Public-private partnership investments in dry ports – Russian logistics markets and risks

The investments have always been considered as an essential backbone and so-called ‘locomotive’ for the competitive economies. However, in various countries, the state has been put under tight budget constraints for the investments in capital intensive projects. In response to this situation, the cooperation between public and private sector has grown based on public-private mechanism. The promotion of favorable arrangement for collaboration between public and private sectors for the provision of policies, services, and infrastructure in Russia can help to address the problems of dry ports development that neither municipalities nor the private sector can solve alone. Especially, the stimulation of public-private collaboration is significant under the exposure to externalities that affect the magnitude of the risks during all phases of project realization. In these circumstances, the risk in the projects also is becoming increasingly a part of joint research and risk management practice, which is viewed as a key approach, aiming to take active actions on existing global and specific factors of uncertainties. Meanwhile, a relatively little progress has been made on the inclusion of the resilience aspects into the planning process of a dry ports construction that would instruct the capacity planner, on how to mitigate the occurrence of disruptions that may lead to million dollars of losses due to the deviation of the future cash flows from the expected financial flows on the project. The current experience shows that the existing methodological base is developed fragmentary within separate steps of supply chain risk management (SCRM) processes: risk identification, risk evaluation, risk mitigation, risk monitoring and control phases. The lack of the systematic approach hinders the solution of the problem of risk management processes of dry port implementation. Therefore, management of various risks during the investments phases of dry port projects still presents a considerable challenge from the practical and theoretical points of view. In this regard, the given research became a logical continuation of fundamental research, existing in the financial models and theories (e.g., capital asset pricing model and real option theory), as well as provided a complementation for the portfolio theory. The goal of the current study is in the design of methods and models for the facilitation of dry port implementation through the mechanism of public-private partnership on the national market that implies the necessity to mitigate, first and foremost, the shortage of the investments and consequences of risks. The problem of the research was formulated on the ground of the identified contradictions. They rose as a continuation of the trade-off between the opportunities that the investors can gain from the development of terminal business in Russia (i.e. dry port implementation) and risks. As a rule, the higher the investment risk, the greater should be their expected return. However, investors have a different tolerance for the risks. That is why it would be advisable to find an optimum investment. In the given study, the optimum relates to the search for the efficient portfolio, which can provide satisfaction to the investor, depending on its degree of risk aversion. There are many theories and methods in finance, concerning investment choices. Nevertheless, the appropriateness and effectiveness of particular methods should be considered with the allowance of the specifics of the investment projects. For example, the investments in dry ports imply not only the lump sum of financial inflows, but also the long-term payback periods. As a result, capital intensity and longevity of their construction determine the necessity from investors to ensure the return on investment (profitability), along with the rapid return on investment (liquidity), without precluding the fact that the stochastic nature of the project environment is hardly described by the formula-based approach. The current theoretical base for the economic appraisals of the dry port projects more often perceives net present value (NPV) as a technique superior to other decision-making criteria. For example, the portfolio theory, which considers different risk preference of an investor and structures of utility, defines net present value as a better criterion of project appraisal than discounted payback period (DPP). Meanwhile, in business practice, the DPP is more popular. Knowing that the NPV is based on the assumptions of certainty of project life, it cannot be an accurate appraisal approach alone to determine whether or not the project should be accepted for the approval in the environment that is not without of uncertainties. In order to reflect the period or the project’s useful life that is exposed to risks due to changes in political, operational, and financial factors, the second capital budgeting criterion – discounted payback period is profoundly important, particularly for the Russian environment. Those statements represent contradictions that exist in the theory and practice of the applied science. Therefore, it would be desirable to relax the assumptions of portfolio theory and regard DPP as not fewer relevant appraisal approach for the assessment of the investment and risk measure. At the same time, the rationality of the use of both project performance criteria depends on the methods and models, with the help of which these appraisal approaches are calculated in feasibility studies. The deterministic methods cannot ensure the required precision of the results, while the stochastic models guarantee the sufficient level of the accuracy and reliability of the obtained results, providing that the risks are properly identified, evaluated, and mitigated. Otherwise, the project performance indicators may not be confirmed during the phase of project realization. For instance, the economic and political instability can result in the undoing of hard-earned gains, leading to the need for the attraction of the additional finances for the project. The sources of the alternative investments, as well as supportive mitigation strategies, can be studied during the initial phases of project development. During this period, the effectiveness of the investments undertakings can also be improved by the inclusion of the various investors, e.g. Russian Railways’ enterprises and other private companies in the dry port projects. However, the evaluation of the effectiveness of the participation of different investors in the project lack the methods and models that would permit doing the particular feasibility study, foreseeing the quantitative characteristics of risks and their mitigation strategies, which can meet the tolerance of the investors to the risks. For this reason, the research proposes a combination of Monte Carlo method, discounted cash flow technique, the theory of real options, and portfolio theory via a system dynamics simulation approach. The use of this methodology allows for comprehensive risk management process of dry port development to cover all aspects of risk identification, risk evaluation, risk mitigation, risk monitoring, and control phases. A designed system dynamics model can be recommended for the decision-makers on the dry port projects that are financed via a public-private partnership. It permits investors to make a decision appraisal based on random variables of net present value and discounted payback period, depending on different risks factors, e.g. revenue risks, land acquisition risks, traffic volume risks, construction hazards, and political risks. In this case, the statistical mean is used for the explication of the expected value of the DPP and NPV; the standard deviation is proposed as a characteristic of risks, while the elasticity coefficient is applied for rating of risks. Additionally, the risk of failure of project investments and guaranteed recoupment of capital investment can be considered with the help of the model. On the whole, the application of these modern methods of simulation creates preconditions for the controlling of the process of dry port development, i.e. making managerial changes and identifying the most stable parameters that contribute to the optimal alternative scenarios of the project realization in the uncertain environment. System dynamics model allows analyzing the interactions in the most complex mechanism of risk management process of the dry ports development and making proposals for the improvement of the effectiveness of the investments via an estimation of different risk management strategies. For the comparison and ranking of these alternatives in their order of preference to the investor, the proposed indicators of the efficiency of the investments, concerning the NPV, DPP, and coefficient of variation, can be used. Thus, rational investors, who averse to taking increased risks unless they are compensated by the commensurate increase in the expected utility of a risky prospect of dry port development, can be guided by the deduced marginal utility of investments. It is computed on the ground of the results from the system dynamics model. In conclusion, the outlined theoretical and practical implications for the management of risks, which are the key characteristics of public-private partnerships, can help analysts and planning managers in budget decision-making, substantially alleviating the effect from various risks and avoiding unnecessary cost overruns in dry port projects.

