Determinants of Public-Private Partnerships in Infrastructure

Abstract

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper presents an empirical analysis of the cross-country and cross-industry determinants of public-private partnership (PPP) arrangements. We find that PPPs tend to be more common in countries where governments suffer from heavy debt burdens and where aggregate demand and market size are large. Our findings also suggest that macroeconomic stability is essential for PPPs. We provide evidence on the importance of institutional quality,where less corruption and effective rule of law are associated with more PPP projects. PPPs are also more prevalent in countries with previous PPP experiences. At the industry level, we find that PPP determinants vary across industries depending on the nature of public infrastructure, capital intensity, and technology required. We also find that private participation in PPP projects depends on the expected marketability, the technology required, and the degree of "impurity" of the goods or services. JEL Classification Numbers: H49, H54, G31, G38

Factors Affecting Local Governments’ Public–Private Partnership Adoption in Urban China

“…Some studies have examined the key factors that influence PPP development from the macro-economic perspective [6]. Yehoue et al [16] found that countries with heavy debt burdens, a large market size, or a high institutional quality tend to encourage PPP development. Albalate et al [17] found that private sector is more willing to participate in PPP in the regions with higher possibility of recovering investment costs.…”

“…Firstly, infrastructure shortage refers to the gap between the aggregate demand and the stock supply of infrastructure. The aggregate demand for infrastructure was measured by per capita GDP (GDPPC) and the growth rate of annual per capita GDP (D_GDPPC) [16]. Per capita GDP reflects the level of economic development.…”

Private Participation in Infrastructure: The Nigerian Experience

“…The objective was for the provision of public capital assets and support services by a private sector consortium in exchange for a stream of (unitary) payments over the life of the contract. Overtime, it became the principal methods for procuring long-term public sector capital projects and delivering associated services in the face of the global financial crisis (HM Treasury, 1997;Broadbent & Laughlin, 2005;Grimsey & Lewis, 2005;Khadaroo, 2005 This support the findings of Hammami et al (2006) that PPPs tend to be more common in countries whose governments suffer from heavy debt burdens, where aggregate demand is sizable, and where markets are large enough to allow for cost recovery. They concluded that macroeconomic stability is essential for PPPs because partnerships are more common in countries with low inflation.…”

Governing Public-Private Partnerships: The Problem of Low-Cost Decisions

“…If a government is in financial difficulties, then the instrument of a PPP may offer a promising solution. The capital from private partners can make feasible infrastructure projects for which there is not enough public money available (Welch, 2006;Hammami et al, 2006). Moreover, consulting firms frequently report that PPP arrangements in many sectors can be expected to be more cost-efficient (i.e., cheaper) than conventional public procurement (see, e.g., PWC, 2005;Deloitte, 2006;Ernst & Young, 2007;KPMG, 2009).…”