Project success should not be measured by a successful initial finance raising or contract signature but, given the long-term nature of the investment (Chapter 1.3), needs to reflect the long-term contract management as well. Some of the questions asked by potential investors will be about how the public authority will act in the future-for example, whether the public party will honor its contract obligations and what happens when things go wrong. A common stipulation in toll road projects is that no competing roads be built for the contract term or within a defined period, for instance. Breaking this obligation, as happened with the Don Muang Tollway in Bangkok,6 can undermine not only the commercial viability of the project but the participation of the private finance community as a whole. A broken or unmet obligation may mean that private financiers may lose interest and confidence in a given market.
The concern for private financiers is not so much that things might go wrong with the project but rather that, if they do go wrong, there is a robust and independent judiciary to bring about a fair resolution. A very good example of this is the Highway 407 ETR real toll road project in Canada (see Case Study 4: Ontario Highway 407 toll road), which led to a major dispute between the public and private parties on the interpretation of part of the contract. Despite the importance of the dispute, it has followed the legal process and has undoubtedly given confidence to future investors in the country.
Uncertainty can also come through the application of broader regulatory regimes, especially when they provide for periodic price reviews. For example, in 2009 the United Kingdom's water industries' five-year price review process was highlighted in the press for setting the targeted return for investors too low and potentially driving investors from the sector.
Seeking private-sector participation is not a substitute for developing a country's institutions. Although some lenders or investors might be prepared to take some risks for grossly inflated returns, this attitude will probably represent poor value for money and gives no platform on which to build a successful program of investment. It might work for one project but is not a sustainable approach.