Jung

lim H

ahm

Wor

ld B

ank

Inst

itute

Por

t Ref

orm

for P

olic

y M

aker

s an

d P

ract

ition

ers

Bra

silia

Apr

il 1~

3, 2

008

Fina

ncia

l Im

plic

atio

n of

Por

t R

efor

m

Con

tent

s

1.Fi

nanc

ial i

mpl

icat

ion

to th

e pu

blic

sec

tor

2.Fi

nanc

ial i

mpl

icat

ion

to th

e pr

ivat

e se

ctor

3.R

isk

Man

agem

ent

4.Fi

nanc

ial A

naly

sis

Why

are

we

conc

erne

d w

ith th

e fin

anci

al

impl

icat

ion

of p

ort r

efor

m?

It’s

priv

ate

inve

stm

ent.

Why

the

publ

ic s

houl

d w

orry

??

1.O

ne o

f the

obj

ectiv

es o

f the

refo

rm –

To c

reat

e fis

cal

spac

e2.

Pub

lic s

uppo

rt3.

Pub

lic c

omm

itmen

t-Not

eas

y to

can

cel

4.O

nce

done

, not

eas

y to

redo

–C

ost m

oney

.5.

Fisc

al im

pact

-> ta

x pa

yers

’mon

ey6.

Any

unn

eces

sary

risk

to th

e pr

ivat

e se

ctor

com

es

back

to th

e us

er

Driv

er 1

: Cre

atin

g Fi

scal

Spa

ce

800

mill

ion

US

D

800

mill

ion

US

D

1 P

PP

Por

t20

0 m

il U

SD

100

Sch

ools

200

mil

US

D

Pub

lic

hous

ing

200

mil

US

D

Soc

ial w

elfa

re20

0 m

il U

SD

Driv

er 2

: Effi

cien

cy

•W

orki

ng w

ith th

e pr

ivat

e pr

oved

to b

e m

ore

on

budg

et a

nd m

ore

on ti

me.

–U

K •P

PP

: 80%

on

time

79%

on

budg

et

•C

onve

ntio

nal:

70%

tim

e ov

erru

n &

70%

cos

t ove

rrun

–S

outh

Afri

ca•

3 to

ll ro

ads,

two

pris

ons,

thre

e ho

spita

ls: A

ll on

tim

e &

on

budg

et•

Con

vent

iona

l: 17

% ti

me

over

run

& 2

1 %

cos

t ove

rrun

(199

0~20

00)

Driv

er 2

: Effi

cien

cy

Con

cess

ion

Gov

’tG

ov’t

SPV

SPV

Driv

er 2

: Effi

cien

cy

Con

cess

ion

L/A

EPC

con

tract

s

Deb

t Fin

anci

ngD

ebt F

inan

cing

Civ

il C

ontr

acto

r &

E&

M C

ontr

acto

r

Civ

il C

ontr

acto

r &

E&

M C

ontr

acto

r

Fina

ncia

l In

vest

ors

Fina

ncia

l In

vest

ors

Advisors

•Traffic

•Financial

•Legal

•Insurance

•Technical

Advisors

•Traffic

•Financial

•Legal

•Insurance

•Technical

Gov

’tG

ov’t

SPV

SPV

Shar

ehol

ders

Agr

eem

ent

Spon

sors

Spon

sors

O&

M c

ontr

acto

rO

&M

con

trac

tor

O&

M

cont

ract

Driv

er 3

: Off-

bala

nce

treat

men

t

•N

o cl

ear i

nter

natio

nal g

uide

line

on a

ccou

ntin

g th

e P

PI

•U

sual

ly tr

eate

d as

off-

bala

nce

to th

e go

vern

men

t•

Not

a h

ealth

y dr

iver

-why

?

