Publication: Evaluation of Public Sector Contributions to Public-Private Partnership Projects
Date
2005-01
ISSN
Published
2005-01
Author(s)
Mackie, Peter
Nellthorp, John
Laird, James
Abstract
The Bank requires that any public sector
contribution to a collaborative effort between the public
sector and private enterprises in the transport sector be
analyzed and justified in economic terms. This Note will set
out the basis for making such an analysis. The general
principles underlying this analysis are that: 1) public
contributions to public-private partnership (PPP) projects
should be justified on the basis of external benefits from
the project, compared with the scenario where no public
contribution is made. 2) these external benefits are
benefits for the wider economy or society which will arise
from the project, but which will not be appropriated by the
private partner in the contract; 3) by implication, the
social welfare gain must be greater than the amount of
public money invested multiplied by the cost of public
funds. In practice, a range of different reasons can be -
and have been - put forward to explain public contributions
to PPP projects, including the following: 1) to pay for
positive externalities, such as decongestion or improvements
in environmental quality; 2) to contribute to the cost of
mitigating negative externalities, which private providers
often have little incentive to take into account when
designing the project; 3) to secure network improvements
necessary for economic development or other planning
benefits, for which users are in the short term unable to
pay. These are considered one by one in Sections 2, 3, and 4.
Citation
“Mackie, Peter; Nellthorp, John; Laird, James. 2005. Evaluation of Public Sector Contributions to Public-Private Partnership Projects. Transport Notes Series; No. TRN 20. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/19e4661e-3e16-5751-8250-19e47d7f9806 License: CC BY 3.0 IGO.”