The Limitation of Determination Structure of the Agreed Rate of Return for Public-Private Partnership (PPP) Road Projects and Improvement in South Korea
Article Sidebar
Main Article Content
Abstract
Public-Private Partnership (PPP) road projects are being promoted worldwide to encourage road investments; however, research on the appropriate rate of return for these projects is insufficient. This is likely because the return on investment for PPP road projects is determined through negotiations between the government and the private sector, a process that remains confidential. The rate of return for PPP road projects is not only a key indicator for evaluating project performance but also a potential driver for future government financial subsidies. Therefore, research on the appropriate rate of return for PPP road projects is necessary for the sustainability of these projects.
This study, based on the concept that both the government and the private sector share the anticipated risks of the project, quantifies six types of risks and proposes a model for predicting the appropriate rate of return. The model is able to explain approximately 68% of the cases in South Korea’s PPP road projects. The risk with the greatest influence on the rate of return was found to be an economic risk, while the least influential was regulation change risk.
Due to the confidentiality of data related to PPP road projects, this study only utilized 54 cases from South Korea. It is hoped that a wider range of data will be collected and further research on the appropriate rate of return will continue to enhance the sustainability of PPP road projects.
Article Details
Copyright (c) 2025 Lee H.
This work is licensed under a Creative Commons Attribution 4.0 International License.
World Bank Public-Private Partnership Resource Center. PPP Reference Guide - PPP Cycle. 2017. Available from: https://ppp.worldbank.org/public-private-partnership/library/ppp-reference-guide-ppp-cycle
Bonzanigo L, Kalra N. Making Informed Investment Decisions in an Uncertain World. Policy research working paper 6765, The World Bank. 2014. Available from: https://ideas.repec.org/p/wbk/wbrwps/6765.html
Checherita C, Gifford J. Risk sharing in public-private partnerships: General considerations and an evaluation of the US practice in road transportation. 2007. Available from: https://ageconsearch.umn.edu/record/207820/?v=pdf
Akerlof GA. The Market for "Lemons": Quality Uncertainty and the Market Mechanism. Q J Econ. 1998; LXXXIV(3):488-500. Available from: https://www.jstor.org/stable/1879431
Daniel K. Thinking, fast and slow. Farrar, Straus and Giroux. 2017.
De Dreu CK, Carnevale PJ. Motivational bases of information processing and strategy in conflict and negotiation. 2003. Available from: https://psycnet.apa.org/doi/10.1016/S0065-2601(03)01004-9
Alghamdi F, Tatari O, Alghamdi L. Enhancing the decision-making process for public-private partnerships infrastructure projects: A socio-economic system dynamic approach. J Eng Appl Sci. 2022;69(1). Available from: https://jeas.springeropen.com/articles/10.1186/s44147-022-00117-0
De Dreu CK, Harinck F, Van Vianen AE. Conflict and performance in groups and organizations. 1999. Available from: https://www.scirp.org/reference/referencespapers?referenceid=2400994
Emmett RB. Reconsidering Frank Knight’s risk, uncertainty, and profit. The Independent Review. 2020;24(4). Available from: https://www.independent.org/pdf/tir/tir_24_4_06_emmett.pdf
Fisher R, Ury WL, Patton B. Getting to yes: Negotiating agreement without giving in. Penguin; 2011. Available from: https://digitalcommons.usu.edu/unf_research/47/
Lempert RJ. Shaping the next one hundred years: New methods for quantitative, long-term policy analysis. 2003. Available from: https://www.rand.org/content/dam/rand/pubs/monograph_reports/2007/MR1626.pdf
Hamilton LC. Regression with Graphics: A Second Course in Applied Statistics. 1991.
Ika Wahyuni P, Hardjomuljadi S, Sulistio H. Model Influence Risk and Incentive Variables on the Feasibility of Public-Private Partnership (PPP) in Highway Infrastructure Projects. Int J Civ Eng Technol. 2019;10(8). Available from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3450312