Risk Management in Transport PPP Projects
In the Islamic Countries
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In fact feasibility studies, including Cost-Benefit Analysis and financial analyses, as well as
risk identification and analyses were performed at the preparation stage of the initiative,
however no due diligences were undertaken which could have possibly identified some of the
potential causes of the problems that determined, or in any case contributed to the failure of the
PPP. For instance, traffic risk was also appropriately identified which in line with legislation was
attributed to the SPV. However, the SPV and the contractor that was effectively selected had no
possibility to handle this risk. The World Bank accordingly recommended in their report the
performance of due diligence analysis by the government and by the International Funding
Institutions as a mitigation risk factor for the early identification and possible improvement of
the project technical and functional characteristics against its expected objectives as well as
appropriate definition and structuring of the procurement strategy and SPV composition. The
need of the project was justified by the opportunity to improve the infrastructure to support
socio-economic development, but the initiative had apparently little economic appeal. Few
bidders participated in the tendering process, that were also considered having poor experience
in PPP and in railway operations. The involvement of CFM in the concession as an equity
shareholder was supported by the consideration that having railway contractors and operators
in the same venture would represent a case of reinforcing rather than conflicting interests, as
both entities would benefit from the early completion of the works and operation of the
infrastructure. Whilst the same solution did not result in termination of other PPP contracts
implemented according to the same pattern in Mozambique, and specified that the relationship
within the shareholders in this specific project appear to have been particularly problematic,
evidences from the Beira Railway Company show that problems may occur when the public
sector is involved in a PPP as shareholder, regulator, policy maker, client and operator. Conflicts
emerged for instance during the concession period when the government had to negotiate at the
same time the licenses for coal mines through the Ministry of Mining and the tariffs for coal
transport by railway with CFM (an issue that was particularly sensible for this concession due to
the inclusion in the PPP contract agreement of a clause according to which lack of agreement on
a tariff with the coal miners might result in the termination of the contract). Accordingly, the
setup of Regulatory Authorities is one of the recommendations of the report by the World Bank.
The complete separation between the procuring authority and promoter is also endorsed as a
best strategy to allocate more appropriately risks and incentives on the public and private sides.
Whereas the public interest focusses on policy targets and on its role as client and regulator, the
private sector looks after the provision of the procured infrastructure and services. The
appropriateness of separating infrastructure management from railway operations at least in
terms of business units, was also mentioned in the report (WB, 2012).
Further to the above consideration related to the lack of capacity by the institutional setting to
fully accomplish the requirements set in the PPP law and its implementing regulation
concerning the feasibility analyses to be performed at the pre-tendering decision process,
existing studies by the World Bank also report that a comparative assessment of the PPP
solution against the conventional public procurement (i.e. Value-for-Money analysis, public
sector comparator) does not seem to be carried out by the Mozambican authorities and this type