How to Read This Report
What This Report Is
This report is the official account of Korea's public-private partnership (PPP) institutional design and performance — from the Act on Promotion of Private Capital Investment in Social Overhead Capital enacted in August 1994 through the abolition of the Minimum Revenue Guarantee in October 2009 and the cumulative results up to the end of 2011. It is a retrospective reconstruction by Jay-Hyung Kim of the Korea Development Institute (KDI), then Senior Fellow and World Bank Adviser, with Seung-yeon Lee of PIMAC. The report covers roughly twenty years of legal, institutional and financial evolution: four legislative phases, two procurement methods (BTO and BTL), seven government-support mechanisms, and ₩26.5 trillion of cumulative PPP investment across 595 signed projects.
The report was designed from the outset for one purpose — to share Korea's PPP experience with developing countries that are considering their own infrastructure procurement reform. A purposeful text always makes choices about what to include and what to omit. The author openly acknowledges the contested verdict on the MRG (chapter 5) and even closes chapter 6 with the line that whether the PPP is a good route in Korea is "not clear at the moment". The Companion takes that unusual concluding admission as the entry point to harder questions: why the MRG was politically irresistible in 1998 even when fiscal hazards were foreseeable, why 70 % of PPP project bids were single-bidder for many years, and what the "₩26.5 trillion of additional capital" headline figure actually means once crowding-out effects are netted.
Read this report not as a reliable neutral description, but as a subject for critical analysis. There are still two strong reasons to read it: first, it is one of the few accounts written for readers who do not know the Korean PPP context, with concrete numbers — 199 BTO and 396 BTL projects signed by end-2011, ₩1,659.5 billion paid out as MRG subsidy through 2010, an Incheon Airport Expressway whose actual traffic ran at 42–57 % of forecast for a decade. Second, how Korea narrates its own PPP experience — which choices it valorises (MOSF leadership, PIMAC as anchor institution, unified appraisal framework), which costs it tucks into footnotes (the crowding-out finding in footnote 23, the moral-hazard analysis of port operators, the single-bidder issue) — is itself a legitimate object of study.
- Diagnose your country's PPP challenges using five problem types and identify the most relevant Korean institution, legal instrument, or design choice.
- Explain the four legislative phases of Korean PPPs (1968–1994 sporadic, 1994–1998 first Act, 1999–2004 MRG era, 2005–present BTL and Risk-Sharing era) and the logic and key reforms of each.
- Identify success-bias patterns in the report (e.g., the framing of headline investment figures without the crowding-out qualifier, the treatment of MRG as a moral-hazard problem rather than a political-economy outcome) and convert what the report does not say into critical questions.
- Draft a policy memo applying Korean PPP experience critically to a specific developing-country context — choosing what to import (PPP Act unification, dedicated PPP unit, unified appraisal), what to modify (risk-sharing parameters, safeguard ceilings), and what to reject (early-period high-MRG concessions).
How This Companion Is Organised
The Companion is organised by reader problem type, not by report chapter order. Answer three questions in the 🔍 Diagnose tab and you will be routed to one of five problem types in the 📋 Type Guide. The 📚 Read the Report tab gives a roughly 25 % compression of the report's five-chapter structure (with the Background/Summary folded into a single chapter 1, and chapters 5 and 6 added as Lessons and Conclusion to match the standard KSP modular template); the 🔬 Critical Reading tab equips you to question the report's own framing — especially on the headline investment figures, the MRG verdict, and the unfinished political-economy story behind both.
Practitioner path: 🔍 Diagnose → 📋 Type Guide (your type) → confirm First Action
Course preparation path: 📚 Read the Report → 🔍 Diagnose → 📋 Type Guide (all types) → 🔬 Critical Reading
Critical reading path: 🔬 Critical Reading → Check Understanding → Scenario Writing → Further Reading
What Problem Am I Trying to Solve?
Diagnostic Tool — Find Your Type in Three Questions
Korean Experience Mapped to Your Problem Type
Type A No Unified Legal Framework for PPPs
'Our PPP projects are happening in a legal vacuum. Each line ministry uses its own sector law; investors complain there is nothing predictable to put in a bid document; concession contracts get renegotiated every time a new minister arrives. How do we put PPPs on a single legal footing?'
Korea's Experience with the Same Problem
From 1968 to 1994 Korea ran PPPs under individual sector laws — the Road Act, the Port Act and others — exactly as you do now. The system worked sporadically and produced no consistent project pipeline. The decisive move came with the August 1994 enactment of the Act on Promotion of Private Capital Investment in Social Overhead Capital, which for the first time set clear, unified criteria on concession periods, user fees and government support, and specified project implementation processes across all eligible sectors.
The 1994 Act was deliberately followed by a four-level legal hierarchy: PPP Act → PPP Enforcement Decree → PPP Basic Plan → PPP Implementation Guidelines. The architecture was designed so that most operational adjustment could happen at the Basic Plan or Guidelines level without amending the statute itself. The Act was renamed and comprehensively amended in December 1998 as the Act on Private Participation in Infrastructure, after the 1997 financial crisis exposed gaps. By 2005 a further amendment had added BTL, expanded eligible facilities to nine residential infrastructure categories, and created PIMAC as the dedicated PPP unit. The cumulative effect: 595 signed PPP projects by end-2011 under a single legal regime that investors could read and rely on.
A unified PPP Act is the foundation of every other reform — but the Act alone does not deliver PPPs. The Korean experience is that the four-level hierarchy matters more than the statute itself. The Basic Plan and Implementation Guidelines absorbed the constant operational adjustment that PPP practice demands; if those had been written into the Act, the system would have required legislative amendment every two or three years and PPP investors could not have planned beyond election cycles.
Where to Read in the Report
| Priority | Section | Why read it |
|---|---|---|
| 🔴 Essential | Ch. 2 §1 | Background in Chronology — the four legislative phases and what triggered each |
| 🔴 Essential | Ch. 2 §2.1 | Hierarchy of legal framework — the four-level Act / Decree / Basic Plan / Guidelines structure |
| 🔴 Essential | Table 1-1 | Chronological characteristics by phase — useful baseline to compare against your own country |
| 🟡 Recommended | Ch. 2 §2.2 | Authorisation under other laws — how special-act priority handles the inevitable conflicts with sector laws |
| 🟡 Recommended | Table 1-2 | The 48 eligible facility types across 15 sectors — scope of the Korean Act for direct comparison with your draft |
| ⚪ Optional | Ch. 5 §2 | Leading role of the Korean Finance Ministry — useful context for why MOSF owns the PPP Act |
The four-level legal hierarchy is the most transferable single instrument in the Korean PPP toolkit. It works in any civil-law jurisdiction; it can be adapted to common-law jurisdictions by giving the Basic Plan the status of secondary legislation. The substantive content of the Act can be borrowed almost verbatim — the 48 eligible facility types, the BTO/BTL definitions, the SPC authority — though the special-act priority clause may require constitutional review in some jurisdictions. Expect to spend roughly 18–24 months on drafting and parliamentary passage; faster is unrealistic, slower is a warning sign about political support.
This week, draft a single-page memo listing every PPP-relevant statute currently in force in your country and identifying the conflicts between them. The page is the diagnostic: where two laws say different things about land expropriation, dispute resolution or termination payments, your PPP investors face uncertainty no concession agreement can resolve. The list of conflicts is the table of contents for the unified Act you will eventually draft.
Type B Demand-Risk Transfer Gone Wrong
'We promised the toll-road operator a minimum revenue guarantee to attract them. Actual traffic is at 40 percent of forecast. The treasury is now paying out for empty roads — and the operator has no reason to do anything about it. We will be paying this for fifteen more years. How do we stop the bleeding without scaring off the next investor?'
Korea's Experience with the Same Problem
This is exactly the problem the Korean MRG produced between 1998 and 2009 — and the report's treatment of it is the most candid section. Under the original MRG (1995–2003), the government guaranteed 90 % of projected revenue for 20 years on solicited projects and 80 % for unsolicited. The 1997 financial crisis had collapsed private investment confidence; to bring concessionaires back, the 1998 Act offered terms that look — with hindsight — far too generous. By 2010, cumulative MRG payments reached ₩1,659.5 billion. The flagship Incheon International Airport Expressway ran at 42–57 % of forecast traffic for a decade and triggered ₩59–100 billion of subsidy each year. The Mokpo New Outport 1-1 ran at 12–31 % of forecast — a catastrophic shortfall — with MRG payments continuing.
Korea responded in two stages. First, tapered tightening between 2004 and 2006: by the 2006 framework, MRG was 75 % / 65 % across years 1–5 / 6–10 for solicited projects only, and unsolicited projects lost MRG eligibility entirely. Second, in October 2009, MRG was abolished altogether and replaced by the Risk-Sharing Structure (RSS) — the government shares investment cost rather than revenue, with a 50 % deductible on the private side and redemption when actual revenue exceeds the risk-sharing threshold. The conceptual move was from revenue insurance to cost insurance with a deductible. Pre-existing concession agreements continue to be honoured, but new high-MRG concessions stopped issuing.
The right lesson is not that MRG was a mistake — it was the only instrument that could revive PPP investment after the 1997 crisis. The right lesson is that early-period bargaining terms must be re-priced as the market matures. The 90 %/20-year terms made sense in 1998; they made no sense by 2003. Korea took eight years to taper and eleven years to abolish. The transferable lesson is to write a sunset or re-pricing review clause into the Act itself, so that the parameter renegotiation does not depend on political appetite at the time the fiscal cost becomes visible.
