The public-private partnership (PPP) modality can enhance the cost efficiency and quality of infrastructure, delivering benefits to the public, government, and private sector. Although these benefits are widely recognized, evidence is lacking on the actual contribution PPPs make to the economy. PPP projects can deliver significant economic benefits, but only if they are well-executed and strong legal, regulatory, and institutional frameworks are in place for these partnerships. This chapter examines the economic effects of infrastructure PPPs in the Republic of Korea and, based on that experience, highlights some lessons learned for other countries in Asia looking to increase the use of PPPs to close their infrastructure gaps.
The Republic of Korea started using the PPP modality as a response to a sharp decline in public and private investment in infrastructure in the late 1990s because of the Asian financial crisis, although its importance for closing infrastructure gaps was recognized earlier in that decade. The Public-Private Partnerships in Infrastructure Act of 1994 was revised in 1998 to strengthen risk-sharing mechanisms in PPP minimum revenue guarantees and construction subsidies, and to assign more infrastructure projects for these partnerships. Since 1998, the country has carried out more than 600 PPP projects.
This engagement with PPPs has, by and large, been a success and has contributed to delivering economic and social welfare benefits. A key reason for this is the country's strong legal, regulatory, and institutional frameworks to facilitate infrastructure PPP projects. This chapter looks at how good governance and having clear options to resolve the disputes, that are often inevitable in such partnerships, have been essential to that success. The chapter also examines the factors that have been important for shaping the county's PPP landscape, including fiscal soundness, unsolicited project proposals, and the refinancing and renegotiation of PPPs.