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Front Cover
Contents
Acknowledgments
Executive Summary
Spotlight ES.1
Abbreviations
Overview
Analytical Framework
Empirical Findings
Policy Recommendations
Notes
References
1 Public-Private Partnerships in South Asia: Managing the Fiscal Risks from Hidden Liabilities While Delivering Efficiency Gains
The Need to Carefully Manage the Fiscal and Economic Risks of PPPs
Balancing the Efficiency Gains from PPPs against Their Risks and Liabilities
Booming Infrastructure PPPs, Their Country and Sector Distribution, and Signs of Distress in South Asia
Fiscal Risks from Contingent Liabilities Due to Early Termination of PPPs
Features of Contract Design That Matter: Exploring the Link between PPP Contract Design and Early Terminations of Highway PPPs in India
Improving Government Capacity, Due Diligence, and Contract Design to Better Manage the Fiscal Risks of the Growing PPP Programs in South Asia
Annex 1A. Methodology to Determine the Value at Risk of a Public-Private Partnership
Annex 1B. Definitions of Variables
Annex 1C. Distribution of South Asian Public-Private Partnership Projects by Sector
Annex 1D. Imputing the Missing Values for Predictions
Annex 1E. Model Selection
Annex 1F. Estimation Tables
Notes
References
2 State-Owned Banks versus Private Banks in South Asia: Agency Tensions, Susceptibility to Distress, and the Fiscal and Economic Costs of Distress
The Upsides and Downsides of State-Owned Commercial Banks
The Omnipresence of State-Owned Commercial Banks in South Asia
Bank Business Models by Ownership Type: The Example of India
Understanding Bank Distress and Its Main Factors
Analyzing the Effect of Firms' Banking with SOCBs Compared with Private Banks
Policy Recommendations
Annex 2A. Methodology for Determining Bank Distress.

Annex 2B. Regression Tables: Probability of Distress for South Asian Banks and Adjustments to Distress, 2009-18
Annex 2C. Regression Tables for South Asian Scheduled Commercial Banks: Country Results, 2009-18
Notes
References
3 South Asia's State-Owned Enterprises: Surprise Liabilities versus Positive Externalities
The Importance of Paying More Attention to the Hidden Liabilities of SOEs in South Asia
Describing the Opaque and Complex SOE Sector in South Asia Using Data
Analyzing the Roots and Extent of Hidden Liabilities in South Asian SOEs
What Drives the Contingent Liabilities from SOEs?
The SOE Sector Has a Role to Play in South Asia, Such as through Its Long-Term Investment in R&
D and Positive Spillovers on Private Firms
Only a Combination of Internal and External Policy Reforms Can Help Better Manage Contingent Liabilities from SOEs in South Asia
Annex 3A. Sources of Data about South Asian SOEs
Annex 3B. Summary Statistics and Estimations for Indian Enterprises
Annex 3C. Productivity Estimation
Notes
References
4 Subnational Governments in South Asia: Balancing the Fiscal Risks of Government Decentralization with the Returns
The Promise and Risks of Fiscal Decentralization in South Asia
The Unclear Extent of Subnational Fiscal Liabilities and Rising Fiscal Risks in South Asia
Fiscal Responsibility Legislation and Subnational Fiscal Risks
Subnational Debt, Data, and Transparency: Lessons from Pakistan
Estimating Contingent Liability Shocks, Adjustment Costs, and Mitigating Factors Using Data for India
Results: Examining the Occurrence of Contingent Liability Shocks
Improved Transparency and Fiscal Rules, the Disciplining Role of Markets, and Better Intergovernmental Frameworks Are Needed to Achieve Better Subnational Fiscal Outcomes in South Asia
Annex 4A. Methodology.

Annex 4B. The Kalman Filter
Annex 4C. Regression Tables
Notes
References
Boxes
Box ES.1 Applying the Purpose, Incentives, Transparency, and Accountability (PITA) Recommendations
Box 1.1 The Hidden Debt of National Highways in India
Box 1.2 Low-, Medium-, and High-Risk Scenarios for Computing Losses to the Government from Contingent Liabilities of Public-Private Partnerships
Box 2.1 Main Findings of the Overall Analysis
Box 4.1 Recommendations for Improving Fiscal Reporting and Transparency in Pakistan
Figures
Figure O.1 Some South Asian Governments (India, Pakistan) Use State-Owned Commercial Banks, State-Owned Enterprises, and Public-Private Partnerships More Commonly Than the Global Benchmark While Others (Bangladesh, Sri Lanka) Are Catching Up
Figure O.2 Analytical Framework: Links from Distress to Adjustments to Impacts
Figure O.3 Highlights of the Report's Findings on Distress, Adjustments, and Impacts
Figure O.4 State-Owned Commercial Banks Adjust Differently from Private Banks in Times of Distress, 2009-18
Figure O.5 Annual Government Support for South Asian State-Owned Enterprises Could Account for More Than 2 Percent of GDP, on Average, Depending on the Country, 2015-17
Figure O.6 A Profound Macrofinancial Crisis Could Trigger Failures among Public-Private Partnerships That Would Cost South Asian Governments up to 4 Percent of Revenues
Figure O.7 The Liabilities of Loss-Making State-Owned Enterprises in India, Pakistan, and Sri Lanka Have Been Huge, but More Than 80 Percent of Losses in Each Country Have Occurred in Only the Top 10 Loss-Makers
Figure O.8 Local Investments in Indian States Fall Significantly with a Contingent Liability Shock, Keep Dropping the Year After, and Stay Well Below the Trend for Three Years.