Where to Read in the Report
| Priority | Section | Why read it |
|---|---|---|
| 🔴 Essential | Ch. 2 §6.1 | MRG and Redemption of Excess Revenue — the original 1998 design and its evolution |
| 🔴 Essential | Ch. 2 §6.2 | Risk-Sharing Structure — the 2009 replacement and why it disciplines moral hazard |
| 🔴 Essential | Tables 1-5, 2-2, 2-3 | The MRG coverage parameters and the actual payments by year and by project — the numbers tell the story the text understates |
| 🟡 Recommended | Ch. 3 §1.5 | Detailed MRG payment analysis with named project shortfalls — Incheon, Cheonan–Nonsan, Daegu–Busan, Mokpo |
| 🟡 Recommended | Ch. 3 §4.2 | Concessionaire perspective on fair rates of return — 6–9 % premium vs. 2–4 % fair premium, the over-payment in the early period |
| ⚪ Optional | Ch. 2 §6.3 | Infrastructure Credit Guarantee Fund — an alternative risk-sharing instrument that did not produce MRG-style problems |
The RSS mechanism is highly transferable in concept — cost insurance with a deductible is good practice — but its operational success depends on (a) the appraising body's ability to estimate the project's cost-insurance base credibly, and (b) the legal-administrative environment's willingness to enforce the deductible when concessionaires complain. The mistake the report wants developing countries not to repeat is offering MRG-style 90 %/20-year terms to attract reluctant investors after a crisis. The honest verdict: if your country's private capital is scarce, you will face the same bargaining position Korea faced in 1998 — and your starting MRG-equivalent terms will look generous in retrospect. Write the re-pricing clause into the Act now.
This week, compile a single page for each existing concession agreement with a demand-risk-transfer clause in your country: actual revenue as percentage of forecast year-by-year, cumulative government payments to date, remaining contract years, and any re-pricing or sunset clause currently in place. If no re-pricing clause exists, you have a Korean-1998-style legacy problem and the page is the input to your renegotiation strategy. If a re-pricing clause exists but has not been triggered, the page is the input to triggering it.
Type C No Dedicated PPP Unit — Line-Ministry Capture
'Each line ministry runs its own PPPs without the skills, the data or the oversight to do it well. Deals collapse mid-bid. Concession agreements get renegotiated to death. We have no consistent VFM standard. How do we put an institutional anchor under our PPP programme?'
Korea's Experience with the Same Problem
Korea's first attempt at a dedicated PPP unit was PICKO (Private Infrastructure Investment Center of Korea), established in 1999 within the Korea Research Institute for Human Settlements (KRIHS). PICKO supported the Ministry in feasibility assessment, VFM testing and project monitoring through Phase III (1999–2004). The arrangement worked, but had a structural weakness — PICKO's host institution (KRIHS) was a sector-specific research body, which limited the credibility of PICKO's judgments outside the transport and land-use spheres.
The 2005 PPP Act amendment restructured the unit. PIMAC (Public and Private Infrastructure Investment Management Center) was created by merging PICKO with the Public Investment Management Center, both folded into KDI as an affiliated organisation. The placement inside KDI — the leading public-policy think tank in Korea since 1971 — gave PIMAC's VFM judgments credibility no inside-government unit could have claimed. PIMAC's mission, prescribed in the PPP Enforcement Decree, covers supporting MOSF in formulating the Basic Plan; assessing feasibility and VFM for potential PPP projects; supporting the formulation of RFPs and the designation of concessionaires; evaluating project proposals; promoting foreign investment; and developing and operating capacity-building programmes (including the Asia PPP Practitioners Network with the World Bank and ADB).
A dedicated PPP unit succeeds or fails on its institutional placement, not on its terms of reference. PIMAC's terms of reference were similar to what PICKO had before; the change was its location inside KDI. The lesson: place the dedicated PPP unit at arm's length from both the financing decision-maker (MOSF) and the project-implementing line ministries. The arm's-length distance — operational independence within a credible host institution — is what allows the unit's VFM judgments to be respected when they recommend rejection.
Where to Read in the Report
| Priority | Section | Why read it |
|---|---|---|
| 🔴 Essential | Ch. 2 §3.2 | Establishment of PIMAC — the institutional design that defines a dedicated PPP unit done right |
| 🔴 Essential | Ch. 5 §4 | Role of a Dedicated PPP Unit — the longer reflection on why the KDI placement matters |
| 🔴 Essential | Ch. 2 §3.1 | MOSF and the PPP Review Committee — how the PPP unit interacts with the decision body above it |
| 🟡 Recommended | Ch. 5 §5 | Standard guidelines and manuals — the body of work PIMAC produces that gives the unit substantive credibility |
| 🟡 Recommended | Ch. 2 §9 | Training and education programme — the capacity-building function that gives PIMAC durability over political turnover |
| ⚪ Optional | Sanghi et al. 2007 | The PPIAF reference on PPP units worldwide — context for understanding why Korea's design differs from peer models |
The institutional architecture is highly transferable, but the credibility of the host institution is not. Korea had KDI's 1971-founded reputation to lean on; new dedicated PPP units in countries without an equivalent anchor institution face a credibility deficit PIMAC did not. Two practical alternatives: (a) place the unit inside a multilateral-supported public-policy institute (some countries have used World Bank PPIAF support to build credible host institutions), or (b) accept that the unit will need 5–10 years to build credibility independently and structure its early reporting to maximise transparency. Do not place it inside the finance ministry directly — that closes off the appearance of independence that the unit needs.
This week, write a single page identifying the three public-policy or research institutions in your country with the most credibility — ranked by their record of being cited respectfully by both the finance ministry and the line ministries in past public-investment debates. The dedicated PPP unit needs to live inside one of them. If none of the three has the standing required, the first action is to invest in building it — which is a 5–10-year commitment that needs to start now, separately from any PPP statute drafting.
Type D No Value-for-Money Discipline in Procurement Choice
'Every project we send up gets pushed as a PPP — it keeps the cost off the budget. We have no way to compare PPP against conventional public procurement on equal terms. The result is that PPP becomes the default, not a choice based on value for money. How do we install the discipline?'
Korea's Experience with the Same Problem
The Korean response was a unified appraisal framework that applies the same VFM standard to PPP and conventional procurement, embedded in the procurement choice from the very first stage. The framework runs in three sequential phases. Phase 1 — feasibility study by cost-benefit analysis: does this project deserve to be built at all from a national-economy perspective? If no, the project is rejected and an alternative is proposed. Phase 2 — VFM study: if feasible, does PPP procurement deliver better value than conventional procurement? Government costs and project output of the public-sector comparator (PSC) are compared against the PPP option. Phase 3 — implementation: if PPP has VFM, the project is implemented as PPP; if not, as conventional procurement; if neither delivers VFM, the project is rejected.
Since 1999, most major investment projects with total costs exceeding ₩50 billion have been subjected to analysis through the preliminary feasibility study (PFS); the National Finance Act of 2006 strengthened the legal grounding for PFS. The mandatory re-assessment study of feasibility (RSF) is triggered when total project cost increases by more than 20 % from the previous phase — a discipline mechanism the report describes as "very effective in discouraging unnecessary cost increases by spending ministries and agencies" (footnote 21). PIMAC has been the hub of research on evaluation methodologies, with KDI's standard guidelines and manuals applied to all road and railroad projects through the same KT_DB transport database.
The decisive move is not adopting VFM analysis — most countries do that on paper. The decisive move is making VFM analysis the procurement-choice gateway, so that no project can be implemented as PPP without passing it and no project can be implemented as conventional procurement without passing the same standard. The unified framework prevents PPP from being a backdoor for off-balance-sheet financing of projects that would not pass a fair public-sector comparator test. Korea pairs this with the 20 % cost-overrun trigger, which prevents the appraisal from being a one-time formality.
Where to Read in the Report
| Priority | Section | Why read it |
|---|---|---|
| 🔴 Essential | Ch. 5 §3 | A Unified Framework of PPP and Traditional Procurement — the core argument |
| 🔴 Essential | Figure 4-1 | The three-phase appraisal flowchart — the operational form of the framework |
| 🔴 Essential | Ch. 5 §5 | Providing standard guidelines and manuals — the body of analytical infrastructure that makes the framework operable |
| 🟡 Recommended | Ch. 5 §7 | Tightening PPP procurement and implementation — including the re-assessment study of feasibility (RSF) at 20 % cost increase |
| 🟡 Recommended | Ch. 3 §4 | Wrap-up cost savings and efficiency gain — empirical evidence on whether the framework actually produces VFM |
| ⚪ Optional | Ch. 5 §3 (UK Green Book / NSW reference) | Comparative reference — the UK and Australian frameworks the Korean design draws on |
The unified appraisal framework is one of the most transferable instruments in the Korean PPP toolkit. The three-phase structure (feasibility → VFM → procurement choice) is mechanically identical across jurisdictions; the UK Green Book and the Australian NSW guidelines apply the same logic. The 20 % cost-overrun trigger for re-assessment is also highly transferable. The binding constraint is technical capacity for VFM modelling — public-sector comparator construction and the supporting databases — which is scarce in early-stage PPP systems. Plan to build the analytical capacity in parallel with adopting the framework, not before or after.
This week, pick one PPP project currently in your country's pipeline and run a simplified three-phase appraisal on it on paper: (a) what is the cost-benefit case for building this at all; (b) if you compare PPP to conventional procurement with realistic assumptions about financing cost, what is the VFM differential; (c) does the differential survive sensitivity testing on the two assumptions you are least sure about? The exercise is not the appraisal — it is the diagnostic. If your country cannot run this simplified version on paper for one project, your VFM-discipline gap is not regulatory; it is analytical capacity.
Type E Fiscal Control of PPP Commitments
'Our PPPs make this year''s deficit look smaller but build huge future obligations the legislature has no visibility on. The next finance minister will inherit a stack of contingent liabilities the current one accepted. How do we put a fiscal control around the programme without choking off the investment we still need?'
Korea's Experience with the Same Problem
Korea's chapter 5 §6 is the most explicit acknowledgement in the report that PPP contingent liabilities require a safeguard ceiling separate from the appraisal framework. The MRG experience by 2009 was the evidence: ₩1,659.5 billion paid through 2010 across 15 projects in operation, with more liability already locked in by signed concession agreements. The report explicitly cites IMF (2006) and OECD (2012) on the need for transparent disclosure of PPP costs and contingent liabilities — what and when the government will pay, full details of guarantees, payment streams especially if back-loaded.
