Risk Management in Transport PPP Projects
In the Islamic Countries
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dedicated PPP policy, institutional setting and/or legal framework without adequate
institutional and human resource capacities to implement the PPP policy and regulations
can be ineffective. Accordingly, due attention should be given to appropriate staffing of the
units/departments involved in PPPs and the professional skills as well as training of the human
resources. Whilst staff training supported by International Funding Institutions and
Multilateral Agencies proved to be successful , most institutions appear to have developed
competences and skills based mostly on a learning by doing approach. It is also noticed that
albeit appropriate in general terms, the implementation of such measures could be however
challenged under the cost-opportunity perspective by the limited number of PPP initiatives
implemented or expected to be implemented in a given country.
Macroeconomic risks
In several investigated countries contracts are usually signed in international currency to
mitigate risks associated with local currency and inflation. Special financial solutions and
products for SPV companies are also offered by International funding Institutions to mitigate
macroeconomic risks on a corporate or specific project basis.
Islamic finance solutions may also mitigate this type of risks. According to the study Islamic
finance was not used in the financing of the PPPs implemented so far in the investigated
countries, except than in Malaysia, that has an extensive experience in the use of Islamic finance
solutions (particularly Sukuk), and where these have been applied to infrastructure investment
projects proving to be effective.
Based on the interviews performed as part of the study further to the reliability of the public
sector and solidity of the banking sector, private investors are generally attracted by the
perspectives of the local economy and demography , as positive outlooks are likely to result
in growth of traffic and revenues.
Project risks
Financial credit risks
High potential revenue generating projects, assumed to be self-sustainable under the financing
stand point (i.e. ports terminals, airports or toll roads) are likely to see most of these risks
allocated primarily to the private sector, whereas availability payment schemes and railway PPP
projects may see the transfer of state loans contracted from International Funding
Institutions, to the SPV, under the institutional PPP model. Several examples considered in the
study follow such an approach, which is particularly effective in those contexts where the
private sector and market are generally weak or poorly developed. In order to improve the
bankability of projects loan guarantees are also provided by the state.
Design, construction and operation risks
It is a general expectation of PPPs in the investigated countries that the involvement of the
private sector brings know-how and competence to the project if not also to the public sector.
The involvement of the private sector also mitigates the risks associated with delays in the
implementation of the project and cost overruns. In general terms the analysis shows that
PPPs are effective under this point of view. PPPs usually involve a structured and multiple set of