Port investment in a volatile environment : a contractual risk perspective on public-private partnership

• Main Author: Xiao, Zengqi
• Other Authors: Lam Siu Lee, Jasmine
• Format: Thesis-Doctor of Philosophy
• Language: English
• Published: Nanyang Technological University 2020
• Subjects: Engineering::Civil engineering::Transportation
• Online Access: https://hdl.handle.net/10356/143098
• Institution: Nanyang Technological University

With a volatile and changing environment, infrastructure investment in ports is becoming increasingly uncertain. Opportunities and challenges coexist and make the port investment with volatility an interesting topic to study. A popular form of port investment is the public-private partnership (PPP). It refers to a long-term contractual arrangement between public agencies and private companies for works and services traditionally provided by the government. This study aims to answer the following research questions: i) why are private companies willing to take more risk in some port PPP projects but not in others? ii) What is/are the key effective measure(s) that can enhance private investors’ willingness to take PPP risk? iii)What are the factors that can affect such measure(s)? The analysis begins by examining the concept of port investment and risks in port investment. Next, the thesis reviews theories that are relevant to port investment. A total of 11 groups of theories are identified and included in the discussion. Following the literature review, the paper conducts a profiling analysis of port PPP projects with an emphasis on differences across countries or regions. An empirical analysis using structural equation modelling is subsequently performed to examine port PPP contractual risk preferences from institutional perspectives. Specifically, the paper examines the impacts of business friendliness, political effectiveness, and freedom from governmental intervention on private investors’ willingness to take port PPP contractual risk. The analysis reveals that the effect of political effectiveness to willingness to take contractual risk mediates through business friendliness and freedom from governmental intervention where the former mediation contributes positively, and the latter has a negative impact. Next, this thesis further investigates the impacts of major economic recessions on private investors’ willingness to take port infrastructure PPP contractual risk in emerging economies given a fixed set of institutional environments. Multi-group structural equation modelling is employed. Findings show that there is less impact from institutional factors after the 2008 financial crisis. Governmental intervention with the quality institutional environment is an effective strategy in attracting private investors in ports even after the financial crisis. In Chapter 6, this research focuses on one of the key effective measures, i.e. governmental intervention. Specifically, it empirically investigates the circumstances that will affect the extent of governmental ownership in port public-private partnerships in developing countries with a focus on project factors and company factors. Multiple linear regression is employed. The results reveal that PPP investment amount, historical presence of governmental ownership, presence of foreign private investors, and presence of other types of private investors are positively associated with the extent of governmental ownership in port PPPs. Awarding process, presence of large local private investors, presence of small local private investors, and presence of vertical integration are negatively associated with the extent of governmental ownership in port PPPs. The study in Chapter 6 is further extended in Chapter 7 to empirically investigate the effects of project-specific government actions on the attractiveness of port PPPs among foreign and domestic private investors. Binary logistic regression and multiple linear regression are employed. The results reveal that project initiation, concession fee requirement, and direct government investment are more significantly related to the attractiveness of port PPPs among private investors. It also reveals a potential trade-off between benefits brought by direct government investment and too much ownership from the government in port PPPs. This research presents a useful reference for several key stakeholders of port PPP projects. For policymakers, this thesis highlights the importance of key institutional factors in boosting private investors’ willingness to take risk. For private investors, this research can serve as a reference framework to assist them in deciding the most suited port PPP projects to enter.