The report's discussion of safeguard ceilings draws on three reference points. Brazil set a ceiling on local-government PPP fiscal commitment at 1 % of government revenue, with central-government authority to withdraw support if the local government fails to comply (chapter 5 §6, drawing on the Brazilian post-1998 fiscal-soundness reforms). The United Kingdom maintained an implicit annual cap of about 2 % of total annual government budget for PFI payments, with PFI as a whole accounting for 10–15 % of total public investment (footnote 19). Korea has been moving toward the IMF/OECD disclosure norms but, as the report acknowledges, did not have a fully implemented statutory safeguard ceiling by 2011. The report poses the questions a credible safeguard requires but does not answer them: who evaluates the ceiling; how often; mandatory or guideline; how PPP commitments affect fiscal stability and public debt; how the ceiling is reported to the legislature and whether it requires legislative approval.
The safeguard ceiling is the part of the Korean PPP system that the report admits is most incomplete. The honest reading is that Korea's fiscal control of PPP commitments by 2011 was disclosure-driven and case-by-case, not statutory and aggregate. The chapter calls for the kind of safeguard the Brazilian and UK systems use; it does not record that Korea has installed it. For a developing-country reader, this is the rare KSP topic where Korean practice is not the model — the lesson is to install the safeguard ceiling earlier than Korea did, before the MRG-style legacy obligations have already accumulated.
Where to Read in the Report
| Priority | Section | Why read it |
|---|---|---|
| 🔴 Essential | Ch. 5 §6 | A Safeguard Limit for PPP Fiscal Commitment — the chapter that frames the problem and references international practice |
| 🔴 Essential | Box 4-1 | IMF disclosure requirements for PPPs — the operational specification of what good disclosure looks like |
| 🔴 Essential | Table 2-2 | Annual MRG subsidy amounts 2001–2010 — the empirical case for why a safeguard ceiling is needed |
| 🟡 Recommended | Ch. 6 (closing chapter) | Concluding remark — the report's acknowledgement that fiscal control remains an open question |
| 🟡 Recommended | Footnote 19 | UK PFI 2 % cap reference — useful for benchmarking your own draft safeguard ceiling |
| ⚪ Optional | Ch. 5 §6 (Brazil paragraph) | Brazilian 1 % ceiling — context for understanding when a hard statutory ceiling makes sense |
The principle — that an aggregate fiscal-commitment ceiling for PPPs is needed and should be statutory rather than discretionary — is transferable. The specific ceiling level is not: 1 % of government revenue (Brazil) or 2 % of annual budget (UK de facto) are starting points but should be calibrated to the country's fiscal envelope, debt levels and the depth of its PPP pipeline. The disclosure requirements (IMF 2006 / OECD 2012) are highly transferable and should be adopted ahead of the ceiling itself — disclosure without a ceiling is at least diagnostic, whereas a ceiling without disclosure is unenforceable. The hardest political move is making the ceiling apply retrospectively to existing concession agreements; Korea has not done this and the developing-country reader probably cannot either.
This week, compile a single page showing every existing concession-agreement payment obligation your government has signed — by year, by mechanism (construction subsidy, MRG-equivalent, lease, ICGF-equivalent contingent) — for the next 1–5, 5–10, 10–20 and 20+ year horizons. The page is the input the IMF disclosure norm requires. If you cannot produce it, you have already failed the disclosure test — which is the diagnostic. If you can produce it, the page is the empirical foundation for the safeguard ceiling you will eventually legislate.
The Whole Terrain of the Report
1 Introduction — Why Korea Turned to Public-Private Partnerships
1.1 The starting point — infrastructure stress in the early 1990s
The report opens with a working diagnosis that is more fiscal than infrastructural: by the early 1990s, Korea found itself with a serious shortage of roads, railways, seaports and airports after decades of rapid economic growth — but the rate of public infrastructure investment had been falling through the 1980s, even as demand surged. The result was severe traffic congestion in roads, railways and seaports, and an emerging recognition in the Ministry of Finance that the conventional public budget would not be enough to close the gap. Public-private partnerships were not, at the start, a value-for-money instrument; they were a capital-mobilisation instrument for a government that did not see its own fiscal envelope as sufficient.
The Act on Promotion of Private Capital Investment in Social Overhead Capital, enacted in August 1994, was the first systematic legal foundation. It set clear criteria on concession periods, user fees and government support, and specified project implementation processes. But almost as soon as the Act took effect, the 1997 Asian financial crisis hit Korea hard: national debt as a percentage of GDP rose from under 10 % before the crisis to 26 % by 2004, public trust in government plummeted, and the demand for administrative reform — including reform of the public investment decision process — became impossible for politicians and bureaucrats to ignore. PPP was reconsidered, this time as both a capital-mobilisation tool and a value-for-money tool. The 1998 comprehensive amendment, renamed the Act on Private Participation in Infrastructure, introduced the Minimum Revenue Guarantee (MRG), buyout rights, foreign exchange risk sharing, and the institutional architecture that would define the next two decades of Korean PPP policy.
1.2 What a PPP is — and why definitions matter
There is no single international definition. The OECD (2008) treats a PPP as an agreement in which the private partners deliver a service in such a way that government service-delivery objectives align with private profit objectives, with effectiveness conditional on a sufficient transfer of risk to the private side. The United Kingdom defines PPPs as arrangements typified by joint working between public and private sectors, with the Private Finance Initiative as the dominant variant — service contracts in which the public sector purchases services from the private sector under long-term contracts. The Korean statutory definition is narrower and more procurement-focused: a project to build and permeate infrastructure such as road, port, railway, school and environmental facilities — traditionally constructed and run by government funding — with private capital, thus tapping the creativity and efficiency of the private sector.
The choice of definition is consequential. The Korean definition focuses on infrastructure asset creation and operation; it largely excludes pure service contracts and asset-light arrangements common in UK PFI practice. This narrow construction made Korean PPPs easier to legislate but harder to compare against, say, UK or Australian PFI experience. The point matters for transferability: a developing-country reader copying the Korean PPP Act inherits this narrow scope unless the legislation is deliberately broadened at adoption.
1.3 The headline numbers — what Korea built
By the end of 2011, the report records, roughly 600 PPP projects were under way: about 150 BTO and 250 BTL projects had been completed and were in operation. Cumulative PPP investment from 1995 to 2010 was ₩26.5 trillion — well above 10 % of annual public investment in social overhead capital. The proportion fluctuated by year, peaking at 19 % in one year of the late 2000s and reaching 16–17 % repeatedly between 2005 and 2010. Within the overall total: 199 BTO projects (77 roads, 17 ports, 8 railways, 67 environmental, 6 logistics, 24 other), and 396 BTL projects (181 primary/middle schools, 86 sewage systems, 65 military residential facilities, 16 national university dormitories, 3 railways, 45 other) — together about ₩50.1 trillion if we add BTO and BTL investment costs, the report's own cumulative measure.
| Indicator | Korea (end-2011) | Note |
|---|---|---|
| Total PPP projects signed | 595 (199 BTO + 396 BTL) | Roughly 145 BTO + 255 BTL in operation |
| Cumulative PPP investment 1995–2010 | ₩26.5 trillion | National BTO + Railway BTL only |
| BTL total private investment (end-2011) | ₩23.6 trillion | Across 396 projects, all sectors |
| Cumulative MRG payments through 2010 | ₩1,659.5 billion | Across the early-period high-guarantee concessions |
| BTO PPP share of annual SOC investment | 4 %–19 % | 2001–2010, peaking late 2000s |
1.4 Three drivers behind the 1994 enactment
The report ties the urgency to three structural drivers. The first is the infrastructure-investment gap: the rate of SOC investment had been declining in the 1980s in particular, even as economic growth raised demand for it, which drove substantial traffic bottlenecks. The second is fiscal-space pressure: the government, judging there would be limits to its ability to fund the needed construction of infrastructure facilities, had come to feel the need to induce private sector participation. The third is post-crisis demand for value for money: after 1997, the share of national debt and public expenditure could no longer be ignored as a political question; PPP was reviewed and regarded as a tool to enhance efficiency in public infrastructure investment, not merely as a financing alternative.
The 1998 amendment was passed in the immediate aftermath of the IMF programme, when the Korean government urgently needed to restore foreign investor confidence and reinvigorate the economy through private capital. The MRG, in that context, was not primarily a value-for-money mechanism — it was a concession demanded by private investors as the price of returning to a market that had just collapsed. The report frames the MRG as a design choice (chapter 2 §6.1); the political-economy reading is that it was a forced concession. Developing-country readers will not see this difference unless they read the 1997–98 macroeconomic context alongside the 1998 Act.
1.5 What the report covers — and what it does not
The report compresses approximately twenty years of institutional and financial evolution into roughly 120 pages. It is organised around five substantive chapters: (1) institutions — the legal framework, decision organisations, procurement schemes, government support, risk-sharing, concession termination, dispute mediation and training; (2) trends — BTO and BTL projects, infrastructure bonds and funds, and selected major project cases; (3) performance — financial and clause analysis of concession agreements, evidence of efficiency gains, contributions to growth and welfare; (4) success factors — seven derived lessons; and (5) the closing question, "Is PPP a good route?"
The report does not cover the political-economy of the 1998 Act amendment in any detail, the bargaining process between MOSF and individual line ministries on particular projects, the personnel arrangements at PIMAC, or comparative material from countries other than the UK, Australia and Brazil. It also has notably less to say about local-government PPPs than about central-government BTO. The reader bringing a question to the report should check first whether it falls inside the report's scope — much that one might expect from a comprehensive PPP review is simply not here.
The report does not provide a single international index ranking, but PPP-experienced jurisdictions in 2011 typically cited the UK (since 1992), Australia (since 1994), Korea (since 1994 first Act, 1998 systematic), Spain, and Portugal as the most institutionally developed Western/East-Asian PPP markets. Korea's distinctive position by 2011 was the combination of a finance-ministry-led decision process, a dedicated PPP unit (PIMAC) inside a leading public-policy think tank (KDI), and a unified appraisal framework that applied the same VFM standard to PPP and conventional procurement — features that the World Bank later highlighted as international good practice in its 2012 PPP Reference Guide.
