Risk Management in Transport PPP Projects
In the Islamic Countries
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work on PPPs in the United Arab Emirates, Alhashemi et al. (2010) identify political support as
the main factor determining the success of PPPs2 .
In PPPs, a balanced risk allocation is challenged by the difficulty to combine public
socioeconomic and private financial objectives: private operators driven by profit may focus on
minimizing construction and operating costs, more than on the delivery of a high-quality service
(Carbonaro et al., 2017). In this regard, the political attitude towards the role of the private
sector in the provision of infrastructures and services of public interest shapes the context in
which PPPs and risk management processes are embedded. The policy and strategic framework,
in fact, affect risk exposure and risk governance throughout the project cycle.
At an upstream phase, the decision to use PPPs in the transport sector should stem from a
politically supported strategic approach developed on the basis of a sectoral transport policy
and the identification of priority interventions. In turn, such approach requires an in-depth
analysis of the relationship between the transport sector and economic growth and
competitiveness of the host economy.
Political stability ensures the reliability of context conditions for PPPs and minimizes
uncertainty. From an analytical perspective, reliability is weakened if no common vision on PPPs
is in place between the government and the opposition, which increases the risk of different
investment preferences of alternating governments and may reflect a broader split on the
subject in public opinion. In this regard, an ongoing communication and consultation process
with stakeholders and the general public facilitates the development of PPPs if correctly carried
out. On one hand, it can inform the public about the investment’s rationale; on the other hand,
by systematically collecting feedback, it allows to foresee possible hostility against the project
and take timely measures in order to ensure the project’s positive performance.
In some cases, the government needs to adopt important reforms to allow private participation
in the provision of public services and encourage a PPP program, such as the privatization of
state-owned enterprises. The World Bank (2015) observed that in economies (or sectors)
dominated by state-owned enterprises, PPPs are not embraced, as there is less competition, and
regulation and oversight are unbalanced. This also shows that PPPs can be successful in one
sector and fail to gain a foothold in another because of uneven government commitment and
consequent inattention to proper regulation and oversight. For example, in China PPPs have
worked mainly in the water sector, as other infrastructure sectors remain dominated by state-
owned enterprises (The World Bank, 2015). As such, for the development of transport PPPs in
particular, sector-specific political commitment is needed, grounded on the relationship
between transport plans (generally by sector, e.g. port masterplans) and the suitability of a PPP
approach in the light of fundamental opportunities and constraints (including e.g. budgetary
constraints).
2 For further examples of creation and maintenance of political commitment and awareness on PPPs, see cases
from Guatemala, Philippines and Senegal in World Bank Independent Evaluation Group (2015), pp. 45-47.