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Raymond E. Levitt Stanford University 2007 ACADEMY OF MANAGEMENT CONFERENCE — PHILADELPHIA, PA

Raymond E. Levitt Stanford University 2007 ACADEMY OF MANAGEMENT CONFERENCE — PHILADELPHIA, PA. Research Challenges for Governance of Infrastructure Projects in Emerging Markets. World Population Forecast. Poor Infrastructure Slows Economic Growth.

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Raymond E. Levitt Stanford University 2007 ACADEMY OF MANAGEMENT CONFERENCE — PHILADELPHIA, PA

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  1. Raymond E. LevittStanford University2007ACADEMY OF MANAGEMENT CONFERENCE — PHILADELPHIA, PA Research Challenges for Governance of Infrastructure Projects in Emerging Markets

  2. World Population Forecast

  3. Poor Infrastructure Slows Economic Growth

  4. $2-3 Trillion Investment Needed in Emerging Market Infrastructure During Next Decade ?

  5. Private-Public Partnerships to the Rescue?

  6. Privatized Infrastructure is Big Business • “PFI”/”PPP” has been widely used in UK, Europe, Turkey for many kinds of facilities • Mixed results, e.g., Chunnel, London Tube… • Emerging as possible financing vehicle in US • PFI/PPP is potential option for developing infrastructure in emerging markets • Lack of formal economy to tax • lack of institutional capacity to build and operate • Consumers already pay for water from trucks! • But political and institutional risk scares investors

  7. Each Party’s National Corporate Governance Host Country Laws Trans-national “Soft Laws” “Civil Society” Governance Financial MarketGovernance Bilateral Investment Treaties Governance of PPP Infrastructure Projects in Emerging Markets is Very Complex

  8. Elements of PPP Governance • Articles and bylaws of PPP “project company” • PPP agreement with host government, including bilateral treaties • PPP financing covenants and enforcement mechanisms • Sponsors • Other Equity holders • Lenders (typically about 75%) • Insurers, including political risk insurer • Off-take and supply agreements • Regulatory regimes • Entitlements (Host country concessions, leases, …) • Procedures for setting and adjusting tariffs (tolls, fees, …) • Labor laws (wages, hours, safety…), Environmental Laws, … • Customs, … • Contracts with Designers, Builders, Suppliers • “Soft-Law” of UN, WB, ADB, Equator Principles, … • Processes for engaging with informal stakeholders (NGOs, local groups) • Proactive engagement • Reactions to challenges

  9. Managerial and Technical Research to BoostInfrastructure Projects in Emerging Markets • Design enhanced governance approaches to deal with extreme complexity of PPP’s in emerging markets • Understand which global institutions and institutional differences matter the most • Develop governance mechanisms to address them • Develop & test distributed infrastructure systems that are not natural monopolies (no “last mile”) to finesse the governance challenges • Cellular telephony is a shining example — ~ fully privatized worldwide ; service has soared; costs have plummeted! • Distributed water treatment and sanitation is becoming cost effective • Distributed power generation likewise

  10. Research Frameworks for Studying Governance of Infrastructure Projects • Ethnographies • Grounded theory case studies • Analysis of large numbers of secondary cases • Using QCA analysis (developed by Charles Ragin) • Roundtables of informed participants • Balanced mix of reflective practitioners • Agent-based computational modeling • Embed institutional differences in agents (W.R. Scott)

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