2 Policy Design — Legal Hierarchy and Decision Architecture
2.1 The four legislative phases
Chronologically, the report divides Korean PPP history into four periods, each marked by a specific legislative or institutional turning point. Phase I (1968–August 1994) saw sporadic PPP projects under individual sector laws — the Road Act, the Port Act and others — with no unified framework. Phase II (August 1994–December 1998) began with the Act on Promotion of Private Capital Investment in Social Overhead Capital. The Act set criteria on concession periods, user fees and government support, but actual project flow remained sluggish — partly because the conditions for PPPs in the country were not yet mature, partly because the government had not yet learned to play the right role, and substantially because the 1997 financial crisis collapsed private investment.
Phase III (early 1999–2004) was the era of aggressive risk-sharing: under the new Act on Private Participation in Infrastructure (December 1998), the government introduced the Minimum Revenue Guarantee, the buyout right, foreign-exchange risk sharing, the Private Infrastructure Investment Center of Korea (PICKO) inside KRIHS, and an improved Infrastructure Credit Guarantee Fund. Solicited/unsolicited categories were formalised. Phase IV (January 2005–present) marked the introduction of BTL, the merger of PICKO into PIMAC at KDI, the expansion of eligible facilities to nine residential infrastructure categories, mandatory feasibility study for large unsolicited projects (₩200 billion or above), the revitalisation of infrastructure funds through public subscription, and — in October 2009 — the abolition of the MRG and its replacement with the Risk-Sharing Structure (RSS) based on compensation of base cost.
| Phase | Period | Defining instrument | Implementation pattern |
|---|---|---|---|
| Phase I | 1968–Aug 1994 | Individual sector laws (Road Act, Port Act, etc.) | Sporadic, ad hoc; no unified framework |
| Phase II | Aug 1994–Dec 1998 | Act on Promotion of Private Capital Investment in SOC (1994) | Sluggish; collapsed in the 1997 financial crisis |
| Phase III | Jan 1999–Dec 2004 | Act on Private Participation in Infrastructure (1998); MRG introduced; PICKO (1999); ICGF improved | Reinvigoration through generous risk-sharing; rapid project growth |
| Phase IV | Jan 2005–present | 2005 amendment: BTL added, PIMAC formed; 2009 MRG abolished, RSS introduced | Expanded scope (social infrastructure), tightened risk transfer back to private side |
2.2 The hierarchy of legal instruments
The Korean PPP framework is a four-level legal hierarchy, deliberately designed to make most operational change possible without amending the Act itself. At the top sits the PPP Act (the renamed Act on Private Participation in Infrastructure), which defines eligible infrastructure types (48 facility types in 15 sectors), procurement types, procurement processes, the roles of public and private parties, and policy supports. As a special act, the PPP Act takes priority over other acts; in particular, it exempts PPP projects from strict government regulation of national property management and allows a Special Purpose Company (SPC) to play a competent-authority role.
Below the Act sits the PPP Enforcement Decree, then the PPP Basic Plan issued by MOSF with PIMAC support, and finally the PPP Implementation Guidelines developed by PIMAC. The Basic Plan covers policy directions, project implementation procedures, financing and refinancing options, risk-allocation mechanisms, payment schemes for government subsidies and documentation instructions. The Implementation Guidelines cover VFM tests, RFP preparation, standard output specifications by facility, tender evaluation, the standard concession agreement and refinancing rules. The Basic Plan and Implementation Guidelines are updated continuously to reflect legal changes and market conditions — the report frames this as evidence of strong government commitment to strengthen private-sector confidence.
| Level | Instrument | Owner | What it sets |
|---|---|---|---|
| 1 — Statute | PPP Act | National Assembly | Eligible facility types; procurement types; roles; supports; SPC authority |
| 2 — Subordinate legislation | PPP Enforcement Decree | Cabinet | Detailed implementation rules under the Act |
| 3 — Policy directive | PPP Basic Plan | MOSF (with PIMAC) | Policy direction; risk allocation; payment schemes; documentation |
| 4 — Operational guidance | PPP Implementation Guidelines | PIMAC | VFM test; RFP; tender evaluation; standard concession; refinancing |
2.3 The decision architecture — MOSF, the Review Committee, and PIMAC
Three institutional roles define the Korean decision process. The Ministry of Strategy and Finance (MOSF) owns the PPP Act, the Enforcement Decree and the Basic Plan; it prepares the draft PPP budget and exercises tight control on public expenditures during implementation. The MOSF plays a central role in budgeting and in preparing and implementing PPP investment plans; main budget decisions are made in bilateral negotiations between MOSF and the relevant line ministry. The MOSF reconciles different opinions among parties, and when deemed necessary can postpone or block part of PPP project expenditures — a power deliberately retained as a discipline device.
The PPP Review Committee (PRC), organised and managed by MOSF under the PPP Act, deliberates on major PPP policies: establishment and modification of the Basic Plan, designation of large projects (total project cost of ₩200 billion or above), formulation and modification of the RFP for a large PPP project, designation of a concessionaire for a large project, implementation of supplementary projects, disposition for public interests, comprehensive evaluation of PPP projects, and other matters MOSF proposes. It is chaired by the MOSF minister, with vice ministers of relevant line ministries and private-sector experts as members.
The Public and Private Infrastructure Investment Management Center (PIMAC) is the dedicated PPP unit. It was established in 2005 by merging PICKO (founded 1999 within KRIHS) and the Public Investment Management Center, both folded into KDI. PIMAC's mission, prescribed in the PPP Enforcement Decree, includes supporting MOSF in formulating the Basic Plan; assessing feasibility and VFM for potential PPP projects; supporting the formulation of RFPs and the designation of concessionaires; evaluating private-company project proposals; promoting foreign investment in PPP projects; and operating capacity-building programmes — including the Asia PPP Practitioners Network Training Program with the World Bank and ADB.
The decisive design choice was to place PIMAC inside KDI rather than inside MOSF directly. KDI has served as Korea's leading public-policy think tank since 1971; its analyses already had standing with the Korean National Assembly, line ministries and the public. By making PIMAC an affiliated organisation of KDI rather than a unit of MOSF, the design gave PIMAC's VFM judgments an independence that pure inside-government units (in many other countries) struggle to claim. The report's chapter 5 §4 returns to this point as one of the seven key success factors.
2.4 Procurement methods — BTO, BTL, and the variants
Under the PPP Act, BTO and BTL are the principal eligible procurement methods, with BOT, BOO and several rehabilitate-variant methods also permitted. Under BTO (Build–Transfer–Operate), ownership transfers to government upon construction completion, and the concessionaire is granted the right to operate and gain a return on investment by collecting user fees directly. Most BTO projects are transport facilities — roads, railways, seaports. Under BTL (Build–Transfer–Lease), introduced by the 2005 amendment, ownership again transfers upon completion, but the concessionaire receives lease payments plus operational costs from government based on operational performance (availability, service quality) for a specified period. BTL is used where the concessionaire would have difficulty recovering investment through user fees — schools, welfare facilities, environmental facilities, military residences.
Korean BTO is sometimes confusing to international readers because it functions like BOT in other jurisdictions: the operation period is private, but the transfer happens at the start rather than the end. The report explains this in a footnote — most Koreans have less willingness to accept private ownership of public goods, especially during the operation and maintenance period, so Korean practice requests a transfer of the PPP property ownership in advance, before the operation period.
2.5 Government support — the six instruments
The 1998 Act and subsequent revisions established six categories of government support, each with its own logic. Land expropriation rights: under the PPP Act, the concessionaire can be granted land-expropriation authority by the competent authority (a power normally reserved to the state), with land acquired through a defined process if voluntary negotiation fails. Construction subsidy: a fixed payment during the construction phase, used to ensure project feasibility when user fees alone would not cover capital costs. Tax incentives and regulatory relief: special taxation, corporate tax breaks, local tax exemptions and exceptions from charges, all stipulated in the PPP Act and elaborated in the Basic Plan. Compensation for bid costs: government covers a portion of preferred-bidder bid preparation costs. Risk-sharing mechanisms: the MRG (1998–2009) and its successor Risk-Sharing Structure (2009–), the Infrastructure Credit Guarantee Fund, the buyout right and early termination payments. Concession termination: detailed guidelines covering default by concessionaire, default by government, political and non-political force majeure.
3 Implementation — Risk Sharing, Major Projects, and What Actually Happened
3.1 The implementation structure — eight periods of evolution
The Korean PPP implementation structure evolved through eight distinct sub-periods between 1994 and 2011. Each is anchored by a specific institutional or risk-sharing change, and reading the table below is the fastest way to grasp how the design responded to experience.
| Period | Institutional core | Risk-sharing approach |
|---|---|---|
| 1968–1994 | Individual sector laws; no unified PPP unit | Project-specific, ad hoc |
| 1994–1998 | Act of 1994; no central PPP unit yet | Initial framework; sluggish private response |
| 1999–2003 | PICKO inside KRIHS (est. 1999) | MRG at 90 % of projected revenue for 20 years (solicited); 80 % for unsolicited |
| 2004–2005 | PICKO continues; preparation for restructuring | MRG tapered: 90/80/70 % over years 1-5/6-10/11-15 (solicited); 80/70/60 % (unsolicited) |
| 2005–2006 | PIMAC formed within KDI; PICKO merged | BTL added; MRG continues for solicited only |
| 2006–2009 | PIMAC role expanded; unified appraisal framework | MRG further tightened: 75/65 % years 1-5/6-10 (solicited); MRG abolished for unsolicited |
| Oct 2009–2010 | PIMAC mature; National Finance Act (2006) PFS extended | MRG fully abolished; Risk-Sharing Structure (RSS) introduced — compensation of base cost |
| 2010–2011 | PIMAC, RSS, fund-based financing all in place | RSS in use for solicited high-public-benefit projects; capacity building scaled |
3.2 The MRG era — promise, performance, problem
The Minimum Revenue Guarantee was the defining instrument of Korean PPP between 1998 and 2009, and it is the report's most contested chapter. Under the MRG, the government guaranteed a private participant a defined percentage of expected revenue for a defined period; if revenue fell below the guaranteed level, the government covered the shortfall; if revenue exceeded a defined upper limit, the government redeemed the excess. Both sides of the band were stipulated in the concession agreement. Coverage tightened over time, as table below shows.
