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Public-Private Partnerships (PPPs) are increasingly an important vehicle for several Western Balkan countries to increase investment to reduce their infrastructure gaps. While there are benefits to well-designed and implemented PPPs, they also carry a potential for large fiscal risks and increased costs if not managed well. Countries with successful PPP programs typically benefit from a clear and well-designed PPP governance framework, which covers all stages of the PPP life cycle. Western Balkan countries need to address gaps in their PPP governance frameworks to fully reap the potential benefits from PPPs.

Macroeconomics --- Economics: General --- Public Finance --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Public Administration --- Public Sector Accounting and Audits --- Economic & financial crises & disasters --- Economics of specific sectors --- Public finance & taxation --- Financial administration & public finance law --- Fiscal risks --- Public financial management (PFM) --- Public investment spending --- Expenditure --- PPP legislation --- Risks of public-private partnership --- Currency crises --- Informal sector --- Economics --- Public-private sector cooperation --- Fiscal policy --- Public investments --- Albania

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Investment in infrastructure can be a driving force of the economic recovery in the aftermath of the COVID-19 pandemic in the context of shrinking fiscal space. Public-private partnerships (PPP) bring a promise of efficiency when carefully designed and managed, to avoid creating unnecessary fiscal risks. But fiscal illusions prevent an understanding the sources of fiscal risks, which arise in all infrastructure projects, and that in PPPs present specific characteristics that need to be addressed. PPP contracts are also affected by implicit fiscal risks when they are poorly designed, particularly when a government signs a PPP contract for a project with no financial sustainability. This paper reviews the advantages and inconveniences of PPPs, discusses the fiscal illusions affecting them, identifies a diversity of fiscal risks, and presents the essentials of PPP fiscal risk management.

Public-private sector cooperation. --- Infrastructure (Economics). --- Risk management. --- Economics: General --- International Economics --- Public Finance --- Infrastructure --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Public Administration --- Public Sector Accounting and Audits --- Investment --- Capital --- Intangible Capital --- Capacity --- Political economy --- International institutions --- Public finance & taxation --- Macroeconomics --- Public investment and public-private partnerships (PPP) --- Expenditure --- Fiscal risks --- Public financial management (PFM) --- National accounts --- Risks of public-private partnership --- Public investment spending --- Public-private sector cooperation --- Financial risk management --- Fiscal policy --- Saving and investment --- Public investments --- South Africa

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There is a strong economic rationale for close cooperation between the public and private sectors. This has resulted in a significant increase in the demand for the provision of public services through instruments combining public and private money such as public-private partnerships (PPPs or P3s). We describe these arrangements and explore how they can be analyzed using standard tools in economics (incentives and principal-agent theory). We discuss the implications of our approach in terms of identifying risks that are often overlooked before turining to the optimal risk-sharing between the public and private partners, in particular with respect to information asymmetries in risk perceptions. This allows us to propose a typology of the risks associated with PPPs, where both internal risks (the risks associated with the contract) and external risks (those associated with the project) are considered.

Management --- Business & Economics --- Industrial Management --- Public-private sector cooperation. --- Privatization. --- Risk management. --- Denationalization --- Privatisation --- Private-public partnerships --- Private-public sector cooperation --- Public-private partnerships --- Public-private sector collaboration --- Insurance --- Contracting out --- Corporatization --- Government ownership --- Cooperation --- Infrastructure --- Macroeconomics --- Public Finance --- Organizational Behavior --- Transaction Costs --- Property Rights --- Bureaucracy --- Administrative Processes in Public Organizations --- Corruption --- Asymmetric and Private Information --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Marketing and Advertising: Government Policy and Regulation --- Transportation Systems: Government and Private Investment Analysis --- Public Enterprises --- Public-Private Enterprises --- Public Administration --- Public Sector Accounting and Audits --- Industry Studies: Transportation and Utilities: General --- Public finance & taxation --- Civil service & public sector --- Public investment and public-private partnerships (PPP) --- Public sector --- Risks of public-private partnership --- Transportation --- Expenditure --- Economic sectors --- Public financial management (PFM) --- National accounts --- Public-private sector cooperation --- Finance, Public --- Fiscal policy --- Saving and investment --- United States