Figure O.9 Checks and Balances on Government Executives Help Prevent Distress of Public-Private Partnerships
Figure 1.1 Active Portfolio of Public-Private Partnerships in Infrastructure in South Asia, 1990-2018
Figure 1.2 Sectoral Distribution of Public-Private Partnership Projects with Financial Closure in South Asia, by Country and Number of Cancellations, 1990-2018
Figure 1.3 Number of National Highway Public-Private Partnership Projects in India, by Year of Financial Closure, 2001-18
Figure 1.4 Traditional versus Public-Private Partnership Procurement of Infrastructure in India, 2001-17
Figure 1.5  Distribution of the Percentage of Contract Period Elapsed, 1990-2018
Figure 1.6 Distribution of Failures of Public-Private Partnerships over the Contract Period, 1990-2018
Figure 1.7 Estimates of Survival and Cumulative Hazard for Public-Private Partnership Projects
Figure 1.8 Factors That Predict the Likelihood of Public-Private Partnership Distress
Figure 1.9 Distribution of Predicted Probabilities of Distress for Public-Private Partnerships in South Asia, from 2020 to the End of Contractual Period
Figure 1.10 Composition of Public-Private Partnership Financing for Active Projects in South Asia, by Country, 1990-2018
Figure 1.11 Estimated Total Fiscal Costs from Early Termination of Public-Private Partnership Portfolio in South Asia, as a Percentage of GDP, 2020-24
Figure 1.12 Estimated Total Fiscal Costs from Early Termination of the Public-Private Partnership Portfolio in South Asia, as a Percentage of Government Revenues for a Single Year
Figure 1.13 Estimated Fiscal Costs from Early Termination of the Public-Private Partnership Portfolio in South Asia over Different Periods as a Percentage of Expected Government Revenues, 2020-24.

Figure 1.14 Estimated Fiscal Costs from Early Termination of the Public-Private Partnership Portfolio Assuming Profound Macrofinancial Shocks, as a Percentage of Government Revenues, 2020-24
Figure 1.15 Number of Indian Highway Projects Canceled versus Not Canceled, by Contract Type and Financial Closure Year, 2010-14
Figure 1E.1 Baseline Hazard Profile Estimates Using Semi-parametric Methods
Figure 1E.2 Baseline Hazard Profile Estimates Using Parametric Methods
Figure 1E.3 Baseline Hazard Profile Estimates Using Flexible Parametric Methods
Figure 2.1 South Asia: Share of State-Owned Commercial Bank Assets in Total Banking Assets, 2016
Figure 2.2 Bangladesh, India, and Pakistan: State-Owned Commercial Banks' Underperformance Relative to Domestic and Foreign Private Banks, 2009-18 Average
Figure 2.3 India: Branch Networks and Total Credit, 2018
Figure 2.4 India: Selected Funding and Credit Indicators, 2018
Figure 2.5 India: Selected Business Model, Performance, and Soundness Indicators, 2018
Figure 2.6 South Asia's Four Main Economies: Business Models and Strategies of State-Owned Commercial Banks versus Privately Owned Commercial Banks, 2009-18
Figure 2.7 India: Characteristics of the Average Client Firms of Scheduled Commercial Banks, 2009-18
Figure 2.8 India, Bangladesh, Pakistan, and Sri Lanka: Interest Coverage Ratio by Bank Type, 2009-18
Figure 2.9 Differences in How State-Owned Commercial Banks and Domestically Owned Private Banks Adjust in Times of Distress
Figure 2.10 Capital Injections by the Indian Government to Distressed State-Owned Commercial Banks, FY2009-FY2020
Figure 3.1 Total Number and Average Revenue of South Asian State-Owned Enterprises, 2017
Figure 3.2 State-Owned Enterprise Revenue by Sector in India, Pakistan, and Sri Lanka, 2016-17.

Figure 3.3 Net Profit/Loss of South Asian State-Owned Enterprises, 2014-17.

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