Investigating and Measuring Barriers to Private Sector Participation in Urban Development (Case Study of Shiraz)

Extended Abstract

Introduction
Consideration of fundamental and logical criteria in urban physical development is one of the principles of urban sustainable development. Urban sustainable development is a kind of development that considers the real needs of humans and the environment; in other words, decisions are deemed wise when they take economic, social, and environmental aspects into consideration. Sustainable income is one of the factors affecting the physical development of cities, which determines the type and extent of urban development based on existing plans. Therefore, a major urban sustainability factor is achieving a sustainable model for financial resources to cover the current and construction expenses of a city and lay the foundations for investment in urban development infrastructures. It merits mention that not only do the incomes need to be reliable and steady, but they also should not pose any threat to urban sustainable development. Considering the lack of sufficient funding for urban projects in most cities around the world, these cities are in need of investments, partnership with the private sector, and facilities from banks and institutions in order to develop their infrastructures. According to reports by Shiraz Deputy Mayor’s Office for Finance and Economy (2019) and Fars Planning and Budget Organisation (2019) in Iran, currently there are 31 private companies active in urban development, 2,618 private companies active in contracting, and 153 private companies active in different urban projects. On the basis of 2018 and 2019 reports, 102 contracts have been signed with the private sector and are being undertaken for projects concerning cemeteries, waste management, public squares, and the green space. According to Figure 1, different districts of Shiraz Municipality signed 255 contracts overall with the private sector in 2019; this number was 690 in 2018, and 1791 in 2016-2017. Therefore, it can be concluded that the number of contracts, i.e. the extent of the private sector partnership, has followed a downward trend. This study examined major barriers to the partnership of the private sector in urban development and construction in Shiraz. The main research question is: What factors inhibit the partnership of the private sector in urban development of Shiraz, and to what extent?

Methodology
This was an applied survey paper, where a measurement tool was prepared to examine the quantitative variables and study the main objective (question) of the research. Structural equation modelling (SEM) was adopted in order to explain the role of factors inhibiting the private sector partnership in Shiraz development. The data were collected using a closed-ended questionnaire on the basis of the five-point Likert scale; the research sample included the directors and officers working at the municipality. The research tool was a researcher-made questionnaire whose face validity and convergent validity were confirmed by experts and university professors. Composite reliability coefficients (greater than 0.7) and Cronbach’s alpha (greater than 0.7) were used to assess the reliability; if the coefficients converge, the research tool will be considered reliable.

Results
Structural Equation Modelling (SEM): As seen in Table 3, according to the results from Fornell and Larcker Matrix, average variance extracted (AVE) of the latent variables, located on the main diagonal of the matrix, is greater than the correlation between them, located below the main diagonal. It can, therefore, be asserted that the latent variables in the current model are more associated with their observable variables than other constituents; in other words, the discriminant validity of the model is confirmed.

Table 3. Discriminant validity of study variables
Source: research findings, 2019

Structural Part of the Model
As seen in Table 4, the value of t coefficient for all the relationships studied is greater than 1.96, indicating the significance of those relationships at the confidence level of 95%. Based on the results of Table 4, the relationship between partnership barriers and policymaking and regulations is 0.4, which is significant considering the value of t coefficient (5.33). In a similar vein, the relationships between partnership barriers and other variables are also significant: studying, preparing, and assigning the projects is 0.263, and the value of t coefficient is 3.45; funding and financial support is 0.364, and the value of t coefficient is 2.68; and lastly, capacity building is 0.145, and the value of t coefficient is 2.14. According to these results, the strongest relationship is between partnership barriers and policymaking and regulations (0.4), and the weakest relationship is between studying, preparing, and assigning the projects and partnership barriers of the private sector in Shiraz development (0.145).


Figure 3. Structural Model together with standardised coefficient of factor loadings and overall effects of main structures
Goodness-of-Fit of the Structural Model
According to the results, the average of shared values and coefficients of determination were 0.868 and 0.16 respectively. Additionally, the value of the goodness-of-fit was 0.372, confirming the model’s goodness-of-fit, as it was greater than 0.36.

Conclusion
In the structural model of the present paper, policymaking and regulations; studying, preparing, and assigning the projects; funding and financial support; and capacity building in the public and private sectors were identified as the influential factors in the partnership of the private sector in development projects in the Iranian city of Shiraz. It should be noted that the variable of policymaking and regulations proved stronger than other variables (0.4), showing that lack of long-term plans, insufficient incentives and exemptions, and lack of upstream legal frameworks have inhibited the partnership of the private sector in Shiraz development plans and projects. Another influential factor confirmed by the structural model is funding and financial support; a number of major inhibiting factors in this regard include not using the capacity of the capital market to finance partnership contracts, insufficient financial resources to offer facilities, and lack of sustainable financial resources to provide backing.