Fiscal Risks from Early Termination of Public-Private Partnerships in Infrastructure

Public-private partnerships (PPPs) in infrastructure provision have expanded around the world since the early 1990s. Well-structured PPPs can unleash efficiency gains, but PPPs create liabilities for governments, including contingent ones. This pap...

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Main Authors: Herrera Dappe, Matias, Melecky, Martin, Turkgulu, Burak
Format: Working Paper
Language:English
Published: Washington, DC: World Bank 2022
Subjects:
Online Access:http://documents.worldbank.org/curated/en/750981647367854667/Fiscal-Risks-from-Early-Termination-of-Public-Private-Partnerships-in-Infrastructure
http://hdl.handle.net/10986/37159
id okr-10986-37159
recordtype oai_dc
spelling okr-10986-371592022-03-18T05:10:43Z Fiscal Risks from Early Termination of Public-Private Partnerships in Infrastructure Herrera Dappe, Matias Melecky, Martin Turkgulu, Burak PRIVATE PARTICIPATION IN INFRASTRUCTURE PER CAPITA GROWTH RATE JAPAN INTERNATIONAL COOPERATION AGENCY ORDINARY LEAST SQUARES REGRESSION BASELINE HAZARD FUNCTION ECONOMETRIC ESTIMATION Public-private partnerships (PPPs) in infrastructure provision have expanded around the world since the early 1990s. Well-structured PPPs can unleash efficiency gains, but PPPs create liabilities for governments, including contingent ones. This paper assesses the fiscal risks from contingent liabilities from early termination of PPPs in a sample of developing countries. It analyzes the drivers of early termination and identifies systematic contractual, institutional, and macroeconomic factors that can help predict the probability that a PPP project will be terminated early, using a flexible parametric hazard regression. Using the probability distributions from the regression analysis, it simulates scenarios of fiscal risks for governments from early termination of PPPs in the electricity and transport sectors, adopting a value-at-risk approach. The findings indicate that the rate of early terminations decreases with direct government support, greater constraints on executive power, and the award of the PPP by subnational governments; it increases with project size and macro-financial shocks. The simulations show that fiscal risks from infrastructure PPP portfolios are not negligible in some countries, reaching as high as 2.8 percent of GDP. A severe macro-financial shock substantially increases the estimates, with the value at risk the year after the shock 11–20 times larger. 2022-03-17T17:56:06Z 2022-03-17T17:56:06Z 2022-03-15 Working Paper http://documents.worldbank.org/curated/en/750981647367854667/Fiscal-Risks-from-Early-Termination-of-Public-Private-Partnerships-in-Infrastructure http://hdl.handle.net/10986/37159 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank Washington, DC: World Bank Policy Research Working Paper Publications & Research
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic PRIVATE PARTICIPATION IN INFRASTRUCTURE
PER CAPITA GROWTH RATE
JAPAN INTERNATIONAL COOPERATION AGENCY
ORDINARY LEAST SQUARES REGRESSION
BASELINE HAZARD FUNCTION
ECONOMETRIC ESTIMATION
spellingShingle PRIVATE PARTICIPATION IN INFRASTRUCTURE
PER CAPITA GROWTH RATE
JAPAN INTERNATIONAL COOPERATION AGENCY
ORDINARY LEAST SQUARES REGRESSION
BASELINE HAZARD FUNCTION
ECONOMETRIC ESTIMATION
Herrera Dappe, Matias
Melecky, Martin
Turkgulu, Burak
Fiscal Risks from Early Termination of Public-Private Partnerships in Infrastructure
description Public-private partnerships (PPPs) in infrastructure provision have expanded around the world since the early 1990s. Well-structured PPPs can unleash efficiency gains, but PPPs create liabilities for governments, including contingent ones. This paper assesses the fiscal risks from contingent liabilities from early termination of PPPs in a sample of developing countries. It analyzes the drivers of early termination and identifies systematic contractual, institutional, and macroeconomic factors that can help predict the probability that a PPP project will be terminated early, using a flexible parametric hazard regression. Using the probability distributions from the regression analysis, it simulates scenarios of fiscal risks for governments from early termination of PPPs in the electricity and transport sectors, adopting a value-at-risk approach. The findings indicate that the rate of early terminations decreases with direct government support, greater constraints on executive power, and the award of the PPP by subnational governments; it increases with project size and macro-financial shocks. The simulations show that fiscal risks from infrastructure PPP portfolios are not negligible in some countries, reaching as high as 2.8 percent of GDP. A severe macro-financial shock substantially increases the estimates, with the value at risk the year after the shock 11–20 times larger.
format Working Paper
author Herrera Dappe, Matias
Melecky, Martin
Turkgulu, Burak
author_facet Herrera Dappe, Matias
Melecky, Martin
Turkgulu, Burak
author_sort Herrera Dappe, Matias
title Fiscal Risks from Early Termination of Public-Private Partnerships in Infrastructure
title_short Fiscal Risks from Early Termination of Public-Private Partnerships in Infrastructure
title_full Fiscal Risks from Early Termination of Public-Private Partnerships in Infrastructure
title_fullStr Fiscal Risks from Early Termination of Public-Private Partnerships in Infrastructure
title_full_unstemmed Fiscal Risks from Early Termination of Public-Private Partnerships in Infrastructure
title_sort fiscal risks from early termination of public-private partnerships in infrastructure
publisher Washington, DC: World Bank
publishDate 2022
url http://documents.worldbank.org/curated/en/750981647367854667/Fiscal-Risks-from-Early-Termination-of-Public-Private-Partnerships-in-Infrastructure
http://hdl.handle.net/10986/37159
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