Risks in Public-Private Partnerships: Shifting, Sharing or Shirking?

Public-private partnerships (PPPs) have now become a popular way of providing infrastructure. A commercial relationship between government and business is not necessarily a new phenomenon, but wholesale use by governments of long term, sophisticated contract techniques on private credit is. Better efficiency in infrastructure provision and strengthened monitoring and accountability are promised, along with stronger business and investor confidence. A major part of the forecast benefits from the private funding of public infrastructure arises through the transfer of risks from the public sector to private parties. This article aims to probe on an empirical basis the realities of risk transfers in PPPs and to compare this experience against both the rhetoric of project proponents and the formal contract conditions. Several conceptual issues are addressed and a case study 1$ used to illustrate some empirical experience on risk transfers under PPP arrangements Experience shows the extent to which risks were shifted or shared as planned, or whether governments ideologically predisposed to the adoption of PPPs shirked accountability for future risks by signing up to PPP deals favoring financiers. Huge financial resources and long term PPP contracts of up to several decades both make it critical to better understand the nature of risk transfers and the extent to which actual risk bearing experience differs from advocate rhetoric.