Issu

e 1-

Rep

ortin

g

•Th

ough

PP

Ps

do n

ot h

ave

publ

ic b

orro

win

g th

at re

quire

re

porti

ng, m

any

cont

ract

ual f

orm

s of

PP

P c

reat

e de

bt-

like

stru

ctur

es

•C

ontin

gent

liab

ilitie

s of

ten

not r

epor

ted

•W

hen

repo

rting

con

tinge

nt li

abili

ties,

for t

rans

pare

ncy,

it

is im

porta

nt to

pro

vide

det

ails

on

met

hodo

logy

of

calc

ulat

ion

and

inpu

ts, r

epor

t on

full

rang

e of

obl

igat

ions

•P

ublic

acc

ess

to c

ontra

cts

(orig

inal

and

as

rene

gotia

ted)

w

ould

als

o be

impo

rtant

Issu

e 1-

Rep

ortin

g

•E

uros

tat

–A

sset

s in

volv

ed in

PP

P s

houl

d be

def

ined

as

non-

gove

rnm

ent a

sset

s if

the

priv

ate

partn

er ta

kes

the

cons

truct

ion

risk

and

at le

ast o

ne o

f the

ava

ilabi

lity

risk

and

the

dem

and

risk

•A

vaila

bilit

y ris

k : P

rivat

e pa

rtner

failin

g to

pro

vide

the

agre

ed

volu

me

and

serv

ice

•D

eman

d ris

k : C

hang

es in

ser

vice

dem

and

caus

ed b

y th

e bu

sine

ss c

ycle

, mar

ket t

rend

s, c

ompe

titio

n or

tech

nolo

gica

l ob

sole

scen

ce

Issu

e 1-

Rep

ortin

g

•IM

F

–A

n al

tern

ativ

e ac

coun

ting

and

repo

rting

app

roac

h w

ould

be

to re

cord

PP

P a

sset

s on

priv

ate

sect

or

bala

nce

shee

ts, c

onsi

sten

t with

lega

l ow

ners

hip.

–Th

e fis

cal c

osts

and

risk

s as

soci

ated

with

PP

Ps

wou

ld th

en b

e as

sess

ed, q

uant

ified

, and

dis

clos

ed.

–It

is u

ncle

ar w

hat a

ppro

ach

will

be

take

n in

fo

rmul

atin

g a

gene

ral a

ccou

ntin

g an

d re

porti

ng

stan

dard

for P

PP

s.–

In th

e m

eant

ime,

PP

P c

osts

and

risk

s sh

ould

be

take

n in

to a

ccou

nt w

hen

asse

ssin

g de

bt s

usta

inab

ility

.

Issu

e 2-

Pub

lic in

vest

men

t

•10

0% p

rivat

e in

vest

men

t inv

olve

s–

Pub

lic in

vest

men

t for

infra

stru

ctur

e–

Opp

ortu

nity

cos

t of p

ublic

ass

ets

–O

ppor

tuni

ty c

ost o

f the

hum

an re

sour

ce–

Pos

sibl

e fin

anci

al c

ost i

n th

e fu

ture

Issu

e 3

–C

ance

llatio

n or

bai

lout

?

•Ve

ry L

ow In

cide

nce

of C

ance

lled

Con

cess

ions

…•

Tota

l Wor

ld

Infra

stru

ctur

e P

PI P

roje

cts

Can

celle

dP

erce

ntag

e

2,48

548

Com

posi

tion

19ro

ads

9 en

ergy

7 w

ater

& s

anita

tion

8 te

leco

m

2.1%

By

Sec

tor

5.8%

3.5%

Sour

ce:

Har

ris (2

002)

Issu

e 3

–C

ance

llatio

n or

bai

lout

?

Ren

egot

iate

d co

nces

sion

sA

vera

ge ti

me

to

rene

gotia

tion

All

sect

ors

42%

2.1

year

s

Ele

ctric

ity10

%2.

3 ye

ars

Tran

spor

t57

%3.

1 ye

ars

Wat

er75

%1.