| Concession period | Solicited MRG / redemption band | Unsolicited MRG / redemption band |
|---|---|---|
| 1995–2003 (years 1-20) | 90 % / 110 % | 80 % / 120 % |
| 2004–2005 (years 1-5) | 90 % / 110 % | 80 % / 120 % |
| 2004–2005 (years 6-10) | 80 % / 120 % | 70 % / 130 % |
| 2004–2005 (years 11-15) | 70 % / 130 % | 60 % / 140 % |
| 2006 (years 1-5) | 75 % / 125 % | None |
| 2006 (years 6-10) | 65 % / 135 % | None |
| Oct 2009 onward | None — replaced by Risk-Sharing Structure | None |
What happened in practice was sobering. Until 2010, about ₩1,659.5 billion were paid to PPP projects as MRG. The number of MRG-subsidised projects rose from 1 in 2001 to 15 in 2010, and the annual amount paid climbed from ₩59.1 billion in 2002 to ₩379.2 billion in 2010 — and the report notes that as more projects move into the operational phase, the MRG subsidy amount is expected to increase further. The Incheon International Airport Expressway, the first BTO project (signed 1995, opened 2000), guaranteed 80 % of projected revenue for 20 years; actual traffic ran at 42–57 % of forecast through the late 2000s, triggering between ₩59 billion and ₩100 billion of subsidy each year. The Cheonan–Nonsan Expressway (82 % guarantee, 20 years) ran at 47–58 % of forecast; the Daegu–Busan Expressway (77 %, 20 years) at 55–62 %; the Mokpo New Outport 1-1 port project (79/77 %, 20 years) ran at 12–31 % of forecast — a catastrophic shortfall in the second half of the decade.
The report frames the MRG as suffering from two design flaws. First, the government took on most of the project risks but provided unreasonably high returns to private participants — in the early years, returns to BTO projects exceeded the 5-year Treasury bond yield by 5 %–8 %, which is far above any reasonable risk premium for a contract whose downside is already covered. Second, the MRG discouraged the project company from maximising revenue — a moral-hazard problem most acute in port projects, where the main user of the facility was sometimes the project company itself. Private port operators eligible for MRG subsidies had no incentive to increase port traffic. The 2009 abolition was the eventual response.
3.3 The Risk-Sharing Structure (RSS) — the 2009 replacement
The new structure introduced in October 2009 is fundamentally different in concept. The government no longer guarantees a percentage of revenue; it shares investment risk, defined as the sum of private investment cost plus the interest rate of 5-year government bonds during construction. The share of investment risk caps the government's exposure; payments are made only when actual operational revenue falls short of that share. The private participant receives subsidy only when actual operational revenue surpasses 50 % of the share of investment risk — a deductible that disciplines effort. When actual operational revenue exceeds the share of investment risk, government subsidies are redeemed on the basis of and within the limit of the amount previously paid.
The conceptual move is from revenue insurance to cost insurance with a deductible. The report argues that the former encouraged private participation but caused moral hazard because of the unreasonably low risks to the private participant, whereas the latter decreases investment risk for private participants while preserving their motivation to make profit. RSS applies to solicited projects with significant public benefits — a deliberate narrowing of the population eligible for any form of government risk-sharing.
3.4 The Infrastructure Credit Guarantee Fund and project finance
Beyond the MRG/RSS axis, the Infrastructure Credit Guarantee Fund (ICGF) has provided credit guarantees to concessionaires since 1994 — the legal basis is Article 30 of the PPP Act, with management by the Korea Credit Guarantee Fund. ICGF consists of annual government subsidies, guarantee fees and investment returns; when a project defaults, ICGF subrogates and pursues recovery. The fund has been a quiet but consistent presence: it lowered the effective cost of debt for concessionaires and made bank financing of PPP projects feasible at scale.
Beyond ICGF, the report describes two private-financing channels — infrastructure bonds (a separate 14 % tax rate on interest revenue for bonds with 15-year or longer maturities, under Article 29 of the Restriction of Special Taxation Act) and infrastructure funds (mutual-fund vehicles for indirect investment, established under Articles 41–44 of the PPP Act). Take-up of infrastructure bonds has been limited because PPP projects need staged funding rather than lump-sum issuance, and because refinancing typically requires creditor consent that is harder to obtain across multiple bondholders. Infrastructure funds have been somewhat more successful — by November 2010 there were one public fund and several private equity funds active in the market.
3.5 Major project cases — six anchors for the system
The report's chapter 2 §4 highlights six projects that anchor the Korean PPP narrative. Incheon International Airport Expressway (BTO toll road #1): ₩1,334 billion total, 40.2 km, 8 lanes, equity/debt/subsidy 25 %/59 %/16 %, 30-year operational period, MRG 80 % for 20 years — completed 2000, refinanced subsequently to all-financial-institution equity. Seoul Beltway Northern Section: ₩1,471 billion, 36.3 km of a 128 km total beltway, MRG 90/110 % for 20 years — completed 2006–2008 in phases; actual demand hovered around 130 % of expected demand and the government received excess-revenue redemption from 2006, using it to lower tolls.
Busan New Port Phase 1: ₩1,648 billion, 9 berths, 50-year operational period, no MRG. The participation of DP World as a 25 % equity holder marked an early example of foreign strategic investor presence. Metropolitan Landfill Gas Power Plant: ₩77.2 billion BTO, 50-MW capacity, 11-year operational period, MRG 90 % for 11 years — the first project explicitly framed in greenhouse-gas-reduction terms. Chungju Military Apartment Housing: ₩18.6 billion, the first BTL project ever in Korea, dedicated March 2007, 200 families housed, 95 %+ resident satisfaction. Ulsan National Institute of Science and Technology (UNIST): ₩250 billion, the first BTL entire-campus construction project — opened February 2009.
'Despite changes designed to encourage private investment, private investment sharply declined due to the financial crisis that hit the nation in late 1997. The amount of actual PPP activity during this period remained quite sluggish. From the viewpoint of policy makers, the immediate aftermath of the financial crisis was a period when they badly needed expanded private investment into social infrastructure, to stimulate the economy and foreign direct investment to upgrade the Republic of Korea's sovereign credit rating to overcome the financial crisis.' — chapter 2 §1, on the 1994–1998 collapse
3.6 Concession termination — the four-category framework
PPP projects can be terminated early for various reasons; concessionaires are compensated for estimated future profits at termination. The 2004 revision of the termination guidelines codified four default categories with distinct payment formulas. Default by concessionaire (during construction): the incurred private investment amount, with operating-period payments at depreciated value. Default by government: the incorporated private investment amount times one plus the current IRR, with operating-period payments as a weighted average of depreciated investment and present value of the remaining operating period. Non-political force majeure: the incurred private investment amount times one plus the standard debt interest rate. Political force majeure: a midpoint formula. The framework eased the burden on government across categories from the looser early-stage practice (1995) and referenced toll-revenue data to take a more realistic approach.
4 Outcomes — What the Performance Analysis Actually Shows
4.1 The aggregate output — what got built
By end-2011, Korea had signed 595 PPP projects totalling roughly ₩50 trillion of private investment cost across BTO and BTL combined. Of the 199 BTO projects, 145 were in operation, 32 under construction and 22 in preparation for construction; of the 396 BTL projects, 255 were in operation, 121 under construction and 20 preparing for construction. Sectorally, BTO was dominated by roads (77), environmental facilities (67), ports (17) and other facilities; BTL by schools (181), sewage systems (86) and military residences (65). The proportion of PPP investment to public investment in SOC ranged from 4 % in 2001 to 19 % at peak, with 16–17 % being typical in the late 2000s. This is not, by international comparison, a small programme.
4.2 Efficiency from three perspectives — users, concessionaires, government
The report's chapter 4 analyses efficiency from three perspectives: users, concessionaires, and government. The findings are mixed and important for honest reading.
From the user perspective, PPP toll roads are still more expensive than equivalent government-financed roads — in the early period, PPP tolls on the Incheon Airport Expressway were 2.54 times the equivalent government-financed toll; on the Cheonan-Nonsan and Daegu-Busan expressways, the ratio was around 2.0; on the Mt. Woomyeon tunnel, 1.4. The gap has narrowed over time — by mid-2000s contracts, the ratio is closer to 1.5 — but it has not closed. The user pays a premium for the PPP delivery mode, in exchange for earlier completion than fiscal scheduling would have allowed.
From the concessionaire perspective, returns were high — and competition was low. Real rates of return on road BTO projects ran at 6–9 % and nominal returns at 11–14 %, with the premium against the 5-year government bond yield at 6–9 %. PIMAC's 2006 estimation of fair rate of return found the appropriate premium to be only 2–4 % on average; the early concession agreements over-paid the private side by 2–5 percentage points. Even more striking, about 70 % of PPP projects involved a sole bidder; only about 30 % had more than one bidder, and there was no significant difference in competition between solicited and unsolicited projects. The premium narrowed in the road sector over time, but the bidding-process pathology was structural — the report acknowledges that "solicited projects may have been carried out less efficiently" than the design intent.
