Can the pilot public-private partnerships project be applied in future urban rail development?

Abstract

Purpose – This purpose of this paper is to evaluate the experiences of public-private partnerships (PPPs) in China's urban rail development, investigates the critical factors impacting on the project viability and derives lessons for future urban rail PPP projects in China and elsewhere. Design/methodology/approach – A case study of the Beijing Metro Line 4 project was adopted as the main research method with semi-structured interviews with senior practitioners and experienced academics as the primary data collection instrument. Qualitative data were collected and subjected to content analysis. Findings – The case study provides six critical factors which are required to facilitate PPP urban rail development: streamlined approval process; robust tendering; strong leadership within the public procuring authority; effective organisational structure and the private sector innovation; commensurate charging approach and government subsidising scheme; and appropriate risk allocation. The research shows that the potential to directly re-apply the Beijing Metro Line 4 model to future urban rail development is limited, but lessons for future urban rail PPPs can still be drawn from the study. Practical implications – The paper serves as an illustration to public procuring authorities and potential private investors on how to structure and manage urban rail PPPs. Originality/value – The research presents an original investigation of China’s first urban rail PPP, the Beijing Metro Line 4 project and assesses the applicability of the Beijing model to future PPP projects in urban rail development.

Review of studies on the Critical Success Factors for Public–Private Partnership (PPP) projects from 1990 to 2013

“…For instance in the water sector, Meng et al (2011) investigated into the CSFs for PPP water projects in China which is of a transfer operate transfer model. Likewise other infrastructure sectors of which PPP has been implemented have their CSFs explored and these include the transportation, telecommunication, energy and housing sectors (Liu and Wilkinson, 2013; Abdul-Aziz and Kassim, 2011; Askar and Gab-Allah, 2002; Jamali, 2004;Ozdoganm and Birgonul, 2000).…”

Factors Influencing the Private Involvement in Urban Rail Public-Private Partnership Projects in China

“…Most risks related to commissioning, operation, and maintenance were transferred to the private sector, whilst the government undertook or shared risks which were beyond the control of the private sector (Roumboutsos, Liu and Wilkinson, 2013). For instance, the public sector shared the construction risk by dividing it into two parts and undertaking Part A with riskier civil works; the government also used shadow patronage, that is a means to compensate the private partner, against the risk of lower ridership than projected.…”

“…Yuan et al (2010) identified 15 driving factors associated with PPP projects in metropolitan transportation systems from the perspective of Chinese public sector; de Jong et al (2010) studies seven urban rail PPP projects in five large metropolitan areas in China; Roumboutsos, Liu and Wilkinson (2013) evaluated the experience of PPPs in China's urban rail development with the focus on critical factors impacting on the project viability based on a case study of Beijing Metro Line 4; Chang (2013) also studied the Beijing Metro Line 4 to illustrate benefits, costs, opportunities and risks in PPPs in China, and he later studied the Beijing metro financing sustainability to demonstrate how subnational governments finance the investment in metro systems (Chang, 2014).…”

“…As the private sector cannot finance an urban rail PPP project alone, the project financing was divided into two parts for this project (Chang, 2013;Roumboutsos, Liu and Wilkinson, 2013). Part A is the building of infrastructure with an estimated RMB 10.7 billion (70% of total investment), which was financed by the public sector.…”

Impact of public support mechanisms on the performance of public private partnerships : an empirical analysis of road projects in Spain

“…Kanter (1999) considers investment by both parties (public and private) essential to ensure full commitment when analysing PPP projects in the social sector. Liu and Wilkinson (2013), based on the case study of the Beijing Metro, found that government involvement through revenue subsidies would be essential to implement urban rail PPP projects that are viable from the financial standpoint. Finally, multilateral support has proven to be effective in lowering both the cancellation rate and the likelihood of distress of PPP projects (Jandhyala, 2016;Marcelo and House, 2016).…”