Risk Allocation in Public-Private Partnerships: a Case Study of Airport Infrastructure Development

Abstract

This study proposes a risk-sharing framework for public-private partnerships in airport infrastructure in Indonesia. Primary data from the literature and secondary data from questionnaires completed by various government and private institutions have been used to develop the airport risk allocation framework. A probability impact matrix and the Statistical Package for the Social Sciences (SPSS) have been used for data analysis. The framework is based on four levels of risk according to public preferences. It involves shifting airside and terminal design risks to the private sector, capacity and site expansion risks to the private sector, and land acquisition and enclave risks (civil and military) to the public sector. Additionally, considering the preferences of private institutions, land acquisition risk is only favoured by the public, while capital cost risk and capacity expansion are shared, and demand risk is mainly private. The result serves as a reference for relevant risk allocation frameworks and issues required for the success of PPP investment schemes.

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