The handshake : why do governments and firms sign private sector participation deals ? Evidence from the water and sanitation sector in developing countries

This paper uses a new dataset,"WATSAN,"of private sector participation(PSP) projects for water and sanitation in developing countries to examine the determinants of the number of projects signed for each country between 1990 and 2004. The new dataset improves on existing sources, in particular in its coverage of projects with local investors, and provides adequate data for cross-country regression analysis. The authors use a negative binomial regression model to investigate the factors influencing the number of PSP projects in a sample of 60 developing countries with 460 PSP projects. The regression results provide support for the hypotheses that PSP is greater in larger markets where the ability to pay is higher and where governments are fiscally constrained. The authors test several indicators of institutional quality and find that these are generally significant in determining the number of projects signed for each country. Measures of the protection of property rights and the quality of the bureaucracy emerge as the most important institutions that encourage PSP. Rule of law and the control of corruption are significant, albeit at a lower level, while the quality of contract law and political stability are not robustly significant.Private Participation in Infrastructure,Town Water Supply and Sanitation,Investment and Investment Climate,Infrastructure Regulation,Water Supply and Sanitation Governance and Institutions

EX ANTE CONSTRUCTION COSTS IN THE EUROPEAN ROAD SECTOR: A COMPARISON OF PUBLIC-PRIVATE PARTNERSHIPS AND TRADITIONAL PUBLIC PROCUREMENT

Theoretical literature suggests a variety of reasons why a public-private partnership (PPP)should exhibit higher costs of construction than traditionally procured public infrastructure projects. The bundling of construction and operation contracts in a PPP give the private partner greater incentives to make investments in the construction phase to lower subsequent operation and maintenance costs. Also, the transfer of the construction risk to the private partner should be explicitly priced in a PPP. We use data on ex ante construction costs of road projects in Europe to test the existence and the magnitude of any such difference between PPPs and traditional procurement. We estimate the ex ante cost of a PPP road to be, on average, 24% more expensive than a traditionally procured road, all other things equal. This estimate corresponds by and large to reported ex post cost overruns in traditionally procured public roads. To the extent that the two measures are representative, this suggests that the largest part of the ex ante construction cost difference originates from the transfer of construction risk. This, in turn, implies that other possible sources of higher PPP construction costs, including bundling, seem to be of second-order importance in the road sector. The analysis does not allow drawing normative conclusions about the desirability of PPP as a procurement method as it focuses only on one cost component in isolation, without being able to quantify its impact on life-cycle costs and benefits.Construction costs; Road sector; public-private partnership; public procurement; infrastructure projects; Europe

PUBLIC-PRIVATE PARTNERSHIPS IN EUROPE: AN UPDATE

This paper offers an updated description of the macroeconomic and sectoral significance of PPPs in Europe, without assessing PPPs from a normative perspective. It shows that, over the past fifteen years, more than one thousand PPP contracts have been signed in the EU, representing a capital value of almost 200 billion euro. While PPPs have in recent years become increasingly popular in a growing number of European countries, they are of macroeconomic and systemic significance only in the UK, Portugal, and Spain. In all other European countries, the importance of investment through PPPs remains small in comparison to traditional public procurement of investment projects. However, PPP procurement is used extensively for major projects and this is spreading out from transport into other sectors.public-private partnership; Europe

How banks price loans to public-private partnerships: evidence from the European markets

This article presents the findings of a recent analysis of the drivers of credit spreads in project finance loans to public-private partnerships, or PPPs, an increasingly popular form of procurement worldwide. PPPs are project finance transactions in which project output is a function of government policy in fields such as health, transport, and education. Because of the controversy that now surrounds the use of private finance in PPPs, understanding the determinants of the cost of debt in such highly leveraged projects is of interest to policy makers as well as originators and participants in the transactions. 2007 Morgan Stanley.

The FDI location decision: modelling conceptions of distance

We investigate how different conceptions of distance impact upon one of the fundamental decisions made by foreign investors, the choice of foreign direct investment (FDI) location within the selected host country. Most the extant literature treats alternative locations as distinct places, and implicitly assumes that the distances between these alternative locations have no impact upon the likelihood of FDI location. However, the boundaries between these locations are often quite arbitrary and defined by administrative fiat rather than political-economic reality, and proximate locations may well impact significantly upon each other's attractiveness to foreign investors. This results in a situation of spatial dependence which, if ignored, can give raise to various estimation and inference problems. The contribution of this paper is to investigate different specifications of this spatial dependence linked to various geographical, economic and administrative measures of distance