Europäisches Planungsrecht und Public Private Partnerships im Städtebau

Diese Arbeit wurde unter dem Titel "Entwicklungstendenzen des europäischen Planungsrechts am Beispiel öffentlich-privater Kooperationen im Städtebau" an der Universität Kassel 2002 als Diplomarbeit (Diplom II) eingereicht.

Comparing public-private school management through a new educational Malmquist index approach. 'Comparación entre la gestión escolar pública y privada a través de un nuevo enfoque del índice educacional Malmquist'.

Resumen tomado de la publicación

Entrepreneurship, ties and relational networks: the case of a public-private cross-border tourism product

The thesis aims to understand the processes of entrepreneurship that try to create businesses or products with a high degree of complexity. This complexity comes from the fact that these products or initiatives can only be viable with the concurrence of a large number of heterogeneous actors (public, private, from different regions, etc..) which interact in a relational context. A case with these characteristics is the Camí dels Bons Homes. The thesis analyzes the evolution of the relational network from the point of view of its structure and content of its links. The results show and explain the observed changes in the network structure and the changes in the ties content. This analysis of the content of ties contributes to a new systematization and operationalization of ties’ content. Moreover this analysis takes in account negative ties, a less discussed issue in literature.

Healthcare providers in the English National Health Service: public, private or hybrids?

In recent years it has been noted that boundaries between public and private providers of many types of welfare have become blurred. This paper uses three dimensions of publicness to analyse this blurring of boundaries in relation to providers of healthcare in England. The authors find that, although most care is still funded and provided by the state, there are significant additional factors in respect of ownership and social control which indicate that many English healthcare providers are better understood as hybrids. Furthermore, the authors raise concerns about the possible deleterious effects of diminishing aspects of publicness on English healthcare. The most important of these is a decrease in accountability

Access to the countryside of England and Wales: public/private partnership or the privatisation of public rights?

This paper examines the evolution of public rights of access to private land in England and Wales. Since the Eighteenth Century the administration and protection of these rights has been though a form of public/private partnership in which the judiciary, while maintaining the dominance of private property, have safeguarded de facto public access by refusing consistently to punish simple trespass. While this situation has been modified, principally by post-World War II legislation, to allow for some formalisation of access arrangements and consequent compensation to landowners in areas of high recreational pressure and low legal accessibility, recent policy initiatives suggest that the balance of the partnership has now shifted in favour of landowners. In particular, the new access payment schemes, developed by the UK Government in response to the European Commission's Agri-Environment Regulations, locate the landowner as the beneficiary of the partnership, financed by tax revenue and justified on the spurious basis of improved 'access provision'. As such the state, as the former upholder of citizen rights, now assumes the duplicitous position of underwriting private property ownership through the commodification of access, while proclaiming a significant improvement in citizens' access rights.

Does watershed development implemented through public private partnership empower women? A case review from Rajasthan, Western India

This paper critically examines the impact of the ‘Guidelines for Hariyali’ – a rural watershed development policy launched in Rajasthan, Western India which has been implemented through a Public Private Partnership (PPP) – for local communities. In 2003, the Government of India launched the ‘Guidelines’ (a comprehensive Integrated Wastelands Development Programme and Drought Prone Areas Programme and Desert Development Programme), the purpose of which is to restore ecological balance by harnessing, conserving and developing natural resources in drought-prone and arid rural areas for the benefit of villages. In the particular case-study area, the policy has been implemented through institutional linkages between a corporation and the government with the aim of sharing responsibilities for finances, planning, implementation and monitoring, the end goal being to enhance the livelihoods of rural households. The analysis focuses specifically on how the ‘Guidelines’ have affected the livelihoods of Rajasthani women, drawing upon findings from focus groups with men and women in the project catchment area, as well as interviews with key actors at public and private sector institutions. Findings reveal that there are significant gaps between policy objectives and the realities on the ground, particularly in the context of women's accessibilities and entitlements. The paper also broadens understanding of how PPPs, if implemented properly, could empower women in the area of watershed management across rural South Asia.

