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The Financial Express

PPP initiatives need to gather pace

Shahiduzzaman Khan | Published: March 05, 2016 22:09:59 | Updated: October 20, 2017 15:50:26


PPP initiatives need to gather pace
Response to undertaking projects on Public-Private Partnership (PPP) initiative is not that much encouraging.  Final agreements on only six projects have been signed so far while the feasibility studies of 18 projects have been completed. Besides, 11 projects are at the final stage of selecting private partners while 10 others at the stage of feasibility study. 
 
This was revealed in the first meeting of the Board of Governors of the PPP Authority held last week at the Prime Minister's Office with Prime Minister Sheikh Hasina in the chair. Stressing the importance of PPP initiatives, the Prime Minister said the government could not do everything on its alone. The PPP initiatives were needed. She asked the authorities concerned to look for the country's benefits while moving ahead with PPP projects.
 
The meeting reviewed the implementation and progress of PPP activities in the country for the last couple of years. Forty-three projects, now in the PPP pipeline, are expected to draw investments of around $14 billion. 
 
The main focus of PPP is to open up investment opportunities and deliver public services through the private sector. The PPP office determines modalities for project implementation and handover mechanism, conducts negotiations with investors, sets terms and conditions under any investment proposals and appoints advisers to projects for feasibility studies. 
 
Although the country is yet to see a breakthrough in attracting investment under PPP initiatives, projects in diverse sectors of the economy, involving nearly $18 billion, got go-ahead until last month. Bangladesh is expected to see striking results from the new initiative of investment.
 
Investment economists, however, blamed lack of professionalism for the dismal situation of PPP-related projects and urged the policymakers to let PPP office work under the finance ministry, instead of Prime Minister's Office (PMO) to avoid political influence and ensure prompt decision.
 
Analysts say the pace of success under the initiative could have been much faster had there been no conceptual problems among ministry officials on PPP-related regulations. Alleged misconception among bureaucrats and potential local investors are still rife making the process slower.
 
On its part, the government claimed that the progress of the PPP-related projects would be much faster now as necessary rules and regulations had been in place to woo investors. On the other hand, it will not sign any contracts in future without having an appraisal or feasibility study of the projects to be implemented, so that financing of the projects faced no hurdles.
 
However, many business leaders said lack of cooperation and trust between the public and private sectors is the key challenge for implementation of the public-private partnership programme. They called upon the government to create a more business-friendly environment and ensure greater coordination among the organisations responsible for PPP project implementation.
 
In most cases, entrepreneurs do not know the details of PPP projects as there is a lack of coordination between the public and private sectors. In order to make PPP successful, this issue needs to be addressed first. Also, the country needs to develop its infrastructure in a quick pace. Otherwise, it will fall behind other competitive countries.
 
For the interest of investment and to provide jobs to three million people who join the labour market every year the PPP can play an important role. In fact, PPP has the ample scope to contribute a lot in the sectors like infrastructure, health, energy, social services in Bangladesh. 
 
With a view to accelerating the progress of economic development of the country, analysts say, infrastructure is required to be developed rapidly and PPP project can be an alternative option to ensure expensive infrastructure development through the involvement of the private sector. 
 
The good news is that the country's banking sector is considering financing PPP projects actively in the wake of a sharp decline in domestic investment demand. Currently, the banks have excess cash in reserves, amounting to an estimated Tk 30 billion, nearly a third of the country's annual budget. 
 
But they want the government to formulate favourable regulatory policies and modalities as soon as possible. They are willing to finance roads, railways, mega power plants, ports and bridges. They consider PPP as an ideal strategy to finance infrastructure projects as an alternative to industrial lending.
 
For Bangladesh to become a middle-income country by 2021, its investment in infrastructure needs to rise from 2.0 per cent to 6.0 per cent of gross domestic product (GDP), and for that the government has pinned its hopes on PPP initiatives.
 
Off-budget financing of development programmes is not a new phenomenon. Over the past few decades, many governments encouraged off-budget financing by private sectors to meet the growing public debt. In 1992, the Conservative government of John Major first introduced a systematic PPP programme in the UK, which was later continued by the subsequent Labour governments.
 
Unfortunately, Bangladesh has a reactive legal structure, according to analysts, which fails to prevent corruption. Since the government has initiated PPP, prompt action is needed to establish a comprehensive policy and regulatory framework for competitive and transparent bidding, sharing risks and rewards.
 
There is no denying that ensuring transparency and accountability of the PPP contracts is vital. The objective of PPP is to produce an outcome greater than the sum of its individual parts. Hence, the analysts say, the focus should be on synergy, not deregulation.
 
It is thus essential to identify the risks associated with a PPP project, and to use an appropriate legal framework to distribute the risks, resources and rewards among the public and private partners. Since the government aims to initiate PPP projects in priority areas, with a goal to speed up the outcomes, the procedural delays of PPP may jeopardise the government's goal. 
 
Therefore, establishing a comprehensive and transparent legal framework in the shortest possible time appears to be the major challenge for the government for efficient implementation of the PPP projects.               
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