7 ye

ars

Latin A

mer

ica

(1988~

2001)

Sourc

e: G

uas

ch (

2004)

Aw

ard

proc

ess

Tele

com

Ene

rgy

Tran

spor

tW

ater

and

S

anita

tion

Tota

lS

hare

of T

otal

Com

petit

ive

Bidd

ing

245

9523

112

569

678

(45%

re

nego

tiate

d)D

irect

ad

judi

catio

n15

143

374

199

22 (8%

re

nego

tiate

d)To

tal

260

238

268

129

895

100

Sourc

e: G

uas

ch (

2004)

Latin A

mer

ica

(1988~

2001)

Issu

e 3

–C

ance

llatio

n or

bai

lout

?

Fina

ncia

l im

plic

atio

n to

the

priv

ate

sect

or

Sta

ble

long

-te

rm re

venu

e

De

fact

o m

onop

oly

Pub

licD

omai

n

•Pub

lic s

uppo

rt

•Pub

lic s

ervi

ce

•Leg

isla

tion

•Reg

ulat

ion

Fina

ncia

l im

plic

atio

n to

the

priv

ate

sect

or Cos

t Ris

k

Rev

enue

Ris

k

Pub

licD

omai

n

•Pub

lic s

uppo

rt

•Pub

lic s

ervi

ce

•Leg

isla

tion

•Reg

ulat

ion

Cos

t of r

egul

atio

n : C

ost r

isk

•Te

chni

cal r

egul

atio

n ha

ve a

n im

pact

on

the

initi

al e

stim

atio

n of

pro

ject

cos

t (in

vest

men

t and

op

erat

ion)

•R

easo

nabl

e to

exp

ect t

he o

pera

tor t

o as

sum

e th

e co

st ri

sk–

Pro

vide

d th

at

–R

ules

of t

he g

ame

are

esta

blis

hed

at th

e ou

tset

–Th

ese

rule

s ar

e cl

ear,

and

clea

r

Cos

t of r

egul

atio

n : C

ost r

isk

•C

ase

1-P

ort o

pera

tor’s

ser

vice

is n

ot re

gard

ed a

s a

publ

ic s

ervi

ce–

Deg

ree

of re

gula

tion

is lo

w–

Any

risk

ass

ocia

ted

with

the

regu

latio

n w

ill b

e re

flect

ed in

the

leve

l of r

etur

n–

Cos

t will

be

pass

ed o

n th

e cu

stom

ers

thro

ugh

incr

ease

in c

harg

e

•C

ase

2-P

ort o

pera

tor’s

ser

vice

is re

gard

ed a

s a

publ

ic

serv

ice

–D

egre

e of

regu

latio

n is

hig

h–

Diff

icul

t to

refle

ct in

the

char

ge–

Ris

k be

tter b

e sh

ared

bet

wee

n th

e co

nces

sion

aut

horit

y an

d th

e op

erat

or

Cos

t of r

egul

atio

n -R

even

ue ri

sk

•D

irect

impa

ct o

n th

e re

venu

e ris

k

•R

even

ue ri

sk is

the

prin

cipa

l ris

k in

volv

ed in

a p

ort

proj

ect d

ue to

the

unce

rtain

ty in

here

nt in

traf

fic a

nd

thro

ughp

ut le

vel p

redi

ctio

n.

–Tr

affic

risk

can

be

assi

gned

to th

e op

erat

or if

the

activ

ity is

not

a

publ

ic s

ervi

ce, a

nd is

sub

ject

to g

enui

ne c

ompe

titio

n–

Sha

ring

risk

is re

com

men

ded

for a

pub

lic s

ervi

ce m

onop

oly.

