Risk Management in Transport PPP Projects
In the Islamic Countries
11
set tariffs that are project specific and defined with a limited focus on the project financial
planning, but this may induce fragmentation and inefficiencies in the transport systems
(especially in urban areas), whereas integration is a key principle to achieve efficiency and
efficacy in the provision of transport services. This may result in political and legal risks as
well as financial sustainability risks for the project.
Especially in those countries with few or no PPP experiences, the authorities should consider
the adoption of a PPP policy and sensibilization initiatives targeted to the managers of the
relevant public institutions involved in the procurement and management of public
infrastructure and services. This will raise awareness on the applicability of the PPP model and
the implications of its adoption for infrastructure and services procurement and operation.
These measures would represent a precondition for the subsequent adoption of institutional
reforms and eventually a PPP dedicated regulatory framework.
Institutional and organizational measures
A unit/department within the government or within the authority responsible for state budget
monitoring and control should be identified that should be responsible for the appropriate
management of the accounting liabilities deriving from the involvement of the public sector in
PPPs. This is required to mitigate fiscal risks associated with PPPs.
Depending on the number of PPPs implemented or expected to be implemented in a country and
the existing institutional setting concerning foreign investment promotion and public
procurement, PPP units may also be set up that could be involved at least in PPP policy
definition and implementation, identification, planning, promotion and appraisal of PPPs.
Furthermore, additional PPP units/departments may be also established within the main line
Ministries involved in the planning, development, implementation and monitoring of PPP
projects in the transport sector as well as within the established Regulatory Authorities. This
might positively impact on the mitigation of political risks associated with PPPs. The active
involvement of Regulatory Authorities in the monitoring of the PPPs, especially when the PPP
institutional model is adopted, represents a mitigation factor of the risk of conflict of interest
between the public institutions involved in the PPP as procuring authorities and partners of
the PPP SPV.
In order to minimize macroeconomic and financial credit risks collaboration with
International Funding Institutions and Multilateral Agencies should be preserved and
strengthened where existing or established for project financing and bankability purposes.
Cooperationwith these institutions is also recommended to receive technical assistance support
at the stages of project planning and preparation. Such a measure would generally have a
positive effect on the management of political risks as well as technical risks related to project
design and operation as well as financial sustainability risks.
Another identified area of improvement is market competition. Due mainly to high entrance
costs in new markets, high upfront costs for project preparation and economy of scale in
operations, in some of the analyzed national markets few private payers have achieved in the
course of the years a dominant market position. In the long term this may reduce efficiency in
the provision of transport services: to avoid operation risks adequate regulations and