Risk Management in Transport PPP Projects
In the Islamic Countries
255
6.1.1. Context related risks
Political and legal risks
Risks of this nature usually refer to different investment preferences of alternating
governments, expansionary policies raising the cost of financing, risk of expropriation, changes
in law, corruption risk and fiscal risk.
The study demonstrates that PPPs are generally considered strategic by the governments
in the investigated countries , that usually adopt the public-private partnership model based
on the combination of two or more of the following objectives:
 Implementing a project reducing the burden of the investment costs on state financial
resources;
 Designing and implementing a project in a more effective and efficient way, as PPPs are
perceived to perform better than conventional procurement projects in terms of timely
execution of the works and at cost, especially for the delivery of complex and large
infrastructure investments;
 Provide services of higher quality standards as private operators are considered capable
to deliver services to customers better than public entities;
 Acquire know-how and competences not available in the public sector and/or in the
national market.
National development and transport development plans usually refer to the strategic relevance
of adopting the PPP model for one or more of the above reasons. However, in many cases, PPP
project pipelines are not included in national plans and sector or mode specific strategies. Value-
for-Money and public sector comparator analyses appear to be in use for the assessment of the
suitability of individual projects to be developed as PPP initiatives, but a systemic appraisal of
transport investments with a selection and prioritization of projects based on their socio-
economic and financial performance does not seem to be performed. Accordingly, the
identification and selection of the projects to be developed under the PPP model is not
entirely clear and unsolicited proposals and direct negotiations are not infrequent, particularly
in those countries where few PPP projects have been implemented. This may also reflect the
lack of institutional competences in identifying projects suitable for implementation under the
PPP model, that are thus proposed by the private sector. National PPP dedicated policies are
also usually missing and national transport plans are not generally backed by transport models.
The unavailability of such strategic documents and of a pipeline of mature initiatives suitable
for PPP implementation may expose the transport sector as well as individual PPP projects to
the risk of changes in preferences of alternating governments , as well as the state and
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