Appendix A: Variables used in Regression Analysis

Dependent variables

1. Has the private investor exited (cancellation) or considered exiting (distress) the project? FAIL (discrete)—1 if the project is listed in the PPI database as being “distressed” or “canceled,” 0 otherwise. Source: World Bank's PPI database.

Independent variables

Regulation

1. What is the actual or perceived degree of regulatory independence? INDEPREG discrete)—1 if the sector is perceived as not having an independent regulator, 0 otherwise. Sources: Singh (2005, 2007), Kennedy (2003), and CUTS (2006).
2. Was the project subject to price cap regulation? PRICECAP (discrete)—1 if yes, 0 otherwise. Sources: Singh (2005, 2007), Kennedy (2003), and CUTS (2006).
3. Was the project subject to rate of return regulation? ROR (discrete)—1 if yes, 0 otherwise. Sources: Singh (2005, 2007), Kennedy (2003), and CUTS (2006).
4. Was contract award based on lowest tariff bid?²¹ LOWPRICE (discrete)—1 if the basis for awarding the contract was the lowest price offered. Source: World Bank PPI database, augmented by data gathered by the author from Singh (2007) and various reports available from the web.
5. Was contract award based on highest payment?²² HIGHPRICE (discrete)—1 if the basis for awarding the contract was the highest price offered. Source: World Bank PPI database, augmented by data gathered from by the author from Singh (2007) various reports available from the web.

Tariff/Political

1. Did the project go through a period in which a tariff freeze was imposed by government executives? TARIFFFRZ2 (discrete)—1 yes, 0 otherwise. Source: Author's review of individual country experiences, from newspaper reports and existing literature.
2. Did the project go through a period in which a tariff freeze was imposed by government executives, along with convertibility restrictions? TARIFFFRZ3 (discrete)—1 if the project scores a 1 in the variable TARIFFFRZ2 above, and there was evidence of other government actions undermining tariffs (such as suspension of convertibility, etc.), 0 otherwise. Source: Author's review of individual country experiences, from newspaper reports and existing literature.
3. Duration of tariff freeze during the investment horizon. YRSFRZ (discrete). Source: Author's review of individual country experiences, from newspaper reports and existing literature.
4. Did the project go through a period in which its tariff was frozen, or there was some other stress event within the first two years after a change in political leadership? POLSTRESS2 (discrete)—1 if yes, 0 otherwise. Source: Author's review of individual country experiences, and information on political regime change, from the POLITY IV dataset from Marshall and Jaggers (2007) and Gasiorowski (1996).

The tariff variables developed for this study (TARIFFFRZ2, TARIFFFRZ3, YRSFRZ, and POLSTRESS2) are proxies for political risk. They capture various political motives, ranging from the desire to insulate the public from macroeconomic shocks (at the expense of the firm), to the desire to gain favorable approval ratings. Unlike tariff freezes imposed by independent regulators, which tend to cover only a subset of sectors, sweeping tariff freezes imposed by government executives tend to have more systemic effects. At the same time, since government executives have other discretionary powers (such as suspending convertibility, or canceling/renegotiating/expropriating a project) broadly defined political risk can be the key determinant of outcomes in PPP projects.

Legal and institutional framework

1. Rule of law: the extent to which agents have confidence in and abide by the rules of society; includes the quality of contract enforcement and property rights, the police, and the courts, as well as the likelihood of crime and violence: RULE (continuous)—country's average annual score for this criterion in the World Bank's governance indicators.
2. Government effectiveness: the quality of public services; the capacity of the civil service and its independence from political pressures; and the quality of policy formulation. GOVEFF (continuous)—country's average annual score for this criterion in the World Bank's governance indicators.
3. Control of corruption: the extent to which power is exercised for private gain; includes both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests: CORRUPT (continuous)—country's average annual score for this criterion in the World Bank's governance indicators.
4. Political stability: the likelihood that the government will be destabilized through unconstitutional or violent means, including terrorism: POLSTAB (continuous)—country's average annual score for this criterion in the World Bank's governance indicators.
5. Regulatory quality: the ability of the government to provide sound policies and regulations that enable and promote private sector development: REGQUAL (continuous)—country's average annual score for this criterion in the World Bank's governance indicators.
6. Voice and accountability: the extent to which a country's citizens are able to participate in selecting their government; includes freedom of expression, freedom of association, and a free media: VOICE (continuous)—country's average annual score for this criterion in the World Bank's governance indicators.

Macroeconomic–economic conditions during the operations phase

Most of the macroeconomic data comes from the International Monetary Fund's International Financial Indictors (IFS)

1. Average rate of real per capita GDP growth in the last 6 years prior to current period, or prior to cancellation or conclusion of project (continuous)—this is a proxy for capacity to pay: AVGPCGR6TRM.
2. Average change in real exchange rate in the last 6 years prior to current period, or prior to cancellation or conclusion of project (continuous): AVGRER6TRM.
3. Average standard deviation of real exchange rate in the last 6 years prior to current period, or prior to cancellation or conclusion of project (continuous): AVGSTDRER6TRM.
4. Average inflation rate in the last 6 years prior to current period, or prior to cancellation or conclusion of project (continuous): AVGINF6TRM.
5. Average of the ratio of total exports plus imports divided by gross domestic product in the last 6 years prior to current period, or prior to cancellation or conclusion of project (continuous): OPEN6TRM.

