Risk Management in Transport PPP Projects
In the Islamic Countries
7
project promoters to the risk of raising the cost of financing in case of possible expansionary
policies. Finally, overlooking the overall planning and regulation of the transport system while
implementing a PPP initiative may result in inconsistent and uncoordinated policy assumptions
(e.g. in terms of tariffs, or project infrastructure surrounding network), that may subsequently
turn into financial sustainability risks for the PPP project at the operation stage. According to
the study PPP units have been established in several of the investigated countries which proved
to be beneficial at least in the identification, planning and appraisal of the PPPs, especially in
those situations where a relevant number of PPPs have been implemented.
A PPP dedicated legal framework is not in place in all the investigated countries at present.
The availability of a PPP specific legislation in those countries where a significant number of
PPPs exist can provide a standard framework for the regulation of PPP contracts. Usually
associated with the identification of a PPP dedicated institutional setting, this can help better
regulating the allocation of key responsibilities (including on the management of risks) related
to the implementation of PPP projects, including risks of expropriation. It may also partially
mitigate risks related to changes in the legislation by including provisions regulating on such
circumstances.
Among the risks under this category, fiscal risks are by far the most discussed type of risks in
the PPP literature. The most appropriate way to deal with this type of risks is represented by
identifying a responsible unit/department within the government or the authority responsible
for state budget monitoring and control (e.g. Ministry of Finance and/or Treasury)
implementing and keeping updated a PPP projects accounting database. PPPs are in fact a
solution to reduce the burden of the investment costs of a project on the state budget, however
implications concerning the possible commitment of the public sector in terms of possible
availability payments, or guarantees associated to PPPs should be closely monitored as could
have a negative impact on the state budget. Thanks to the involvement of Multilateral Agencies
and International Funding Institutions (e.g. ADB, AfDB, EIB, EBRD, EU, IMF, WB) a growing
awareness is noticed in the investigated countries about the financial and fiscal risks related to
PPP initiatives. The study seems to show that regardless the size of the country and the number
of implemented PPP initiatives, institutional and procedural measures have been adopted
by the PPP concerned institutions to improve their capacity in the management of these
risks and efforts are ongoing to further strengthen institutional competences and increase
transparency in financial and fiscal risk management practices.
In general terms the adoption of a PPP policy at the national and/or sector level, together with
the setup of a PPP dedicated institutional setting (i.e. PPP unit and/or departments within the
government, Ministry of Finance and line Ministries) and legal framework represent key
mitigation elements for most of the political and legal related risks associated with PPPs. These
solutions provide indeed for a clear identity of PPPs in the policy, institutional and legal systems
with benefits in terms of political and institutional commitment to PPPs, and overall
transparency in the identification, development, procurement and monitoring of PPPs, thus also
reducing the risk of corruption.
The analysis shows that ad hoc PPP policies, institutional settings and legal frameworks are not
in place in all countries. At the same time the analysis also suggests that having in place a