Public–Private Partnership Risk Factors in Emerging Countries: BOOT Illustrative Case Study

Abstract

A public–private partnership (PPP) is an agreement between a host government and a private entity in which the private sector supplies infrastructure assets and services that are traditionally provided by the government. The popularity of PPP projects has been steadily on the rise over the past few years. This upward trend is in large part driven by governmental fiscal austerity, particularly in the aftermath of a prolonged global economic recession. The perceived attractiveness of PPP projects is particularly acute in emerging countries because of population growth and increased urbanization. PPP projects are usually highly complex in nature. They require large capital expenditure, they have long durations, and they usually utilize sophisticated technology. For a construction firm willing to expand its services internationally, a PPP project represents a unique opportunity to leverage its core competency and achieve competitive advantage in both domestic and foreign markets. Risk, however, increases with foreign penetration because of unfamiliarity with the geography, the supply chain, the local codes, and the business practices. Using an illustrative case study of a build-own-operate-transfer (BOOT) thermal power plant project, this paper addresses the salient risk factors facing the construction firm undertaking a PPP in an emerging country.