Public-private partnerships (PPPs) can provide real advantages for helping governments close infrastructure gaps and spur economic growth, especially when faced with fiscal constraints. But PPPs come with considerable risks and challenges. Delays and cancellations are a big concern in developing economies, where many countries are grappling with stringent fiscal constraints. Delays and cancellations in infrastructure projects in these countries can impose large efficiency losses, discourage private investment, and disrupt the provision of infrastructure and public services. A noticeable trend since the early 1980s has been rising tensions between contract parties in PPPs, which have caused contracts to run into difficulties or be terminated. In less-developed countries in Latin America and the Caribbean, PPP projects have simply been abandoned because either the private or public sector partner was unable to fulfill contract obligations (Ahmad et al. 2014). Indeed, breach of contract in PPP projects has become widespread globally since the 1990s, and is a major problem for attracting foreign investors to PPPs (Nose 2014).
This chapter estimates the hazard rates of PPPs in developing Asia using survival time hazard analysis. It examines project-related factors, including type of PPP; contract award method; level of government support; macroeconomic factors (growth, debt levels, and the occurrence of natural disasters); and institutional factors (whether there is a dedicated PPP unit, law and order issues, and degree of corruption, for example).
The empirical results suggest policymakers should carefully assess these factors to determine the expected efficiency gains of proposed PPP projects, because project success depends just as much on well-designed contracts as on economic and political conditions, and institutional capacity. We begin by discussing the reasons for failed PPP projects in developing countries globally, and common risks and success factors for PPP projects. We then describe the data and analytical framework for the empirical analysis, present the estimation results, and discuss the policy implications of the results focusing on developing Asia.