge.worldbank.org/handle/10986/25089 License: CC BY 3.0 IGO
Economic Intelligence Unit (EIU). Evaluating the Environment for Public-Private Partnerships in Eastern Europe, Central Asia and the Southern and Eastern Mediterranean. London; 2017.
Available:https://infrascope.eiu.com/wp-content/uploads/2017/05/Infrascope-2017_EECA-SEMED_Final_5-
May.pdf
Cheung E, Chan AP, Kajewski S. Enhancing value for money in public private partnership projects: Findings from a survey conducted in Hong Kong and Australia compared to findings from previous research in the UK. Journal of Financial Management of Property and Construction. 2009;14(1):7-20.
Delmon J. Private sector investment in infrastructure: Project finance, PPP projects and PPP frameworks. Kluwer Law International BV; 2015.
Das DTC, Sikidar S. Public private participation (Ppp) In India-Its operational mechanism and challenges ahead. Challenges in Implementing Public Private Partnership (PPP) in Malaysia.
Mahalingam A, Kapur V. Institutional capacity and governance for PPP projects in India. In Lead 2009 Conference, South Lake Tahoe, CA, USA; 2009.
Pratap KV, Sethi M. Infrastructure financing in India—Trends, Challenges and Way Forward. In 20 Years of G20. Springer, Singapore. 2019;183-198.
Toudas K, Poutos E, Balios D. Concept, regulations and institutional issues of IPSAS: A critical review. European Journal of Business and Social Sciences. 2013;2(1):43-54.
Biondi Y, Sierra M. Accounting for pension obligations in the European Union: A case study for EPSAS and transnational budgetary supervision. In 14th International Conference on Pension, Insurance and Savings, University of Paris Dauphine and University of Berkeley, Paris. 2016;9.
Krishnan S. IFRS and IPSAS convergence in India-transnational perspectives. Doctoral Dissertation, Manchester Business School; 2016.
Senarath Yapa PW, Ukwatte S. The new public financial management (NPFM) and accrual accounting in Sri Lanka. In the Public Sector Accounting, Accountability and Auditing in Emerging Economies. Emerald Group Publishing Limited. 2015;7-50.
Moretti D. Accrual practices and reform experiences in OECD countries. Results of the 2016 OECD Accruals Survey. OECD Journal on Budgeting. 2016;16(1):9-28.
EIU, E.I.U.. Evaluating the environment for public-private partnerships in Latin America and the Caribbean: The 2010 Infrascope: A Guide to the Index and Methodology; 2010.
Farquharson E, Encinas J. The UK Treasury Infrastructure Finance Unit; 2010.
Smith AL. PPP Financing in the USA. Policy, Finance & Management for Public-Private Partnerships. 2009;198-212.
Greve C. International Public-Private Partnership Policies. Convergence in Themes from ASEAN, the European Union, IMF, OECD, the UN, and the World Bank. In Fourth International PPP symposium, New York, USA; 2015.
Available:file:///C:/Users/HP/Downloads/epec-state-guarantees-in-ppps-public%20(5).pdf
Ruiz-Nunez Fernanda, Clive Harris. The State of PPPs: Infrastructure public-private partnerships in emerging markets and developing economies 1991-2015. World Bank Group and PPIAF; 2016.
Benjamin J, Jones T. The UK’s PPPs Disaster – Lessons on Private Finance for the Rest of the World. The Jubilee Debt Campaign. The Grayston Centre, London; 2017.
Available:https://jubileedebt.org.uk/wp-content/uploads/2017/02/The-UKs-PPPs-disaster_Final-
version_02.17.pdf
Gatti S. Private financing and government support to promote long-term investments in infrastructure. Report, Organisation for Economic Cooperation and Development (OECD); 2014.
Available:https://www.oecd.org/daf/fin/private-pensions/Private-financing-and-government-support-to-
promote-LTI-in-infrastructure.pdf
Pereira Dos Santos P, Kearney MC. Multilateral development banks’ risk mitigation instruments for infrastructure investment. Inter-American Development Bank; 2018.