•H

igh

degr

ee o

f reg

ulat

ion

impo

se c

onst

rain

s on

the

oper

ator

•O

pera

tor h

as li

ttle

mea

ns to

man

age

the

com

mer

cial

risk

•S

till,

oper

ator

sill

take

the

cost

risk

Ris

k M

anag

emen

t•

Ris

k id

entif

icat

ion

•S

harin

g of

risk

s w

ith th

e po

rt au

thor

ity, t

he s

tate

or

oth

er p

ublic

aut

horit

ies

•S

harin

g of

risk

s w

ith p

artn

ers

(spo

nsor

s,

cust

omer

s, s

uppl

iers

, sub

cont

ract

ors)

•R

educ

tion

of e

xpos

ure

to th

e re

sidu

al ri

sk o

r the

pr

obab

ility

of i

ts o

ccur

renc

e•

Red

uctio

n or

lim

itatio

n of

the

cons

eque

nces

of

resi

dual

risk

s (e

x. in

sura

nce)

•A

djus

tmen

t of t

he e

xpec

ted

rate

of r

etur

n ac

cord

ing

to th

e de

gree

of r

esid

ual r

isk

Ris

k M

anag

emen

t•

Ris

k as

sess

men

t and

man

agem

ent i

s no

t the

sol

e re

spon

sibi

lity

of th

e op

erat

or.

•W

hile

the

oper

ator

will

sta

nd re

spon

sibl

e fo

r its

bus

ines

s pl

an•

Ris

k an

alys

is o

f con

cess

ion

auth

ority

is m

ore

impo

rtant

as

it w

ill d

eter

min

e th

e su

cces

s an

d th

e fa

ilure

of t

he

proj

ects

–R

educ

e th

e ris

k un

der t

he p

ublic

con

trol b

efor

e bi

ddin

g–

Con

side

r mor

e ris

k sh

arin

g op

tions

if ri

sks

are

not u

nder

the

priv

ate

sect

or c

ontro

l–

May

wan

t to

leve

rage

the

cata

lytic

role

of s

ubsi

dy, o

r inv

estm

ent

from

the

publ

ic–

The

conc

essi

on a

utho

rity

will

not

wan

t to

keep

all

risk

unde

r the

pu

blic

con

trol

Cou

ntry

risk

•R

isks

resu

lting

from

the

natio

nal a

nd in

tern

atio

nal

fram

ewor

k w

ithin

whi

ch th

e pr

ojec

ts m

ust o

pera

te

–Le

gal r

isk

•La

ck o

f pre

cisi

on in

the

legi

slat

ion

•P

ossi

bilit

y of

the

chan

ges

•C

hang

es in

the

envi

ronm

enta

l law

s ha

s pa

rticu

larly

sig

nific

ant

impa

ct–

Mon

etar

y ris

k•

Exc

hang

e ra

te fl

uctu

atio

ns•

Non

-con

verti

bilit

y of

the

loca

l cur

renc

y in

to fo

reig

n cu

rren

cies

•N

on-tr

ansf

erab

ility

Cou

ntry

risk

–E

cono

mic

risk

•V

olum

e of

trad

e de

pend

s on

the

mac

roec

onom

ic fa

ctor

s•

Larg

e im

pact

on

the

leve

l of a

ctiv

ity•

Mar

ket s

urve

y &

reas

onab

le p

lann

ing

–Fo

rce

maj

ure:

•

Nat

ural

dis

aste

r•

Ris

k of

war

–In

terfe

renc

e or

rest

rain

t of p

rice

risk

•In

the

nam

e of

pub

lic s

ervi

ce, p

rote

ctio

n of

use

rs•

Impo

sitio

n of

new

ope

ratin

g re

quire

men

ts•

Add

ition

al in

vest

men

t•

New

con

stra

ints

•S

hort

term

con

sequ

ence

vs

long

term

con

sequ

ence

Pol

itica

l ris

k

•N

on-c

ompl

ianc

e, e

xpro

pria

tion,

nat

iona

lizat

ion

•R

isk

miti

gatio

n th

roug

h co

ntra

ctua

l arr

ange

men

t ofte

n fo

und

insu

ffici

ent

•In

sura

nce

–MIG

A

•S

ome

stra

tegi

es to

con

side

r–

Incl

usio

n of

mul

tilat

eral

org

aniz

atio

n (n

ot a

form

al g

uara

ntee

)–

Incl

usio

n of

exp

ort c

redi

t age

ncie

s (a

ct a

s a

guar

anto

r dur

ing

the

loan

per

iod)

