Public-Private Partnerships in Highways in Transition Economies

Abstract

In many countries the private sector has been involved in financing infrastructure through concessions under a public-private partnership (PPP) program. PPP projects, however, are somewhat underutilized in countries with transition economies, where financing gaps are significant and growing, and there seems to be enormous potential for more private-sector involvement in the financing and operation of highway assets in such countries. The reasons for the low rate of private financing of roads in transition economies include relatively low traffic volumes, lack of appropriate legal frameworks, economic and political instability, and the consequently high perception of risk. As traffic increases on key roads, new legislation is enacted, and institutions and economic growth become more sustainable: it is likely that this sector of transition economies will become more attractive to private investors. This paper reviews the legal framework required for attracting private capital for PPP projects, possible steps that could allow a country to launch a PPP program for highways, the concept of greenfield and road maintenance concession programs, public-sector comparators, competitive selection of concessionaires, and the use of partial risk guarantees to mitigate risks. It also summarizes potential applications of the World Bank Toolkit for PPP in Highways as an instrument to help decision makers and practitioners screen potential PPP projects and define the best approach for a specific country.

On the Development of Public–Private Partnerships in Transitional Economies: An Explanatory Framework

“…In transition countries, despite the apparently enormous potential for private involvement in the financing and operation of hard infrastructure, the actual application of PPPs has been slow and limited. Queiroz () attributes this phenomenon to the lack of an appropriate legal framework, economic and political instability, and, consequently, high perceived risk. Some scholars have concluded that PPP development in transition countries requires rapid development in procedures, market awareness, institutional acceptance, and risk taking (Snelson ).…”

Public–private partnership projects in Greece: risk ranking and preferred risk allocation

“…identification, assessment and allocation) reports findings concerning mature PPP markets. The analysis of case studies, usually on a national level has been seen by academia and development institutions (Songer et al, 1997;Lam, 1999;Spackman, 2002;Thomas et al, 2003;de Lemos et al, 2004;Queiroz, 2005;PPIAF, 2006;Singh and Kalidindi, 2006;Ng and Loosemore, 2007 and others) as a means to assist in PPP success by presenting the most pronounced risks and best practices in risk allocation.…”

Public–private partnerships in roads and government support: trends in transition and developing economies

“…All other things being equal, this rate depends largely on the construction cost and traffic volumes (Queiroz 2007). Estimating such toll rates for different PPP projects can be largely facilitated when an appropriate financial tool is available.…”