Global Lessons in Public Private Partnerships

Abstract

There are three light rail transit systems (LRT) operating in Metro Manila. A financing structure comparison of the LRT-3 project, a public-private partnership project, and the LRT-2 project, a publicly administered project, showed that the high cost and time overruns of the public project compared to the PPP marginalize the advantages of the low financing rates of overseas development agency (ODA) loans in the public project. Because of increasing demand for efficient public transit service, there is increasing interest in PPPs to ensure the sustained operation of the LRT-3 line. Among the lessons learned from a comparison of these two projects are that linking private-sector investment payments to system availability helps manage operating and maintenance risks, and that linking payment of the maintenance fee to the maintenance provider to system availability also helps to manage operating and maintenance risks. Among the policies that should be considered to foster the development of financially viable transit systems are to strengthen public institutions that develop and implement transit-oriented development with a mission of linking urban growth to development of transit service or catchment areas, to seek a balance between public-sector fiscal discipline and private-sector investment in the development of metro-wide transit systems, and to champion good governance to prevent public-sector hostile expropriation or reverse privatization as experienced in Bangkok, Kuala Lumpur, and Manila.

TOPICS: Project finance, emerging