Mechanisms for Transportation Infrastructure Investment in Developing Countries
Authors: Snehamay Khasnabis, Sunder Lall Dhingra, Sabyasachee Mishra, and Chirag Safi (2010)
Report
Synopsis: In this paper, the authors examine different investment mechanisms for transportation infrastructure projects involving the private enterprise in developing countries. Roles identified vary from those of a financier to an operator for successful public-private ventures. A case study involving such a joint venture in India, the Mumbai Pune Expressway/National Highway 4 (MPEW/NH4) is presented, and fiscal implications of the program, both from the perspective of the public and the private enterprise are examined. The study concludes that if properly planned, joint ventures can be mutually beneficial. A joint public-private program may enable the public sector to use the resources saved for other public projects. It also provides the private agency an opportunity to invest monies in a profitable enterprise that yields social benefits, (e.g. improving mobility, promoting economic development, etc.). Careful analysis must be conducted before the project is undertaken to assess the financial and economic implications of the project from each participant’s viewpoint, with due regard to risks and uncertainties associated with such long term investments.
Authors: Sabyasachee Mishra, Snehamay Khasnabis, and Sunder Lall Dhingra (2012)
Report
Synopsis: Traditional economic analysis techniques used in the assessment of Public Private Partnership (PPP) projects are based upon the assumption that future cash flows are fully deterministic in nature and are not designed to account for risks involved in the assessment of future returns. In reality, many of these infrastructure projects are associated with significant risks stemming from the lack of knowledge about future cost and benefit streams. The fundamental premise of the PPP concept is to efficiently allocate risks between the public and the private partner. The return based on deterministic analysis may not depict a true picture of future economic outcomes of a PPP project for the multiple agencies involved. This deficiency underscores the importance of risk-based economic analysis for such projects. In this paper, the authors present the concept of Value-at-Risk (VaR) as a measure of effectiveness (MOE) to assess the risk share for the public and private entity in a PPP project. Bootstrap simulation is used to generate the risk profile savings in vehicle operating cost, and in travel time resulting from demand-responsive traffic. The VaR for Internal Rate of Return (IRR) is determined for public and private entity. The methodology is applied to a case study involving such a joint venture in India, the Mumbai Pune
Authors: Snehamay Khasnabis, Sunder Lall Dhingra, Sabyasachee Mishra, and Chirag Safi (2010)
Report
Synopsis: In this paper, the authors examine different investment mechanisms for transportation infrastructure projects involving the private enterprise in developing countries. Roles identified vary from those of a financier to an operator for successful public-private ventures. A case study involving such a joint venture in India, the Mumbai Pune Expressway/National Highway 4 (MPEW/NH4) is presented, and fiscal implications of the program, both from the perspective of the public and the private enterprise are examined. The study concludes that if properly planned, joint ventures can be mutually beneficial. A joint public-private program may enable the public sector to use the resources saved for other public projects. It also provides the private agency an opportunity to invest monies in a profitable enterprise that yields social benefits, (e.g. improving mobility, promoting economic development, etc.). Careful analysis must be conducted before the project is undertaken to assess the financial and economic implications of the project from each participant’s viewpoint, with due regard to risks and uncertainties associated with such long term investments.
A Simulation Approach for Modeling Risk in Transportation Infrastructure Investment Decision Making
Authors: Sabyasachee Mishra, Snehamay Khasnabis, and Sunder Lall Dhingra (2012)
Report
Synopsis: Traditional economic analysis techniques used in the assessment of Public Private Partnership (PPP) projects are based upon the assumption that future cash flows are fully deterministic in nature and are not designed to account for risks involved in the assessment of future returns. In reality, many of these infrastructure projects are associated with significant risks stemming from the lack of knowledge about future cost and benefit streams. The fundamental premise of the PPP concept is to efficiently allocate risks between the public and the private partner. The return based on deterministic analysis may not depict a true picture of future economic outcomes of a PPP project for the multiple agencies involved. This deficiency underscores the importance of risk-based economic analysis for such projects. In this paper, the authors present the concept of Value-at-Risk (VaR) as a measure of effectiveness (MOE) to assess the risk share for the public and private entity in a PPP project. Bootstrap simulation is used to generate the risk profile savings in vehicle operating cost, and in travel time resulting from demand-responsive traffic. The VaR for Internal Rate of Return (IRR) is determined for public and private entity. The methodology is applied to a case study involving such a joint venture in India, the Mumbai Pune