Project design phase
Economic conditions during project design phase

1. Average rate of real per capita GDP growth in the last 6 years prior to financial closure (continuous): RPCGDPGR6PRCLOS. Source: IFS.
2. Average standard deviation of real exchange rate in the last 6 years prior to financial closure (continuous): STDRER6PRCLOS. Source: IFS.

Structure of transaction

1. Type of transaction (discrete)—The following variables are binary in nature; 1 if the condition is present, 0 otherwise. Source: World Bank's PPI database.
   1. Management contract (MGTCON)
   2. Concession (CONCESS)
   3. Divestiture (DIVEST)—Full (FULL) or Partial (PARTIAL)
   4. Greenfield (GREEN)
   5. Merchant (MERCH)
2. Type of PPI (discrete)—The following variables are binary in nature; 1 if the condition is present, 0 otherwise. Source: World Bank's PPI database.
   1. BOT (BOT)
   2. BOO (BOO)
3. Was the infrastructure built by the proponent? BUILD (discrete, 1 or 0). Source: World Bank's PPI database.
4. Was the infrastructure owned by the proponent? OWN (discrete, 1 or 0). Source: World Bank's PPI database.
5. Was rehabilitation involved? REHAB (discrete, 1 or 0). Source: World Bank's PPI database.
6. Contract period: CONPER (continuous). Source: World Bank's PPI database.
7. Value of investment (continuous)—INVST (continuous, investment in physical assets) and TINVST (continuous, total investment). Source: World Bank's PPI database.
8. Value of investment to GDP ratio—INVST2GDP (continuous). Sources: World Bank's PPI database and IFS

Multilateral or bilateral support

1. Loan: LOAN (discrete)—1 if the project received a loan from multilateral financial agencies (MFIs), 0 otherwise. Source: World Bank PPI database.
2. Political risk guarantee: GUAR (discrete)—1 if the project received a political risk guarantee from MFIs, 0 otherwise. Source: World Bank PPI database.
3. Equity: EQUITY (discrete)—1 if the project received equity from MFIs, 0 otherwise. Source: World Bank PPI database.
4. Risk management: RISK (discrete)—1 if the project received financial risk management services from MFIs, 0 otherwise. Source: World Bank PPI database.
5. Cumulative support: CUMSUP2 (continuous)—total amount of support from MFIs. Source: World Bank PPI database.
6. No assistance from MFIs: NOASSIST (discrete)—1 if the project did not receive assistance from MFIs, 0 otherwise. Source: World Bank PPI database.

Contract

1. Government fiscal support: GOVRISK (discrete)—1 if the project benefited from some form of risk absorption by government, 0 otherwise. Source: World Bank's PPI database. The glossary of the World Bank's PPI database lists primarily greenfield projects as receiving explicit forms of guarantees (the exception being merchant facilities). This includes projects designed as build-lease-transfer (BLT), build-operate-transfer (BOT), build-operate-own (BOO), and projects wherein governments rent facilities from private investors.
2. Contracted with federal or local government? FEDCON (discrete)—1 if the project was contracted by the federal government, 0 otherwise. Source: World Bank's PPI database.

Nationality

1. Foreign investor involvement: FDI (discrete)—1 if there was foreign investor involvement in the project, 0 otherwise. Source: World Bank's PPI database.

Country's fiscal capacity

1. Average fiscal position (cash surplus or deficit) in the last 6 years prior to current period, or prior to cancellation or conclusion of project: AVGSUR6TRM (continuous). Source: IFS.
2. Number of projects supported by the country since start of data collected: NUM (discrete). Source: World Bank's PPI database.
3. Number of years since the first recorded PPP project in the country: TIMEPER (discrete). Source: World Bank's PPI database.
4. Short-term debt to exports ratio: SHORTDEBTEX (continuous). Source: IFS.
5. Absolute number of IPPs: IPPS (discrete). Source: World Bank's PPI database.

Sectoral dummies (The primary source of data is the World Bank's PPI database)

Primary sector dummies—ENERGY, WATER, TELECOM, TRANSPORT

Sub-sector dummies—ELECSUB (electricity), GENER (generation), DISTRIB (distribution), TRANS (transmission), NATGASUB (natural gas)

Water and sewerage dummies—UTILITY, TREAT (treatment and sewerage)

Telecoms dummies—FIXDACC (fixed access), MOBILE

Transport dummies—HIGHWY (highway), ROADS (toll roads), SEAPORT, AIRPORT, RAIL

Regional dummies—these are regional groupings based on the World Bank's PPI database. Latin America and the Caribbean (LATAM), East Asia and the Pacific (EASIA), South Asia (SASIA), Eastern Europe and Central Asia except Russia (EUROCNORUS), Europe and Central Asia (EUROCASIA), Middle East and North Africa (MENA), Sub-Saharan Africa (AFRICA)

Others—Size of population: POP6TRM. Source: IFS

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