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Financial risk management for PPP in Korea

Related Document
Frame of Image  Fiscal Liabilities: Ex post basis
5. Concluding Remarks
1
Background
2
Why PPP? Its Potential Benefits
 Fiscal Flexibility

Faced with budget constraint, government can take PPP as a financial option to fill the infrastructure gap timely.
 Efficiency Gains
Minimizing LCC (Life Cycle Costs) by integrating DBFO (Design-Build-FinancingOperation) works into a single contract  Little possibility of cost and time overruns (Little optimism bias)
  
Risk allocation: Each party manages risks they are best able to handle Selecting most efficient provider in the market through open bidding
 Quality Service
Private operators tend to be more responsive to preference of consumers  A fraction of government payment is subtracted as a penalty when operators do not meet pre-specified output quality

 Reform the Public Sector
Competition between public and private parties  Provide expertise and experience not readily available in public agencies

3
Expanded Fiscal Space by PPP
white bar = B/C; blue bar = R/E
B/C R/E 2.5 2.0 A B I
Project name
Project Cost
Accumulated Project cost
B/C
R/E
A
B
100
150 80 100 50
100
250 330 430 480
2.5
2.0 1.8 1.6 1.5
0.0
1.1 0.8 0.2 0.3
C
1.5
1.0 0.5
D
E
C
F G H
D E
F
G
$
70
200 100 100
550
750 850 950
1.3
1.1 0.6 0.5
0.1
0.5 0.3 2.0
Gov’t Budget
H I
Infrastructure Gap
Given the budget constraint of USD 330 million, by implementing B thru PPPs, the government can divert the saved funding from B in the amount of USD 150 billion to D, and E, which is


Full Text
Title Financial risk management for PPP in Korea
Similar Titles
Material Type Proceedings
Author(English)

Park, Hyeon

Publisher

Sejong, South Korea : KDI School of Public Policy and Management

Date 2017-07
Event

Capacity building Program for Afghanistan Officials in Public Private Partnership

Event [Workshop] Capacity building Program for Afghanistan Officials in Public Private Partnership
Pages 56
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Administration
Industry and Technology < Construction
Holding KDI School of Public Policy and Management
License