Pro

ject

risk

•R

isks

ass

ocia

ted

with

the

inve

stm

ent t

o an

d op

erat

ion

of p

roje

ct

•M

ajor

ity o

f pro

ject

risk

s ar

e ca

rrie

d by

the

oper

ator

–C

onst

ruct

ion

risk

•D

elay

s in

sta

rt-up

•Lo

ss o

f ear

ning

from

ope

ratio

n•

Incr

ease

d in

terim

inte

rest

cha

rges

•P

enal

ties

the

oper

ator

is o

blig

ed to

pay

Pro

ject

risk

–H

and-

over

risk

•Ta

king

ove

r of e

xist

ing

faci

lity

•R

etur

ning

faci

lity

upon

term

inat

ion

of c

once

ssio

n

–O

pera

ting

risk

•N

on-p

erfo

rman

ce (p

enal

ty fo

r low

traf

fic)

•O

pera

ting

cost

ove

rrun

•Lo

ss o

f rev

enue

(diff

icul

ty in

fee

colle

ctio

n, th

eft)

–P

rocu

rem

ent r

isk

•P

oten

tial u

nava

ilabi

lity

of g

oods

and

ser

vice

crit

ical

to th

e po

rt op

erat

ion

•S

elf-g

ener

atio

n/pr

oduc

tion

•Lo

ng-te

rm p

urch

ase

agre

emen

t

Pro

ject

risk

–Fi

nanc

ial r

isk:

Ris

ks a

ssoc

iate

d w

ith•

Rai

sing

sha

reho

lder

s' e

quity

•O

btai

ning

loan

s•

Sec

urin

g st

and-

by lo

ans

•Fo

rmat

ion

and

man

agem

ent o

f SP

V•

Inte

rest

rate

fluc

tuat

ion

•G

over

nmen

t’s fa

ilure

to p

ay s

ubsi

dy–

Reg

ulat

ory

risk:

the

cost

of r

egul

atio

n is

ul

timat

ely

born

e by

the

user

Ris

kR

isk

Allo

catio

n

Item

Des

crip

tion

/ Com

men

tsS

tate

Ope

rato

rS

hare

d

PLA

NN

ING

Pro

ject

Ap

prov

alS

tatu

tory

Con

sent

for P

roje

ctX

Infra

stru

ctur

eP

lann

ing

and

com

plet

ion

on ti

me

X

Ris

k M

atrix

(exa

mpl

e)

LEG

AL

Cha

nges

in

Law

Gen

eral

Cha

nge

in L

aw,

X

Dis

crim

inat

ory

Cha

nge

in L

awX

Ris

kR

isk

Allo

catio

n

Item

Des

crip

tion

/ Com

men

tsSt

ate

Ope

rato

rSh

ared

XR

espo

nsib

ility

for d

esig

n to

the

exte

nt th

at d

esig

n ha

s no

t alre

ady

been

und

erta

ken

for c

onse

nt p

roce

ssD

esig

n

XR

espo

nsib

ility

for a

ccur

acy

of d

esig

n da

taD

esig

n D

ata

XR

espo

nsib

ility

for s

ettin

g sp

ecifi

catio

n cr

iteria

Spec

ifica

tion

XR

espo

nsib

ility

for s

ettin

g st

anda

rds

Des

ign

Stan

dard

s

DES

IGN

Ris

k M

atrix

(exa

mpl

e)

