“…The PPP model promotes the improvement of service quality (Iossa and Martimort ) but also brings about investment inefficiencies, such as long negotiation times and high transaction costs (Chan et al ). Free and competitive macroeconomic environments and sound legal systems have a positive effect on PPP investment efficiency (Mota and Moreira ); financial support policies have also promoted the investment performance of PPP projects (Garrido et al ). Reasonable risk allocation, policy support, public support, and transparent procurement procedures are important factors in the success of PPP project investment (Osei‐Kyei and Chan ).…”
By identifying the political motives of officials and local governments, this study aims to provide a new political economic analysis framework for understanding China's incentives for investing in public–private partnership (PPP) infrastructure projects. Chinese urban panel data for the period 2013–17 were used to examine the mechanisms of promotion pressure and financial burden in relation to investments in PPP infrastructure projects. Based on our findings, the following policy recommendations are proposed: standardise the behaviour of local government officials in promoting PPP projects, establish a lifelong accountability mechanism for PPP project performance, establish a mechanism for local government debt risk assessment and prevention, and avoid the risk of local debt arising from over‐investment in PPP infrastructure projects. Moreover, a match should be formed between local economic infrastructure planning and investment plans to avoid over‐ or under‐investment.
“…The PPP model promotes the improvement of service quality (Iossa and Martimort ) but also brings about investment inefficiencies, such as long negotiation times and high transaction costs (Chan et al ). Free and competitive macroeconomic environments and sound legal systems have a positive effect on PPP investment efficiency (Mota and Moreira ); financial support policies have also promoted the investment performance of PPP projects (Garrido et al ). Reasonable risk allocation, policy support, public support, and transparent procurement procedures are important factors in the success of PPP project investment (Osei‐Kyei and Chan ).…”
By identifying the political motives of officials and local governments, this study aims to provide a new political economic analysis framework for understanding China's incentives for investing in public–private partnership (PPP) infrastructure projects. Chinese urban panel data for the period 2013–17 were used to examine the mechanisms of promotion pressure and financial burden in relation to investments in PPP infrastructure projects. Based on our findings, the following policy recommendations are proposed: standardise the behaviour of local government officials in promoting PPP projects, establish a lifelong accountability mechanism for PPP project performance, establish a mechanism for local government debt risk assessment and prevention, and avoid the risk of local debt arising from over‐investment in PPP infrastructure projects. Moreover, a match should be formed between local economic infrastructure planning and investment plans to avoid over‐ or under‐investment.
“…These are related to the presence of guarantees and various forms of subsidies to PPP investors, i.e., contingent liabilities, meaning public spending that may be triggered by a future event (Cebotari et al, 2009) that are difficult to evaluate in amounts and timing. According to Mota and Moreira (2015), the way PPP extends over time may affect future generations, due to the increase in mandatory expenses and hidden debt. In particular, not only a misjudgement of the costs but also accounting regulations and public support triggered when projects fall below certain financial thresholds, affect fiscal risks and fiscal illusion.…”
Section: The Research Questions Of the Reviewmentioning
Public-Private Partnerships (PPPs) are mostly presented as a means to introduce efficient procurement methods and better value for money to taxpayers. However, the complexity of the PPP mechanism, their lack of transparency, accounting rules and implicit liabilities make it often impossible to perceive the amount of public expenditure involved and the long-run impact on taxpayers, providing room for fiscal illusion, i.e., the illusion that PPPs are much less expensive than traditional public investments. This psaper, thanks to a systematic review of the literature on the EU countries experience, tries to unveil the sources of this illusion by looking at the reasons behind the PPPs’ choice, their real costs, and the sources of fiscal risks. The literature suggests that PPPs are more costly than public funding, especially when contingent liabilities are not taken into account, and are employed as mechanisms to circumvent budgetary restrictions and to spend off-balance. The paper concludes that the public sector should share more risks with private sectors by reducing the amount of guarantees, and should prevent governments from operating through a sleight of hand that deflects attention away from off-balance financing, by applying a neutral fiscal recording system.
“…On the other side, Li, Akintoye, Edwards and Hardcastle (2005) find that the most important factors for PPPs are effective search, project feasibility, government assurances, economic conditions and financial factors. To some extent, similar classification is given in Mota and Moreira (2015) who emphasize intrinsic (economic, legal and political environment), and extrinsic (economic viability, trust, risk management and procurement) success factors. Finally, Ng, Wong and Wong (2012) state that the right mixture of adequate technical, financial/economic, social, political, legal, and other factors can assure appropriate implementation of a PPP arrangement.…”
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