From the government perspective, the picture is most complex. The government supervises and controls projects through concession agreements; it transfers some risks to private participants but retains quality-control responsibility and shares demand risk through MRG. Quality control evolved from coverage of construction-period indemnities (1994) to full quality-assurance plans including ISO 9001/14001 standards (2005, New Boondang Railway). MRG payments became a significant fiscal burden — the ₩1,659.5 billion paid through 2010 imposed a real cost on national budget and pushed the abolition decision in 2009.
| Efficiency dimension | Direction over time | Indicator |
|---|---|---|
| User-fee gap PPP vs. public | Narrowing | Ratio fell from 2.54 to ~1.5 in road sector |
| Real rate of return to concessionaires | Declining | Closer to estimated fair return as competition increased |
| Competition in bidding | Slowly improving | Number of bidders rose over time but ~70 % single-bidder in early years |
| MRG annual subsidy | Rising then capped | From ₩59 bn (2002) to ₩379 bn (2010); abolished 2009 prospectively |
| Quality-control specification | Tightening | From construction indemnity (1994) to ISO 9001/14001 plans (2005) |
4.3 Contribution to economic growth — the macroeconomic estimate
Using the KDI macroeconomic model, the report estimates that PPP investment contributed roughly 0.198 % of GDP growth in 2008 — up from 0.035 % in 2001. The growth contribution rose steadily through the decade: 0.035 % (2001), 0.052 % (2002), 0.048 % (2003), 0.060 % (2004), 0.094 % (2005), 0.127 % (2006), 0.154 % (2007), 0.198 % (2008). Each ₩1 trillion increase in capital expenditure expanded GDP by 0.02 % in the year of execution and 0.01 % in the following year, though with mild contraction in the fourth and fifth years.
Footnote 23 of the report cites a study by Rhee and Lee finding that the promotion of PPP projects results in a decline in fiscal investment by the government — implying a crowding-out effect of PPPs on public investment — and therefore does not have a significant effect on total investment. The report frames this as a partial result, but it is consequential: if PPPs simply substitute for fiscal SOC investment, then the headline ₩26.5 trillion figure is not net additional infrastructure capital. The report does not draw this conclusion explicitly; the reader has to draw it.
4.4 Contribution to social welfare — earlier completion
The report estimates the welfare contribution of PPPs by treating the alternative as fiscal-investment-with-delay. For 14 PPP roads in operation by end-2008, the comparison was: if the same roads had been built fiscally, completion would have been delayed by at least one year (sometimes two), given the average annual road budget of ₩7.85 trillion over 2000–2008. The discounted user welfare from 30 years of operation at the earlier completion date, compared with delayed scenarios, yields a substantial benefit estimate — though the analysis depends heavily on the assumed delay length and discount rate. The honest reading is that PPP delivers infrastructure earlier than fiscal scheduling would, and that earlier delivery has welfare value; how large that value is depends on assumptions the reader can check.
4.5 What the outcome analysis does not measure
The report's chapter 4 analysis has notable gaps that the careful reader should note. Quality of delivered services is not systematically measured — there is no comparative service-quality table across PPP and fiscal facilities, only the indication that quality-control clauses have tightened over time. Distributional effects of higher user fees are not analysed — who pays the toll premium, and whether the burden falls regressively, is not addressed. Renegotiation outcomes after concession agreement signing are touched on in §3, but the size and frequency of renegotiation are not quantified across the BTO portfolio. Long-run fiscal effects beyond the MRG payments are not modelled — the present-value future obligation under remaining concession agreements is not stated in the report, and disclosure norms (IMF 2006, OECD 2012) are discussed only as recommendations Korea was working toward, not as practices fully in place by 2011.
The outcomes can be read in three lines. Capital mobilised: ₩26.5 trillion cumulative 1995–2010, 4–19 % of annual SOC investment. Cost to government: ₩1.66 trillion in MRG payments through 2010, with more to come; toll-user premium of 1.5–2.5x government rates. Output: 145 BTO and 255 BTL projects in operation by end-2011, plus 175 more under construction or preparation — a portfolio that no purely fiscal scheduling could have delivered on the same timeline.
5 Lessons — Seven Success Factors and Their Boundary Conditions
5.1 The seven key success factors
The report's chapter 5 distils seven factors that, in the authors' reading, drove Korean PPP performance. Each is worth holding alongside the boundary condition that determined whether it was specific to Korea or transferable elsewhere.
| # | Success factor | What it actually depended on in Korea |
|---|---|---|
| 1 | Post-crisis demand for better VFM | The 1997 financial crisis broke the political legitimacy of business-as-usual public investment; without that crisis, neither the 1998 Act nor the demand for VFM analysis would have been politically possible |
| 2 | Leading role of the Ministry of Strategy and Finance | MOSF held both budget power and PPP Act authority; in countries where infrastructure budget and infrastructure regulation sit in different ministries, the unified leadership cannot be replicated by structural change alone |
| 3 | A unified framework for PPP and traditional procurement | The three-phase appraisal (feasibility study → VFM study → procurement choice) applied the same standard to PPP and conventional procurement, preventing PPP from being a backdoor for off-balance-sheet financing |
| 4 | A dedicated PPP unit (PIMAC) with independent standing | PIMAC's institutional placement inside KDI gave its VFM judgments the credibility that an internal MOSF unit could not have provided; the 1971 founding date of KDI matters |
| 5 | Standard guidelines and manuals for the analysis | The PPP VFM Guidelines, RFP templates, standard concession agreement and refinancing rules created cross-project comparability; line ministries developed their own evaluation guidelines using the PIMAC benchmark |
| 6 | A safeguard limit for PPP fiscal commitment | Disclosure-driven discipline (IMF 2006, OECD 2012 norms) and, in some peer countries, hard ceilings (Brazil's 1 % of revenue, UK's de facto 2 %); Korea was working toward this rather than fully implementing it by 2011 |
| 7 | Tightening PPP procurement and implementation | The competitive bidding process and the mandatory re-assessment study of feasibility (RSF) when total project cost rises by more than 20 %; this is enforceable only when the appraising agency has standing to refuse |
5.2 Lessons by stage of PPP system maturity
The seven factors do not all operate at the same stage of system development. The table below maps them to a four-stage maturity model — a useful diagnostic for developing-country readers asking which lessons apply now.
| Stage | What is in place | Korean lessons that bind first |
|---|---|---|
| Stage 1 — pre-PPP | Individual sector laws; no PPP statute; donor-led pilots | Factors 1 and 2 — political legitimacy and finance-ministry leadership; without these, even the best statutory drafting fails to produce a working PPP market |
| Stage 2 — first PPP Act | A statute exists; no dedicated PPP unit; ad hoc appraisal | Factors 3 and 4 — unified appraisal framework and a dedicated PPP unit; without these, PPP becomes the off-balance-sheet escape hatch the report warns against |
| Stage 3 — risk-sharing era | PPP unit functional; first wave of MRG-style guarantees; visible fiscal cost emerging | Factors 5 and 6 — standard guidelines and safeguard limits; without these, the moral-hazard and crowding-out problems compound |
| Stage 4 — mature PPP system | Unified framework operational; risk-sharing tightened; capacity-building ongoing | Factor 7 — tightened procurement and implementation; the marginal returns of further institutional change become smaller, but so does the cost of operational error |
5.3 Transferability — what travels and what does not
Not every Korean success factor transfers. The table below records the report's claims alongside an honest verdict on transferability — what works elsewhere as-is, what needs heavy modification, and what is Korea-specific in ways the reader should not paper over.
| Korean instrument | What travels | What is Korea-specific |
|---|---|---|
| PPP Act four-level hierarchy (Act → Decree → Basic Plan → Guidelines) | Highly transferable; the design is replicable in any civil-law jurisdiction | The Korean "special act" takes priority over other laws; in jurisdictions without statutory hierarchy of this kind, alternative drafting is needed |
| MOSF-led decision process | The principle (finance ministry as PPP gatekeeper) is transferable | The specific powers MOSF holds — budget authority + PPP Act ownership + chair of PRC — usually sit in separate ministries elsewhere |
| PIMAC-style dedicated PPP unit inside a public think tank | The institutional split between the appraising body and the financing decision-maker is transferable | Korea had KDI's 1971-founded reputation to lean on; new units in countries without such anchor institutions face credibility challenges PIMAC did not |
| Unified appraisal framework (feasibility → VFM → PPP/CP choice) | Highly transferable; the UK Green Book and the Australian NSW guidelines are similar | Requires technical capacity for VFM modelling that is scarce in early-stage PPP systems |
| MRG (1998–2009) | The mechanism is technically transferable but should not be replicated as designed | Korea's 90 %/20-year initial parameter was a forced concession after the 1997 crisis; the early generosity is the lesson not to repeat |
| Risk-Sharing Structure (2009–) | Highly transferable; the cost-sharing-with-deductible logic is good practice | Requires a credible legal-administrative environment to enforce the deductible |
| Mandatory re-assessment study of feasibility (RSF) at 20 % cost increase | Highly transferable; the mechanism disciplines cost growth without slowing approval | Effectiveness depends on the appraising body's institutional standing |
5.4 Six conditions that determined what Korea could do
The honest reading of the report is that Korean PPP performance depended on six background conditions that the reader's country may or may not share. (i) A unified finance ministry with both budget and PPP-statute authority; in most developing countries these powers are split, and the unification is hard to engineer. (ii) A pre-existing public-policy think tank of national standing (KDI) into which the dedicated PPP unit could be placed; new think tanks take a decade or more to acquire equivalent credibility. (iii) A legal-administrative environment in which special-act priority is enforceable; in many jurisdictions the PPP Act would have to navigate around constitutional limits on land expropriation, national-property management and SPC authority. (iv) A capital market deep enough to issue infrastructure bonds and funds in domestic currency at acceptable cost; Korea developed this only gradually and even by 2010 infrastructure-bond utilisation was low. (v) A political system willing to abolish the MRG when its fiscal cost became visible; the 2009 decision was not automatic — it required active political-economy work. (vi) Sustained capacity-building (PIMAC's Asia PPP Practitioners Network, MOSF training programmes); without continuous investment in human capital on both the public and private sides, the standard guidelines do not get applied.
Korea's PPP framework matured in a country with GDP per capita that rose from roughly USD 11,000 in 1995 to USD 22,000 in 2010, and where private capital was domestically available at moderate cost. A developing country whose private capital is scarce, expensive, or held in foreign currency faces a fundamentally different bargaining position with potential concessionaires. The Korean experience teaches what institutional architecture is needed; it does not, by itself, teach how to obtain risk-pricing power against a sole bidder who knows you have no alternative.
