A risk-based willingness model for strategic investment of the private sector in public-private partnership transportation infrastructure projects in Vietnam

Abstract

The rapidly increasing demand and the inefficacy of financing transportation infrastructure project investments have contributed to various challenges for Vietnam in recent decades. Since the country’s budget is inadequate for investing in all necessary infrastructure projects, the Vietnamese government has been inviting other economic sectors, especially the private sector, to participate in infrastructure development. The cooperation between government agencies and private entities, called public-private partnership (PPP), must encounter various challenges leading to difficulties in attracting private investors. A main reason is that private investors must deal with critical risks concerning PPP investment environments. It is a challenging task for the government to optimally manage such risks to enhance the attractiveness of PPP projects for private investors. This research investigates concern factors, risk factors, investment willingness, risk-responsive strategies, and decision support tools for private investors when promoting investment capitals in the PPP transportation infrastructure projects in Vietnam. Details of these issues were preliminarily compiled by comprehensive literature review. To reflect unique characteristics of PPP projects in Vietnam, the compiled results are reviewed by a group of PPP experts from both public and private sectors in Vietnam through in-depth interviews and questionnaire surveys. In addition, ten PPP project case studies in Vietnam are analyzed to derive the profile of PPP transportation projects. The results shows that the most concern factors of private investors are their own capacity, demand issues, legal and political risks, long-term income, and financial sources. There are five risk factors that represent a significant difference between the private sector and the public sector’s perceptions are political risks, enhancement of company’s strength in its industry, construction risks, demand issues, and financial viability of the company. The risk factors of PPP transportation infrastructure projects in Vietnam previously identified are quantitatively assessed based on their probabilities and impact levels. The critical risk factors are land acquisition and compensation, approvals and permits, inadequate feasibility studies, finance market, subjective evaluation methods, and change in laws and regulations. By performing factor analysis, these critical risk factors are grouped into four categories: (1) bidding process, (2) finance issues, (3) laws and regulations, and (4) project evaluation issues. The data attained from a questionnaire survey is analyzed by the structural equation model (SEM) approach. A risk-based investment willingness assessment model (RIWAM) is developed to examine the relations of different risk factors affecting PPP projects, investment willingness, and risk-responsive strategies of the private sector. The results indicates that bidding finance, bidding process, and project feasibility are critical to the investment willingness of the private sector in PPP projects. Thus, they are determinants for attracting private investors. Finance, partners’ capacity, and investment willingness of the private sector have strong influence on their risk-responsive strategies. Twenty-eight investment willingness criteria are identified and applied to a decision-making assessment tool (DMAT) through FAHP and TOPSIS approaches to support private investors to identify the optimal PPP projects among all potential PPP projects.