Public-private partnership's procurement criteria: the case of managing stakeholders' value creation in Kazakhstan

The article presents the study of the criteria that Kazakhstan's government used for granting a public–private partnership (PPP) contract to a private investor for construction and operation of eleven kindergartens in the city of Karaganda during 14 years. From the perspective of value creation for critical stakeholders, there was often misalignment between bidders' views of these criteria and the perceived value for citizens and the government. The latter may significantly enhance the creation of shared values in a PPP by actively engaging stakeholders in the design of the bids' assessment criteria.

Concessionary nature of public-private partnerships in Russia and Kazakhstan: a critical review

This article provides a critical overview of Public-Private Partnerships (PPPs) in Russia and Kazakhstan and examines the rationale underpinning such partnerships. The analysis discusses the reasons why governments in Russia and Kazakhstan focus principally on concessions as a form of PPP and goes on to provide a critical assessment of the key approaches and situational factors relating to concessions in these two countries. The article finds that external globalization impulses pressed Russia and Kazakhstan to align their policies and institutions with western orthodoxy and perceived international best practice. An ever-increasing emphasis on use of PPPs has been a key feature of this alignment. However, the governments of Russia and Kazakhstan have increasingly resorted to concessions as progress with the development and implementation of Western style PPP models has stalled. This article concludes that the governments of Russia and Kazakhstan have demonstrated an overly optimistic approach to PPP and as a result may have substantially understated their overall concessional risks and costs. Features of Russian and Kazakhstani PPP arrangements such as ambiguity in output specification and extensive reliance on government subsidies, combined with lack of expertise of private partners, may significantly decrease concession benefits.

Conceptualising public-private partnerships: a critical appraisal of approaches to meanings and forms

Purpose – The purpose of this article is to survey various meanings attached to a public-private partnership (PPP) and related aspects in Western literature, and identify commonalities and differences between them. Additionally, the article intends to critically assess conflicting and overlapping views on contractual and institutional PPPs, their forms and models, and draw insights for transitional economies. Design/methodology/approach – The article contrasts and compares views on PPP meanings, forms and models within Western PPP literature, and also draws comparisons with understanding of partnership aspects in the Russian language sources. The article examines theories underpinning PPPs, builds connections to PPP advantages and drawbacks, and provides critical assessment of net benefits that PPPs may bring along to the society. Findings – The article concludes that future PPP research in transitional countries such as Kazakhstan and Russia, particularly in the area of organisational and power arrangements in partnerships, may delineate new concepts such as government as a guarantor of a PPP project, social significance of a PPP project, and risk management in a country's contextual environment. Practical implications – In transitional countries, in which PPPs are in their infancy, clarification of theoretical positions, and identification of commonalities and differences between meanings attached to the PPP terminology may enable better decisions by researchers and practitioners in their selection and further development of partnerships and related concepts. Originality/value – Research in the field of PPPs in transitional countries such as Russia and Kazakhstan is in its infancy. The paper intends to contribute to the body of knowledge about PPPs by providing detailed account and categorisation of their principal meanings, forms, models, underpinning theories, and drawing insights for future research in transitional countries.

Impact of externalities on sustainable development: evidence from public-private partnerships in Kazakhstan and Russia

Purpose – This paper aims to investigate the influence of public-private partnerships (PPPs) on social and economic conditions in Kazakhstan and Russia from a public economics perspective, namely, through the lens of a market failure and PPPs’ negative externalities. Design/methodology/approach – Drawing on the concept of a market failure and using the externalities perspective, the paper investigates whether partnerships are instrumental in solving market problems, which is illustrated by the evidence from ongoing PPP projects in Kazakhstan and Russia. Findings – Results show that citizens face expansion of monopolistic trends in the service provision and decreased availability of public services. Additionally, the government support to partnerships recreates a negative externality in the form of a higher risk premium on loan interest rates that banks use to finance PPPs. The partnerships’ impact on sustainable development often appears detrimental, as they significantly intensify the struggle between sub-national governments for increased transfers from the national budget. Practical implications – The government agencies must incorporate the appraisal of the PPP externalities and their effects on the society in the decision-making regarding the PPP formation. Originality/value – The authors suggest that, although government is interested in PPPs’ positive externalities, in reality many negative externalities may offset the positive spillover effects. As a result, the partnerships’ contributions to economic and social sustainability remain controversial. Extending the value-for-money concept to incorporate the assessment of PPP externalities might significantly enhance the partnership conceptualisation by more comprehensive and accurate assessment of PPPs’ economic and social value.