Unsolicited PPP Project Proposals

Unsolicited projects are widely used in emerging economies, with the Republic of Korea having one of the world's highest ratios of solicited to unsolicited projects. As of March 2015, 54.1% of 222 BTO projects started out as unsolicited project proposals, accounting for 58.2% of total investment in BTO projects. Table 8.11 shows the extent of the use of unsolicited project proposals in four emerging economies: Chile; the Republic of Korea; South Africa; and Taipei,China.

Table 8.11: Unsolicited Proposals for PPP Projects in Four Emerging Economies

PPP = public-private partnership.

Sources: J. T. Hodges and G. Dellacha. 2007. Unsolicited Infrastructure Proposals: How Some Countries Introduce Competition and Transparency. Public-Private Infrastructure Advisory Facility Working Paper No. 1. Washington DC; and authors' calculation.

Flexible and inventive project approaches are a positive side to unsolicited project proposals, and they impose less of a financial burden on ministries. Lower priority projects tend to be put forward as unsolicited proposals, as there might be fewer financial incentives for the private sector alone to implement them. Given this, governments should evaluate the importance of unsolicited proposals in terms of their national plans and priorities.

Because solicited projects take considerable time and costs to push through, unsolicited PPP proposals have been actively sought by the government in the Republic of Korea. But it still puts more effort into solicited projects because they align better to the country's national economic plan and its priorities for infrastructure. Table 8.12 shows the acceptance ratios for unsolicited PPP project proposals from 2009 to 2016. Value-for-money tests and competitive bidding processes are applied to unsolicited project proposals, and this has resulted in getting value for money from unsolicited project proposals. In this way, the government tries to secure efficiency and fiscal soundness in PPPs from unsolicited projects.

Table 8.12: Acceptance Ratio for Unsolicited PPPs in the Republic of Korea, 2009-2016

PPP = public-private partnership.

Source: Authors' calculation based on data from the Public and Private Infrastructure Investment Management Center, Republic of Korea.

The expectation that new PPP projects will continually come on stream has helped maintain private sector interest in infrastructure projects and programs in the Republic of Korea. Even so, the government still lacks the technical and financial capacities to manage projects that started out as unsolicited proposals. Because these projects can encourage innovation in the private sector, the lesson for developing Asia from the Republic of Korea's experience in dealing with unsolicited project proposals is that countries need to build this capacity in their agencies working on PPPs.