Toward Better Infrastructure

Identifying public‐private partnership (PPP) risks in managing water supply projects in Ghana

“…The financing of publicly‐owned and operated water and wastewater utilities overwhelmed the capabilities of the public sector, giving rise to lower‐than‐expected performance and low productivity by a number of public sector utilities in most countries (Coyaud, 1988; Idelovitch and Klas, 1995). In response, governments around the world turned to the private sector in the form of public‐private partnerships (PPPs) to address public water utilities' operational failures, infrastructural backlogs, and funding gaps in the provision of water supply and sanitation services, since the early 1990s (Nickson, 1996; Braadbaart, 2001; Haarmeyer and Mody, 1998; Shendy et al , 2011). In the context of this paper, a PPP in the water sector “involves transferring some or all of the “assets” or “operations” of public water systems into private hands” (Palaniappan et al , 2006).…”

“…Compared with other sectors such as telecommunications, energy/power plants and road transportation, private investment in the water sector has been modest, yet private activity continues to increase in various dimensions (Haarmeyer and Mody, 1998). While literature comparing public and private sector efficiency in developing countries remains limited, vast documentation exists on the prominent role of private involvement in several cross‐country studies and in developed nations (Shendy et al , 2011). For example, in the USA and UK water industries, Hassanein and Khalifa (2007) based on 234 cases observed better performance by the private sector than its public counterpart regarding labour productivity, tariffs imposed, and return on equity.…”

“…Overall, private participation in water services, based on case studies and statistical or econometrical analysis, have produced mixed outcomes (Marin, 2009a; Kirkpatrick et al , 2004): some improvements in quality and reliability of water services and improved coverage are reported, but cases of high unaccounted‐for‐water, high water tariffs, low water quality and lower‐than‐expected private sector performance attracting public opposition and subsequent contracts cancellation are commonplace. Moreover, despite their instrumental role in some countries, PPPs in urban water supply present a new set of challenges (collectively “risks”) for the parties involved, such as the implementation of effective regulatory frameworks by the public sector (Shendy et al , 2011). PPPs in water supply have been very controversial (Prasad, 2006; Marin, 2009a), with a large number falling short of original targets, for example the anticipated surge in private investment flows only partially materialised (Hall and Lobina, 2006).…”

Institutional Investment in Infrastructure in Emerging Markets and Developing Economies

“…Furthermore, foreign capital can bring additional risks to a project (e.g., currency risk) that can be difficult to cover, given that projects generally provide services for local markets. Shendy et al (2011) The mismatch between supply and demand of infrastructure capital is particularly significant in developing countries, where there is significant demand for investment in greenfield projects. From an economic and social development perspective, institutional investment in mature, low-risk infrastructure is not a policy goal in itself, unless the resources freed up will be rolled into new projects.…”

“…There are also other countries with similar investments in infrastructure stocks and bonds. Overall, the data is scarce on country experiences in mobilizing insurance funds for infrastructure financing in developing countries (Shendy et al, 2011). This is a field that definitely deserves more investigation and better data collection.…”