Available:https://publications.iadb.org/publications/english/document/Multilateral-Development-
Banks%E2%80%99-Risk-Mitigation-Instruments-for-Infrastructure-Investment.pdf
European Investment Bank (EIB). Study on Legal & Financial Frameworks in the Mediterranean Partner Countries. Luxembourg; 2011.
Available:http://www.eib.org/attachments/med/ppp-study-volume-3.pdf
Istrate E, Puentes R, Moving forward on public private partnerships: US and international experience with PPP units. Brookings-Rockefeller; 2011.
Available:https://www.brookings.edu/wp-content/uploads/2016/06/1208_transportation_istrate_
puentes.pdf
Wibowo A, Kochendoerfer B. Selecting BOT/PPP infrastructure projects for government guarantee portfolio under conditions of budget and risk in the Indonesian context. Journal of Construction Engineering and Manage-ment. 2010;137(7):512-522.
Bilal A. Stimulating the Bankability of PFI/PPP Infrastructures through the UK Government Guarantees: Prospects and Challenges. CIB Proceedings 2015: Going north for sustainability: Leveraging knowledge and innovation for sustainable construction and development. 2015;115.
Owolabi H. Public accountability: The case of Government Guarantee Scheme in PFI/PPP Projects. PhD, University of the West of England; 2018.
Available:http://eprints.uwe.ac.uk/34567
Rulliadi D. Guarantee Fund in Indonesian Public-Private Partnership (PPP): International Design as Domestic Innovation'; 2014.
Available:http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.689.1901&rep=rep1&type=pdf
Schur M. Public-Private Partnership Funds: Observations from International Experience; 2016.
Available:https://www.adb.org/sites/default/files/publication/202486/eawp-06.pdf
Aslan C, Duarte D. How do countries measure, manage, and monitor fiscal risks generated by public-private partnerships? Chile, Peru, South Africa, Turkey. The World Bank; 2014.
Available:http://documents.worldbank.org/curated/en/485861468307741430
/pdf/WPS7041.pdf
Jett A. Risk mitigation and sovereign guarantees for public–private partnerships in developing economies. Asian Development Bank. Philippines; 2018.
Available:https://www.adb.org/sites/default/files/publication/468626/ewp-564-risk-mitigation-sovereign-
guarantees-ppps.pdf
Rhee CY, Hangyong L. Public-Private partnerships in infrastructure and macroeconomy: The experience of Korea. Performance Evaluation and Best Practice of Public-Private Partnerships. Seoul: Korea Development Institute; 2007.
Tvarnø CD. Legal, financial and governmental PPP initiatives. Management. 2016;9(7):5-17.
Grilo L, Hardcastle C, Akintoye A, Silva S, Melhado S, Edwards P. Challenges and opportunities for the Brazilian public private partnerships program. Procurement Public Private Partnerships–Opportunities and Challenges. 2005;19-31.
Budina N, Polackova Brixi H. Irwin T. Public-private partnerships in the new EU member states: Managing fiscal risks. The World Bank; 2007.
Available:http://siteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1207588563500/4864698-
1207588597197/WPS114.pdf
Babatunde SO, Perera S, Zhou L, Udeaja C. Stakeholder perceptions on critical success factors for public-private partnership projects in Nigeria. Built Environment Project and Asset Management. 2016;6(1):74-91.
Ter-Minassian T. Fiscal rules for subnational governments. OECD Journal on Budgeting. 2007;6(3):1-11.
Lee H. The public-private partnerships and the Fiscal Soundness of Local Governments in Korea; 2017.
Available:https://www.kdevelopedia.org/mnt/idas/asset/2017/10/24/DOC/PDF/
04201710240148941078290.pdf
Kim JH, Kim J, Shin S, Lee SY. Public–private partnership infrastructure project: Case studies from the Republic of Korea. Institutional Arrangements and Performance (Vol. 16). Asian Development Bank. 2011;1.