5.5 What the report does not derive as a lesson
The report's chapter 5 names seven success factors. Three further lessons emerge from the same evidence base but are not explicitly drawn — the careful reader can ask why. The political-economy of early concession terms: why was Korea, in 1998, willing to accept 90 % / 20-year MRG terms that were obviously generous? Because the immediate post-crisis bargaining position was weak. The lesson — bargain harder when private capital is scarce — is not stated. The competition problem: 70 % single-bidder rates are recorded but no specific structural reform is recommended; the implicit lesson is that something in Korean construction-sector concentration limits the achievable bidder count, but the lesson is not generalised. The crowding-out qualifier: footnote 23 records Rhee and Lee's finding that PPPs may not be net additional capital; no lesson is drawn about what to do if your country's PPP programme is in fact substituting for fiscal investment rather than supplementing it.
6 Conclusion — "Is PPP a Good Route?" The Unresolved Question
6.1 The report's own honest closing
Chapter 6 of the report carries a title that, by KSP standards, is unusually candid: "Concluding Remark: Is PPP a Good Route?" The answer the authors give is also unusual: not clear at the moment. They acknowledge that evaluating PPPs is extremely difficult both in theory and in practice, because of the conceptual slipperiness of the comparison (private vs. public cost) and because so many disciplines need to be reconciled — economics, accounting, law, political science, engineering. They cite Hodge (2010) noting that different reviewers see the same results differently, and acknowledge that evaluation has also proved difficult because of the inherently political nature of the decision-making process, which acts as a distorting lens.
The report goes further. It records that PPPs have proven popular in many countries for many bad reasons as well as good — Boardman and Vining (2010) note that governments like PPPs because they postpone government cash outlays, allow project costs to be placed off budget, improve government net cash flow, reduce the transparency of government finances, transfer risks to the private sector, and reduce exposure to political risk. Even in the UK, the main motive for encouraging PFIs was to reduce or minimise the budget deficit; in the US, to pay later (and sometimes considerably more). This is the kind of acknowledgement the typical KSP report does not make. The reader should not pass it without pause.
6.2 Constraints and the solutions the report proposes
| Constraint | Korean response | Honest verdict |
|---|---|---|
| Infrastructure investment shortfall vs. fiscal envelope (early 1990s) | PPP Act 1994; private capital mobilised at scale | Worked at mobilisation; partially substitutes for rather than supplements fiscal SOC investment per the Rhee and Lee finding |
| Lack of value-for-money discipline in conventional procurement | Unified appraisal framework; preliminary feasibility study (PFS) for projects ≥ ₩50 billion; mandatory VFM analysis | Highly transferable design; effectiveness depends on the appraising body's standing |
| Generous risk-sharing terms (1998–2009 MRG) | Recognition of moral hazard; phased tightening 2004–2006; abolition 2009 with Risk-Sharing Structure replacement | The eventual fix is right; the original error cost ₩1.66 trillion through 2010 |
| Single-bidder market structure (~70 % of projects in early years) | No structural reform recommended; competition increased gradually as market matured | Unresolved; the report acknowledges but does not address |
| Contingent liability disclosure | Move toward IMF (2006) and OECD (2012) disclosure norms; PPP Review Committee oversight | Partial; no statutory safeguard ceiling on aggregate PPP fiscal commitment by 2011 |
| Comparison of PPP vs. conventional procurement performance | Microeconomic efficiency analysis (chapter 4); macroeconomic growth contribution estimate | Suggestive rather than conclusive; the report itself notes empirical tests of VFM are not conclusive |
6.3 The unfinished agenda
The report closes with three open agenda items that the reader's policy memo should engage. The political-economy of PPP adoption is not analysed: why does a government choose PPP over fiscal procurement in a specific project? The report describes the appraisal framework but does not trace which projects entered the PPP pipeline through the appraisal route and which through political initiative. The cumulative fiscal commitment is not stated: the report does not present a single number for the present value of all future government payments under existing concession agreements (MRG, BTL lease, construction subsidy, ICGF contingent liabilities). Without this figure, the safeguard-ceiling discussion in §5 cannot be operationalised. The performance evaluation framework is incomplete: the closing chapter calls for "more rigorously handled comprehensive framework of analysis with a broader scope of perspectives from microeconomic to macroeconomic points of view", including multidisciplinary approaches and comparative studies. This is an admission that the report's chapter 4 is a beginning, not a conclusion.
6.4 What the PPP experience really teaches
The strongest reading of the report is not that Korea succeeded by mobilising private capital — that is the report's headline reading, but it works only with the crowding-out qualifier hidden in footnote 23. The stronger reading is that Korea succeeded because each PPP-implementation period produced an institutional residue that survived political turnover: PICKO at KRIHS survived to become PIMAC at KDI; the MRG framework survived in modified form as the Risk-Sharing Structure; the PPP Basic Plan and Implementation Guidelines accumulated through five revisions without losing continuity. Institutions accumulate; the headline numbers (₩26.5 trillion mobilised, 595 projects signed) are visible but the institutional architecture under them is what travels.
If you have one week back in your office, do not draft the list of PPP candidate projects. Draft the institutional architecture that will outlast any one project. Korea mobilised ₩26.5 trillion on top of a PPP Act that placed the finance ministry as gatekeeper, a Basic Plan that could be revised without amending the statute, a dedicated PPP unit at arm's length from the financing decision-maker, and a unified appraisal framework that applied the same VFM test to PPP and conventional procurement. Without that institutional architecture, the same ₩26.5 trillion would have produced fiscal stress without delivery quality, exactly as it has in several other countries that copied Korean numbers but not Korean institutions.
6.5 First action — concrete and specific
This week, write a single page on the institutional split your country has — or does not have — between (a) the body that decides which projects enter the PPP pipeline, (b) the body that conducts the VFM analysis, and (c) the body that signs the concession agreement. Two questions: are these three different bodies, or are some of them the same body wearing different hats? And does the VFM-analysing body have institutional standing to recommend rejection? If the answers are "same body" and "no", then your country has the formal apparatus of a PPP system but not the discipline. The page is the seed of every later decision — choice of risk-sharing parameters, safeguard ceiling design, capacity-building priority. Most PPP programmes that have collapsed under fiscal stress in the last fifteen years collapsed not on project failure but on the absence of this page.
This Companion is a learning aid produced for the Ministry of Strategy and Finance · KDI School of Public Policy and Management, KSP Knowledge Sharing Program — Public–Private Partnerships: Lessons from Korea on Institutional Arrangements and Performance (Jay-Hyung Kim and Seung-yeon Lee, 2013). Use alongside the original report.
What This Report Does Not Say
1 Success Bias — What the Report Says and What It Leaves Out
The purpose of this report is "to share Korea's PPP experience with developing countries." Look for the traces that purpose has left in the text. A purposeful text always makes choices about what to include and what to omit. A report having success bias does not mean it lies — it means it selects. Reading well is reading what is selected against. This report is unusual among KSP volumes in that chapter 6 carries the title "Is PPP a good route?" and answers "not clear at the moment." That candor opens the door for everything else in this Companion.
| What the report says | What the report does not say |
|---|---|
| "₩26.5 trillion of private capital mobilised through PPPs 1995–2010 — over 10 % of annual SOC investment" | Footnote 23 (Rhee and Lee) records that PPP investment crowds out fiscal SOC investment, with no significant effect on total investment. If true, the headline figure is not net additional capital; it is a recomposition of who delivers it. |
| "The 2009 abolition of the MRG addressed the moral-hazard problem" | The MRG was politically irresistible in 1998 because the 1997 crisis had collapsed private-investor confidence; the 90 %/20-year terms were a forced concession, not a design choice. The 2009 abolition only became possible after the fiscal cost (₩1.66 trillion by 2010) had already accumulated. The framing as a design correction omits the political economy. |
| "PPP projects show efficiency gains: user-fee gap narrowed, returns to concessionaires came down, MRG levels decreased" | About 70 % of PPP projects involved a sole bidder; there was no significant difference in competition between solicited and unsolicited projects. The headline efficiency gains operated within a structurally uncompetitive bidder pool the report flags in chapter 3 §4.2 but does not propose any remedy for. |
| "PIMAC inside KDI is the institutional innovation that anchored the system" | PIMAC's credibility came from KDI's 1971 founding date and 35 years of prior standing as Korea's leading public-policy think tank. A country adopting the PIMAC architecture without an equivalent host institution may end up with the formal apparatus but not the credibility — a point the report acknowledges in chapter 5 §4 only obliquely. |
| "The unified appraisal framework prevents PPP from becoming a backdoor for off-balance-sheet financing" | The report does not state the present value of all future government payments under existing concession agreements (MRG legacy + BTL leases + construction subsidies + ICGF contingent liabilities). Without that single number, the appraisal framework cannot be calibrated against an aggregate ceiling. Chapter 5 §6 calls for the ceiling but does not record that Korea has installed it. |
Find Success Bias for Yourself
For each pattern below, find one quotation from the report, write it down, and write the question that hides behind it.
| Pattern of statement | What to look for in the report |
|---|---|
| Achievement stated, cost omitted | Find a sentence with "successfully" or "efficiency gains" in chapter 3 or 4. Then ask what the matching fiscal cost was, and where in the report that cost appears (often in a table or footnote). |
| Forced concession framed as design choice | The 1998 MRG terms (90 % / 20 years on solicited projects) are described in chapter 2 §6.1 as a design choice. Re-read them as a bargaining concession after the 1997 market collapse. Does the framing change the assessment of who bore the risk-pricing failure? |
| Structural pathology flagged but not addressed | Chapter 3 §4.2 records that about 70 % of PPP projects had sole bidders. The report does not recommend any structural remedy. Why? What would a remedy look like, and what does the absence of one tell you about Korean construction-sector concentration? |
| Counter-evidence in footnotes | Footnote 23 (Rhee and Lee — PPPs may crowd out fiscal SOC investment) is the report's clearest counter-narrative to the headline mobilisation figure. Read it alongside chapter 4 §5; the contrast re-frames the entire macroeconomic-contribution argument. |
| Causation conflated with succession | Chapter 4 §5 attributes 0.198 % GDP growth contribution in 2008 to PPP investment. But the same period saw a rise in private SOC investment overall (PPP + non-PPP). How much of the growth contribution is the PPP effect specifically, and how much is the general private-investment expansion? |
2 Check Your Understanding
Answer the questions below to check your grasp of the report and this Companion.
