The finance minister is expected to make some announcements in the upcoming budget on public-private partnership (PPP) initiative. As usual, the next budget might witness a large sum of money earmarked for the PPP projects.
But what is worrying is that such commitments are being given by the government for the last few years. Analysts see a number of challenges and weaknesses that need to be resolved first. There should be a very strong regulator and good transaction adviser for the PPP projects. The governance issue is very important in the implementation of such projects.
Bangladesh needs to raise investment in public-private partnership (PPP) projects to $12.5 billion a year from $3.5 billion now to overcome the challenges in construction of mega infrastructures. The higher per capita income and rapidly growing economic activities are contributing to a substantial increase in the demand for power and transport infrastructures.
The growth potential of the Bangladesh economy is, undeniably, constrained by the severe infrastructure bottlenecks, arising from a decline in private sector investment in infrastructure over the years and a lack of policy environment conducive to such investments.
Bangladesh has a medium-and-long-term target growth rate of 8.0 per cent a year. However, the country's growth rate has stabilised at an average of 6.0 per cent plus in recent years due to the stagnating domestic investment.
In order to boost the economic growth, gross domestic investment should be raised to 34.4 per cent of GDP by fiscal '20. Given the country's huge investment gap in infrastructure, a large chunk of such additional investment is a necessity.
Bangladesh thus needs to raise its investment rate closer to the levels attained by India and China today, i.e. 37-40 per cent of GDP, in order to achieve a sustained growth rate of 8.0-10 per cent over the next decade. Bangladesh not only faces the challenge of mobilising sufficient resources to finance domestic investment but also of developing effective institutional arrangements to implement such large infrastructure projects.
PPP is nevertheless a funding model for implementing large infrastructure projects in areas such as a new telecommunications system, airport, toll roads and bridges and power plants. The public partner is represented by the government. The private partner can be a privately-owned business, public corporation or consortium of businesses with a specific expertise.
PPP is a broad term that can be applied to anything from a simple, short-term management contract to a long-term contract that includes funding, planning, building, operation, maintenance and divestiture. Such arrangements are useful for large projects that are economically and socially desirable and require significant amounts of resource spending for implementation.
Also, there should be public-private partnership between the government and the employers for training -- a must for enhancing skill development, especially for apprentice and mid-level employees.
The country's skills development agencies and other industry associations should come up with proposals on training. Reports say such organisations have the ability to accommodate these proposals and can solve the problems in public-private partnership. Almost 2.0 million people are entering the job market every year, but the fact is that many of them are not skilled.
The main reason is that there is a missing link between the industry demand and the country's 'flawed' educational system. For example, the garment sector was searching for around 70,000 textile engineers in 2014 but managed to get only 5,000 at the end. The country needs to identify the reasons for such huge gap between the demand and supply.
The country's educational system is based on certificates and not on acquiring a certain level of technical ability. The whole educational system should be reorganised so that everyone can get a job.
To meet the country's development targets, investment in infrastructure needs to be increased from the current US$3-3.5 billion to $12.5 billion annually. There is a huge spectrum of possibilities for the PPP initiative in the country. As such, the investment climate should be more attractive. Proper infrastructure plan basing on sectoral approach is a must for sound completion of the PPP projects.
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