We’ve spoken a bit about the factor of risk in
infrastructure projects, and categorized them as well.
The article here (A New Type of Risk in
Infrastructure Projects, by
Maria Craciun), adds to that categorization, using a few different lines of thinking. It also talks about a kind of risk we haven't mentioned..
Please find below a paragraph from the paper of particular significance
with respect to PPPs:
To the above three
risks it seems appropriate to introduce a fourth one, manifested especially in
the latest years: the risk of financing. The global financial crisis
that affected, 2008-2010, a significant part of the world economy, including
the U.S., EU or Japan, gave birth to a new type of risk, one that initiators of
investment projects had not witnessed before. This risk is determined by events
which can lead to loss of project funding opportunities. So far, usually, the
inability to finance a project has been due for the most part, to the project
itself. Either this did not meet the requirements of potential lenders or
providers of capital, or was confronted with a number of risks whose costs and
whose ownership was deemed too expensive.
Please note the final risk the author talks about is
something that has become predominant relatively recently. This risk is the
risk of a good project not being able to take off because of the lack of
sufficient funds. That point really stresses on the importance of PPPs because
the risk can be totally mitigated if governments really are willing to fund and
support private projects and set up partnerships with them.
Although, I am not sure how
valid this kind of risk is for the Indian scenario at present.
2 comments:
I feel that the government should lend the private player depending on how crucial the infrastructure facility is. If it's an important one, it will be used irrespective of an economic crunch, and thus can recover the cost.
Still this situation you have described above looks like a deadlock, and I think in most cases the projects will just stop.
Yes, that's the case only if the government is playing an active role. They might end up having to build it themselves five years down the line if the private player drops out.
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