Towards a Principal-Agent Based Typology of Risks in Public-Private Partnerships

Posted by Luc Leruth

 

This IMF Working Paper (jointly written with André de Palma and Guillaume Prunier, two co-authors from the “Ecole Polytechnique” in France) uses the Principal-Agent framework and the theory of incentives to derive a typology of risks in public-private partnerships (PPPs or P3s). We analyze the significant increase in the demand for the provision of public services through instruments combining public and private money (such as PPPs). We describe these arrangements and discuss the implications of our approach in terms of identifying risks that are often overlooked before turning to the optimal risk-sharing between the public and private partners, in particular with respect to information asymmetries in risk perceptions. This allows us to propose a typology of risks where both internal risks (the risks associated with the contract) and external risks (those associated with the project) are considered.

Finding Credible Information About Public-Private Partnerships

Posted by Eivind Tandberg.

 

Many countries pursue public-private partnerships (PPP) as a mechanism to enhance the efficiency of public spending and to broaden the financing options for public services. For many transition and developing countries, the PPP concept is still new, and many countries do not yet have any PPP projects in operation. There is emerging awareness of the risks and potential benefits of PPPs, but countries often find it difficult to fully assess these aspects when developing PPP projects.

 

There is considerable demand for information about PPPs, and a number of information resources are available. However, much of the information is provided by entities that have strong interests in promoting PPPs, such as national PPP agencies, legal firms and financial market participants. It is often difficult to find objective and neutral information. This post suggests a few sources that contain interesting materials, but does not pertain to be exhaustive. There are obviously many other reliable and valuable sources in this sector.

World Bank—Sovereign Debt Management Forum (October 27-29, 2008)

Posted by Brian Olden

The World Bank hosted the Fourth Sovereign Debt Management Forum between October 27–29, 2008 in its Washington, D.C. headquarters. Despite the ongoing turmoil in world financial markets, the event was well attended, with representatives from over 55 advanced OECD, emerging, and low-income countries (LICs), as well as representatives from international institutions, including the IMF and the EU.

The forum was very timely, given the current market turmoil, and naturally much of the discussion centered around the impact of the crises on economies, in general, and on debt management operations, in particular.  Much of the focus was on what the role of debt managers will be in helping to mitigate the effects of the crises on economies in the short and medium-term.

Addressing Infrastructure Challenges and Managing Fiscal Risks from PPPs

Posted by Gerd Schwartz, Ana Corbacho, and Katja Funke (all IMF staff)

Governments face important challenges to upgrade public infrastructure and improve the delivery of public services. As in other regions of the world, countries in the European Union (EU) and several non-EU economies in Europe have been facing strong demands to strengthen the quality of public infrastructure to accelerate economic development and income convergence. At the same time, tight budget constraints have raised incentives to rely on private sector resources to supply infrastructure. In this context, public-private partnerships (PPPs) are being used more and more as an alternative to traditional public procurement. While this has created new business opportunities for the private sector, it has also given rise to new fiscal, macroeconomic, and reputational risks for governments.

How then should governments address these infrastructure challenges and manage associated risks? Edited by Gerd Schwartz, Ana Corbacho, and Katja Funke Public investment and Public-Private Partnerships: Addressing Infrastructure Challenges and Managing Fiscal Risks brings together the perspectives of academics, practitioners, and members of several international organizations. It is based on the proceedings from a high-level international seminar for government officials, which was organized jointly by the Fiscal Affairs Department of the IMF, the Hungarian Ministry of Finance, and the International Center for Economic Growth, European Center (ICEG-EC), and with some financial support from the European Investment Bank.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges (Video 3)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the third part of this YouTube video; parts 1 and 2 appear in other posts published today.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges ( Video 2)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the second part of this YouTube video; parts 1 and 3 appear in other posts published today.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges (Video 1)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the first part of this YouTube video; parts 2 and 3 appear in other posts published today.

Public Financial Management Reform -- Trends and Challenges

Posted by Bill Dorotinsky

On June 18, 2008, I spoke on Public Financial Management Reform: Trends at the the International Consortium on Government Financial Management (ICGFM) monthly speaker series in Washington, D.C.

I took the opportunity to share my personal views on current trends and challenges in public financial management (PFM) reform, drawing on my experience across the globe and multiple institutions. (As I noted, these are not the views of the IMF, or any other institutions with which I have been associated.)

The presentation covered three broad areas:

1. Common PFM reform recommendations, seen across all donors, consultants, etc.
2. Information on what reforms countries have been implementing in recent years
3. Challenges ahead for improving PFM

The PowerPoint can be downloaded here Download public_financial_reform_trends_icgfm_June_2008.ppt

The ICGFM Blog also posted a summary and video of the presentation on their Blog (CLICK HERE).

Three Innovative Aspects in the Literature on Public-Private-Partnerships (PPPs)

Posted by Francois Michel

Keeping an eye on the literature on public-private partnerships (PPPs) may be challenging because of the frequency of publication on the topic, but it is highly rewarding. A series of recent articles from major public administration reviews shed new light on three aspects of PPPs that appear particularly useful in the PFM context.

Governance and managerial aspects of PPPs. G. Hodge and C. Greve open their international survey of the performance of PPPs with a particularly comprehensive discussion of the definition of such contracts. While mentioning the crucial notions of long-term engagement and risk sharing on which PFM literature has relied to recommend certain institutional and contractual arrangements, Hodge and Greve point out that PPPs can also refer to “public policy networks in which loose stakeholders relationships are emphasized”, and to “civil and community development in which partnership symbolism is adopted for cultural change.”