Proceedings of the 14th Meeting of the
Transport and Communications Working Group
10
Learning from the Great Recession: a recession in a globalized economy is likely to affect the
performance of PPPs throughout the investment life-cycle. However, these events are usually
not addressed in contracts. Against this background, there is a need for preparation to face these
events and for increasing awareness about the cost of alleviating measures.
Learning by doing: the likelihood of PPP cancellation decreases rapidly with the cumulative
number of transactions within a jurisdiction. According to the literature, the cancellation risk
decreases to 5-7% after 15-20 implemented transactions. It is possible to seize benefits from
experience by building strong management capacity within the public sector.
Controversies: evidence and opinions on the merits of PPPs remain fragmented and
controversial. While risk governance represents a key component to build resilient PPP delivery
systems, inappropriate risk management implies higher costs and failure to achieve VfM. In
addition, in the assessment of a PPP, putting excessive emphasis on the element of risk transfer
may be misleading.
The growing role of Islamic finance: the Islamic financial market has been growing rapidly
across the globe (with double-digit annual growth, according to the literature). During the 2008
financial crisis, Shariah-compliant financial institutions performed better than conventional
ones. For PPP transactions, Islamic finance can be particularly suitable, as the requirements for
compliance with Shariah are generally in line with the features of PPP contractual arrangements.
Moreover, Islamic finance has revealed itself as characterized by flexible tools, which can be
used in combination with conventional finance as well.
Questions and Answers
Question: Could urbanization be identified as a further global trend relevant to the analysis?
Answer: according to the consultant, urbanization could be identified as a further global trend
that is increasingly relevant in relation to transport PPPs. This is confirmed by PPP initiatives
related to public transport across the globe. In terms of risk management, the consultant
highlighted that transport PPPs in urban contexts entail an additional layer of risk as they
involve the urban/municipal government which may not have the same experience of the
central government in managing PPP contracts. Therefore, the development of PPPs for urban
public transport calls for the enhancement of skills and competencies related to PPPs not only
at the central level but at the municipal level as well.
Question: Are transport PPPs sustainable in less developed countries where the public sector
may have to provide subsidies for the ticket cost?
Answer: According to the consultant, the provision of subsidies is an example of an issue, which
should be carefully assessed as part of the in-depth appraisal in the pre-tendering phase. As
such, no straightforward answer can be offered in relation to the sustainability of transport PPPs