Ris

kR

isk

Allo

catio

n

Item

Des

crip

tion

/ Com

men

tsSt

ate

Ope

rato

rSh

ared

XLa

bour

, Equ

ipm

ent a

nd M

ater

ials

requ

ired

for d

esig

n an

d co

nstru

ctio

n w

orks

Res

ourc

es

XA

dditi

onal

wor

ks

Add

ition

al W

orks

XC

hang

es to

des

ign

and

cons

truct

ion

requ

irem

ents

due

to n

ew

stan

dard

s C

hang

es

XC

ost o

ver-r

un ri

sk fo

r des

ign

and

Con

stru

ctio

n C

ost

XR

espo

nsib

ility

for c

onst

ruct

ion

Con

stru

ctio

n

CO

NST

RU

CTI

ON

Ris

k M

atrix

(exa

mpl

e)

Ris

kR

isk

Allo

catio

n

Item

Des

crip

tion

/ Com

men

tsSt

ate

Ope

rato

rSh

ared

XLa

bour

, Equ

ipm

ent a

nd M

ater

ials

to c

arry

out

wor

ksR

esou

rces

XA

dditi

onal

wor

ksA

dditi

onal

Wor

ks

XC

hang

es to

ope

ratio

n an

d m

aint

enan

ce s

tand

ards

and

sp

ecifi

catio

nsC

hang

es

XC

ost o

f car

ryin

g ou

t req

uire

d m

aint

enan

ce w

orks

C

ost

XR

espo

nsib

ility

for M

aint

enan

ce w

orks

M

aint

enan

ce

OPE

RA

TIO

N &

MA

INTE

NA

NC

E

Ris

k M

atrix

(exa

mpl

e)

Ris

kR

isk

Allo

catio

n

Item

Des

crip

tion

/ Com

men

tsSt

ate

Ope

rato

rSh

ared

GEN

ERA

L / O

THER

Qua

lity

Man

agem

entC

ompl

ianc

e w

ith q

ualit

y m

anag

emen

t sta

ndar

dsX

Forc

e M

ajeu

reTe

rmin

atio

n du

e to

Ter

roris

m, R

iots

, War

, Fru

stra

tion,

nat

ural

ca

tast

roph

es (e

arth

quak

e, fl

oodi

ng e

tc.)

X

Pro

test

or A

ctio

nX

Envi

ronm

enta

lR

isk

of e

nviro

nmen

tal i

mpa

ct a

nd a

ssoc

iate

d co

sts

of m

itiga

tion

X

Ris

k M

atrix

(exa

mpl

e)

Sourc

e: A

dopte

d f

rom

Snel

son

(2007)

FAQ

1: I

RR

leve

l 2000

2001

2002

2003

2004

2005

Num

. of P

roje

ct7

23

410

8R

eal

9.54

9.67

8.93

8.67

8.75

8.09

Nom

inal

14.9

515

.15

14.3

713

.83

13.9

711

.78

5Yr K

TB6.

927.

496.

084.

684.

574.

14

Num

. of P

roje

ct2

1-

14

2R

eal

9.56

8.90

-9.

508.

858.

24N

omin

al15

.04

14.3

5-

14.9

814

.29

10.9

45Y

r KTB

6.92

5.43

-4.

414.

434.

18

Rat

e of

R

etur

nPo

rt

Rat

e of

R

etur

nTo

tal

Sourc

e: R

hee

(2007)

FAQ

2: R

even

ue G

uran

tee

110% 90

%

Act

ual r

even

ue

Rev

enue

to th

epr

ivat

e pa

rtner

Rev

enue

shar

ing

Rev

enue

subs

idy

(Exp

ecte

d re

venu

e)10

0%

Tim

e sp

an(y

ears

in

oper

atio

n)

Tim

e sp

an(y

ears

in

oper

atio

n)

