Effect of the Political Environment on Public Private Partnership Projects

Infrastructure plays an important role in economic growth and development. Increasingly, infrastructure projects are being developed with investment from private sector. In recent years, India has implemented a large number of roads under public private partnership (PPP) projects. This study is an empirical analysis of the impact of political environment on various project outcomes. The data set for the study comprised 62 completed national highway PPP projects. Our results showed that project technical characteristics influenced project performance more than political factors. Among the different political factors, the factors pertaining to state government were prominent in influencing performance as compared to those of Central Government. The change in state government during the project development phase resulted in higher time overruns. Interestingly, different political parties in the state and Central Government need not necessarily impact the project negatively. Projects developed in states where the state and Central Government are different had lower unit time and lower time overrun. For private investors, our results imply that in a country with strong political and legal systems, project development performance is more dependent on the project technical characteristics and operating environment variables as compared to political factors.