Enforcing Public-Private Partnership Contract: How do Fiscal Institutions Matter?

IMF Working Papers, November 15, 2017

Source details

Canonical URL: Enforcing Public-Private Partnership Contract: How do Fiscal Institutions Matter?

PPPs have increased rapidly in emerging and developing countries, creating both opportunities and fiscal challenges.
Governments have increased commitments in guarantees and direct subsidies to promote PPPs, while contractual disputes remain high with significant costs.
Larger government financing needs are associated with a higher probability that governments offer guarantees.
Lower budget transparency is associated with a higher probability that governments offer guarantees.
Lower bureaucratic efficiency is associated with a higher probability that governments offer guarantees.
Propensity score matching results show that disputes are more common for guaranteed contracts due to:
- adverse selection effects, and
- contingent liability effects.
PPP management quality and budget transparency are key determinants for a longer survival of PPPs.

Empirical analysis conducted on about 6,000 PPP contract-level observations.
Propensity score matching used to assess the impact of guarantees on dispute incidence.

Improve budget transparency to reduce the probability that governments offer guarantees and to support longer PPP survival.
Strengthen bureaucratic efficiency to lower reliance on guarantees in PPP contracts.
Enhance PPP management quality to increase PPP project survival and reduce disputes.
Recognize and manage adverse selection and contingent liability risks when offering guarantees on PPPs.

IMF Working Paper by Manabu Nose, "Enforcing Public-Private Partnership Contract: How do Fiscal Institutions Matter?", November 15, 2017.