Private investors will only come in on government infrastructure projects, if they are confident of earning a decent return on their investment. Especially at the early stages of PPP transactions, private partners require government financial support or guarantees to cover certain risks. Governments, for their part, want their infrastructure projects to be bankable, and they use a range of supportive instruments to achieve this.
All three countries have policy measures to promote infrastructure PPPs. The Philippines makes viability gap funding available for solicited PPP projects. Viability gap funding is also available for infrastructure PPPs in Indonesia. The Republic of Korea provides financial support to resolve financial feasibility problems that may occur in an infrastructure PPP. A construction subsidy, for example, can be given to a special purpose vehicle if the competent authority deems it necessary for maintaining user fees at a certain level.
Inadequate right-of-way acquisition processes and government budgets for land acquisition are hindering the implementation of infrastructure PPPs in Indonesia and the Philippines. Compulsory land acquisitions are controversial and take time to resolve, and the governments of both countries are taking steps to tackle this problem. In the Republic of Korea, the competent authority may, if necessary, buy land for an infrastructure PPP and let the concessionaire use it free of charge until project completion. In Indonesia, land acquisition is an obligation of the government contracting agency, and Presidential Regulation No. 30 of 2015 allows investors to prefinance land acquisition, which is later recovered by the government. In the Philippines, the Public-Private Partnership Strategic Support Fund reduces the risk of project delays or cancellations because of land acquisitions by helping the government meet the cost of these acquisitions or doing preparatory work on them. Despite these efforts, all three countries need to do more to ensure a smoother path for land acquisitions by providing efficient processes for land compensation, timelines, financing schedules, and plans and formulas for compensating landowners.
Although not exhaustive, the comparative analysis of the three countries shows that enabling legal, institutional, and policy environments are vital for the successful implementation of infrastructure PPPs. Reform efforts-to varying degrees-are being undertaken by the governments of these countries to remove obstacles to the greater participation of the private sector in infrastructure PPPs. But, going by the measures taken so far, bolder steps need to be taken in all three countries.