Cooperation and opportunism under long-term public-private contracts: Evidence from water concessions in Asia.

Blanc-Brude, Olivia Natalie Jensen (2007) Cooperation and opportunism under long-term public-private contracts: Evidence from water concessions in Asia. PhD thesis, London School of Economics and Political Science.

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Abstract

This thesis addresses the implementation of long-term public-private contracts for utility services. Long-term contracts are inevitably incomplete and need to be adjusted over time to take account of new information or changes in the operating environment. Institutional environments, especially in developing countries, are also very likely to be incomplete. The existing literature has tended to focus on one of these two types of incompleteness; this thesis takes the analysis a step further by integrating the two into a single approach. Many contracts contain provisions for periodic adjustments to their terms, 'contractually mandated renegotiations.' Other adjustments will be necessary to rebalance a contract after a major shock, 'shock-induced renegotiations.' This research looks at both these types of adjustment in incomplete institutional environments and considers the behaviour of government and firm actors. The analysis proceeds in three steps. First, regression analysis of an original database of PSP projects, 'WATSUP', is used to test the relationship between institutions the number of PSP projects in each country. This confirms the significance of institutions. Second, a framework for the analysis of government and firm behaviour is developed which takes into account the two types of incompleteness, time inconsistency, actors' time preferences and the role of multiple actors. Third, in-depth case studies of the implementation of PSP contracts for water services in Manila and Jakarta are presented, based on more than 50 personal interviews in the two locations. The findings suggest that contractual incompleteness can be better managed if: the parties agree a set of principles and procedures for contract adjustment at the outset; set out clear lines of responsibility for contract renegotiation and approval; and establish contract-specific regulatory institutions with clearly defined implementation responsibilities.

Item Type:	Thesis (PhD)
Uncontrolled Keywords:	Political Science, Public Administration, Water Resource Management
Sets:	Collections > ProQuest Etheses
URI:	http://etheses.lse.ac.uk/id/eprint/2152

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