3 Scenario Writing — What Would You Have Done?
This scenario presents an implementation barrier encountered in the field. The goal is to engage with real-world complexity, not textbook solutions. Read the questions below and write your response freely. Nothing you write is saved or shared.
Scenario
You are Daniel Mendes, a mid-level officer in the PPP unit of your country's Ministry of Finance. The Minister has personally directed that the new ₩1.2-trillion-equivalent North-South Expressway be procured as a BTO concession with a 90 % minimum revenue guarantee for 20 years, signed within 60 days. The Minister's justification is that the road must open before the next national election and only a high-MRG package will attract concessionaires given recent capital-market turbulence.
Your technical staff have run the demand forecast three different ways. The optimistic case (Ministry of Transport demand model) projects 75 % of bid-case traffic. The central case (your own PPP unit's 10-year traffic series) projects 55 %. The conservative case (an external advisor accounting for the parallel free-route expansion that the Ministry of Infrastructure has independently announced) projects 38 %. If the central case is right, the MRG will trigger fiscal payments of roughly ₩90 billion per year for the entire concession period — for a single road, that is roughly the annual MRG cost of the entire mid-2000s Korean MRG portfolio.
The Minister's chief of staff calls you Wednesday morning. He says the Minister has reviewed your technical brief and has authorised you to negotiate the MRG down to 80 % to "address the technical concerns". You have until Friday to bring a recommendation. The lead bidder — the only one to clear pre-qualification — has indicated that anything below 75 % MRG will cause them to withdraw their bid. The political risk of an empty bidder list outweighs, in the Minister's view, the fiscal risk of a high MRG.
The Minister wants your recommendation by Friday. The lead bidder wants signature by month-end. The Director-General of your unit — to whom you formally report — has been silent on the matter for ten days. What do you write?
Core Tensions in This Scenario
| Conflicting Values | Fundamental question |
|---|---|
| Political deadline vs. forecast realism | The election horizon is two years; the concession horizon is twenty. How do you write a recommendation that respects the Minister's political mandate while honestly recording the 20-year fiscal exposure? Where in the brief does the forecast risk become un-negotiable? |
| Sole-bidder bargaining position vs. fiscal exposure | A single qualified bidder gives you no negotiating leverage on the MRG floor — every concession to the technical case strengthens the bidder's walk-away threat. What is the cost of postponing procurement six months to rebuild bidder competition versus signing under duress now? Korean experience suggests the postponement cost is overstated and the signature cost understated. |
| Executive discretion vs. legislative disclosure | A 20-year MRG creates a contingent liability that under IMF (2006) disclosure norms should be reported to the legislature with the 1–5, 5–10, 10–20, 20+ year payment-obligation profile. Does the technical brief you submit to the Minister become the disclosure, or does it stop there? If it stops, do you trigger the disclosure through another channel? |
Connection to Korean Experience
This is exactly the situation Korean PPP-unit officials faced in 1998. The 1997 financial crisis had collapsed private-investor confidence; the December 1998 Act on Private Participation in Infrastructure was amended specifically to introduce the MRG, with the 90 % / 20-year terms on solicited projects functioning as a forced concession to bring concessionaires back to a collapsed market. The Incheon International Airport Expressway, signed under this regime in 1995–1998, ran at 42–57 % of forecast traffic for a decade and triggered ₩59–100 billion of MRG subsidy each year through the late 2000s. The Cheonan–Nonsan Expressway (82 % MRG, 20 years) ran at 47–58 % of forecast; the Mokpo New Outport ran at 12–31 %. Korean officials who signed these concessions in 1998–2003 did not lack technical skill — they faced exactly the Mendes situation: sole or near-sole bidder, post-crisis confidence collapse, political pressure to deliver visible infrastructure, and an MRG instrument that was the price of any deal. The fiscal cost (₩1.66 trillion by 2010) accumulated slowly enough that the political-economy reckoning came only with the 2009 abolition. The lesson the report does not quite state: the structural position those officials were in produced predictable fiscal stress, and the re-pricing clause and safeguard ceiling that would have disciplined the system were not in the 1998 Act because they would have killed the deal at signing.
Re-read the scenario above and write down — on paper or in a document — how you would act if you were Daniel Mendes. There is no right answer. Draw on your own experience and home-country context; aim for 50–100 words. Nothing you write is saved.
Questions to consider — ① Is the Minister's directive a legitimate exercise of political authority over a discretionary procurement choice, or has the Minister overstepped the technical-appraisal framework the PPP statute establishes? Where does the boundary sit, and what would you have to write in your brief to make the boundary visible without insubordination? ② Can you propose a structure that splits the difference — say, a 75 % MRG matching the bidder floor, coupled with an aggressive re-pricing clause at year 5, public disclosure of the contingent liability before signing, and a competitive re-bid for the operational phase at year 10 — and which element would you fight hardest to keep if the Minister wants only one? ③ If the Minister rejects the re-pricing clause but accepts the disclosure requirement, do you sign? If the Minister accepts the re-pricing clause but rejects the disclosure, do you sign? Which trade-off would you accept and which would lead you to recommend cancellation? ④ Have you seen, in your own country's recent infrastructure procurement, a high-guarantee concession signed under sole-bidder conditions and political deadline? What did the responsible officials actually do, and what concession surprised you in retrospect?
4 Assignments
- a.Summarise the chosen footnote or box in 3–5 sentences. Quote one original sentence and identify exactly where the material is referenced (or fails to be referenced) in the main text of the relevant chapter.
- b.Is the implication specific to Korea, or could it occur in a similar form in your own country? Compare against one specific case from a PPP or infrastructure-procurement programme you know.
- c.Why do you think the report places this material in a footnote or box rather than in the main analytical argument of chapter 4 or 5? What would change in the reader's overall impression if it were moved into the main text?
- a.Choose one Korean instrument or institution that corresponds to your type, and evaluate its transferability along three dimensions: legal basis, governance, technical capacity.
- b.What must absolutely be modified before transfer, and what can be imported substantially as-is?
- c.Write the "First Action" in one sentence. It must specify a responsible person, a deadline, and one success metric.
- ①Current diagnosis — which of the five problem types applies to your chosen country, with evidence from the report and from country data
- ②Two or three Korean instruments worth learning from — why these, with explicit transferability assessment
- ③Transfer conditions and required modifications — what to change from the Korean original, and why; what to reject outright (especially early-period MRG terms)
- ④Roadmap — what to do in years 1–2, 3–5, with the sequence justified (statute first, unit second, ceiling third is the Korean order; defend or deviate)
- ⑤Limits of this report — what cannot be learned from it, where you would look to supplement (especially on the crowding-out finding, the single-bidder problem, and the unwritten safeguard ceiling)
5 Further Reading
- Jay-Hyung Kim, Jungwook Kim, Sunghwan Shin and Seung-yeon Lee, Public–Private Partnership Infrastructure Projects: Case Studies from the Republic of Korea, Volumes 1 and 2 (Asian Development Bank, 2011). The longer ADB study that is the explicit source for chapters 2–4 of the KSP report. Provides the detailed financial and institutional reconstructions that the KSP report compresses. Essential for any policy memo on the Korean PPP framework.
- Jay-Hyung Kim (ed.), Performance Evaluation and Best Practice of Public-Private Partnerships (Korea Development Institute, 2007). The Korean hub for the VFM evaluation work PIMAC built on; chapter 6 (Rhee and Lee) contains the crowding-out finding that becomes footnote 23 of this report.
- Anthony Boardman and Aidan Vining, "Assessing the economic worth of public-private partnerships", in Hodge, Greve and Boardman (eds.), International Handbook on Public-Private Partnerships (Edward Elgar, 2010), pp. 159–186. The critical-evaluation perspective. Read it alongside the report's chapter 6 admission about the "many bad reasons" governments like PPPs — Boardman and Vining are where that admission comes from.
- Graeme Hodge, "Reviewing Public-Private Partnerships: Some Thoughts on Evaluation", in the same International Handbook (Edward Elgar, 2010). The methodological argument for why evaluation of PPPs is empirically open in most countries — useful for the critical-reading assignments.
- Timothy Irwin, Accounting Devices and Fiscal Illusions, IMF Staff Discussion Note SDN/12/02 (March 2012). The strongest case that PPP benefits may be illusory; cited by the report in footnote 24. Essential reading on the fiscal-illusion problem the report acknowledges but does not solve.
- International Monetary Fund, Public-Private Partnerships, Government Guarantees, and Fiscal Risk (Fiscal Affairs Department, 2006). The technical foundation for the disclosure norms reproduced in Box 4-1 of the report. The single most useful reference for designing your country's contingent-liability disclosure requirements.
- World Bank and Public-Private Infrastructure Advisory Facility, Public-Private Partnerships Reference Guide, version 1.0 (World Bank, Washington DC, 2012). The international good-practice synthesis written after Korea's system matured; useful for benchmarking your country's draft framework against an internationally validated reference.
- Changyong Rhee and Hangyong Lee, "Public-Private Partnerships in Infrastructure and Macroeconomy: The Experience of Korea", chapter 4 of Performance Evaluation and Best Practice of PPPs (KDI, 2007). The empirical study behind footnote 23's crowding-out claim. Necessary for understanding why the headline mobilisation figure cannot be taken at face value.
This Companion is a learning aid produced for the Ministry of Strategy and Finance · KDI School of Public Policy and Management, KSP Knowledge Sharing Program — Public–Private Partnerships: Lessons from Korea on Institutional Arrangements and Performance (Jay-Hyung Kim and Seung-yeon Lee, 2013). Use alongside the original report.