1-5

1-5

6-10

6-10

11-1

511

-15

Rev

enue

subs

idy

Rev

enue

subs

idy

90%

90%

80%

80%

70%

70%

Rev

enue

shar

ing

Rev

enue

shar

ing

110%

110%

120%

120%

130%

130%

Thre

shol

d fo

rTh

resh

old

for

Sol

icite

dS

olic

ited

Tim

e sp

an(y

ears

inop

erat

ion)

Tim

e sp

an(y

ears

inop

erat

ion)

1-5

1-5

6-10

6-10

11-1

511

-15

Rev

enue

subs

idy

Rev

enue

subs

idy

80%

80%

70%

70%

60%

60%

Rev

enue

shar

ing

Rev

enue

shar

ing

120%

120%

130%

130%

140%

140%

Thre

shol

d fo

rTh

resh

old

for

Un-

solic

ited

Un-

solic

ited

Not

e: M

RG

is n

ot a

pplie

d w

ith th

e ac

tual

re

venu

e fa

lls b

elow

50

of fo

reca

sts.

Sourc

e: K

im (

2006)

& P

IMAC

Cla

ssifi

catio

n20

0120

0220

0320

0420

05

agre

emen

tvs

. tra

ffic

volu

me

46.9

%44

.6%

41%

41%

52.8

%

Rev

enue

sub

sidy

1,06

382

31,

050

1,11

476

7

agre

emen

tvs

. tra

ffic

volu

me

--

47.0

%52

.2%

-

Rev

enue

sub

sidy

--

404

386

390

agre

emen

tvs

. tra

ffic

volu

me

55.9

%65

.3%

62.9

%62

.2%

-

Rev

enue

sub

sidy

6847

6369

-

agre

emen

tvs

. tra

ffic

volu

me

--

Rev

enue

sub

sidy

8-

New

Mok

po O

utpo

rt

Gw

angj

u2n

d B

eltw

ay,

Sec

tion

1: 8

5% g

uara

ntee

d ov

er 2

8 ye

ars

(Ope

rate

d si

nce

Nov

. 29,

20

00)

Che

onan

-Non

san

Exp

ress

way

: 82%

gua

rant

eed

over

20

year

s (O

pera

ted

sinc

e D

ec. 2

3,

2002

)

Inch

eon

Intl.

Airp

ort

Exp

ress

way

: 80%

gua

rant

eed

over

20

year

s(O

pera

ted

sinc

e N

ov. 2

1,

2000

)

Sourc

e: K

im (

2006)

& P

IMAC

Rev

enue

gua

rant

ee: P

aym

ent c

an b

e ve

ry la

rge

(uni

t: 10

0 m

illion

KR

W, %

)

050100

150

200

250

300 20

01

2003

2005

2007

2009

2011

2013

2015

2017

2019

Yea

r

Billion 1999 won

Fore

cast

reve

nue

Gua

rant

eed

reve

nue

Act

ual r

even

ueSourc

e: I

rwin

(2004)

•Pay

men

t is

hard

to m

easu

re…

.

FAQ

2: R

even

ue G

uara

ntee

Janu

ary

1999

Janu

ary

2006

Solic

ited

Un-

solic

ited

Sol

icite

dU

nsol

icite

d

Per

iod

Who

le o

pera

ting

perio

d15

Yea

rs10

yea

rs

Gua

rant

ee90

% o

r le

ss80

% o

r le

ss

Firs

t 5 y

ears

90%

Nex

t 5 Y

ears

80%

Last

5 Y

ears

70%

Firs

t 5 Y

ears

75

%N

ext 5

Yea

rs

65%

Con

ditio

nN

one

No

MR

GIf

Act

ual R

even

ue

< 50

% o

f Pro

ject

ed

Rev

enue

Sam

e as

Lef

t

Abo

lishe

d

May

200

3

FAQ

2: R

even

ue G

uara

ntee

Sourc

e: K

im (

2008)

•Onc

e se

t-up,

har

d to

redu

ce.

•If s

uppo

rt is

nee

ded,

sub

sidy

cou

ld b

e a

bette

r ide

a.