Nose M. Enforcing public-private partnership contract: How do fiscal institutions matter? International Monetary Fund; 2017.
Available:https://www.worldbank.org/content/dam/Worldbank/Event/DEC/ABCDE/ABCDE-
2015/PPP_and_Investment_Nose.pdf
Adarkwa O, Radovic M. Investing in the Nation’s Infrastructure-the Role of Institutional Investors & Public-Private Partnerships; 2016.
Available:http://www.civildatanalytics.com/uploads/4/6/2/5/46259103/investing_in_the_
nation%E2%80%99s_infrastructure-_the_role_of_institutional_investors_&_public-private_
partnerships.pdf
World Bank Group. Benchmarking Public-Private Partnerships Procurement 2017. World Bank, Washington, DC. © World Bank; 2016.
Available:https://openknowledge.worldbank.org/handle/10986/25089 License: CC BY 3.0 IGO
Economic Intelligence Unit (EIU). Evaluating the Environment for Public-Private Partnerships in Eastern Europe, Central Asia and the Southern and Eastern Mediterranean. London; 2017.
Available:https://infrascope.eiu.com/wp-content/uploads/2017/05/Infrascope-2017_EECA-SEMED_Final_5-
May.pdf
Cheung E, Chan AP, Kajewski S. Enhancing value for money in public private partnership projects: Findings from a survey conducted in Hong Kong and Australia compared to findings from previous research in the UK. Journal of Financial Management of Property and Construction. 2009;14(1):7-20.
Delmon J. Private sector investment in infrastructure: Project finance, PPP projects and PPP frameworks. Kluwer Law International BV; 2015.
Das DTC, Sikidar S. Public private participation (Ppp) In India-Its operational mechanism and challenges ahead. Challenges in Implementing Public Private Partnership (PPP) in Malaysia.
Mahalingam A, Kapur V. Institutional capacity and governance for PPP projects in India. In Lead 2009 Conference, South Lake Tahoe, CA, USA; 2009.
Pratap KV, Sethi M. Infrastructure financing in India—Trends, Challenges and Way Forward. In 20 Years of G20. Springer, Singapore. 2019;183-198.
Toudas K, Poutos E, Balios D. Concept, regulations and institutional issues of IPSAS: A critical review. European Journal of Business and Social Sciences. 2013;2(1):43-54.
Biondi Y, Sierra M. Accounting for pension obligations in the European Union: A case study for EPSAS and transnational budgetary supervision. In 14th International Conference on Pension, Insurance and Savings, University of Paris Dauphine and University of Berkeley, Paris. 2016;9.
Krishnan S. IFRS and IPSAS convergence in India-transnational perspectives. Doctoral Dissertation, Manchester Business School; 2016.
Senarath Yapa PW, Ukwatte S. The new public financial management (NPFM) and accrual accounting in Sri Lanka. In the Public Sector Accounting, Accountability and Auditing in Emerging Economies. Emerald Group Publishing Limited. 2015;7-50.
Moretti D. Accrual practices and reform experiences in OECD countries. Results of the 2016 OECD Accruals Survey. OECD Journal on Budgeting. 2016;16(1):9-28.
EIU, E.I.U.. Evaluating the environment for public-private partnerships in Latin America and the Caribbean: The 2010 Infrascope: A Guide to the Index and Methodology; 2010.
Farquharson E, Encinas J. The UK Treasury Infrastructure Finance Unit; 2010.
Smith AL. PPP Financing in the USA. Policy, Finance & Management for Public-Private Partnerships. 2009;198-212.
Greve C. International Public-Private Partnership Policies. Convergence in Themes from ASEAN, the European Union, IMF, OECD, the UN, and the World Bank. In Fourth International PPP symposium, New York, USA; 2015.