In fact, the work suggests that country risk ratings are a reliable predictor of the likelihood of investment in PPPs as well as the level of investment. Foreign Direct Investment overall is not nearly as sensitive to sovereign risk as PPI. This suggests that other big investors in developing economies—mining, oil, gas, or the garment industry—are able to attract returns commensurate with the risks they are assuming. Not so for infrastructure sectors—especially when mobile telephony is removed from the data. To assign an average value, an improvement in country risk ratings by one standard deviation is associated with a 27 percent higher chance of having a PPP commitment, and a 41 percent higher level of investment in dollar terms. Country risk is a good predictor for both greenfield investments and concession and for all sectors—though particularly for energy investments.
Posted on: Fri, 06 Sep 2013 07:32:51 +0000
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