The Financial Express

Pinning hopes on PPP initiatives

| Updated: October 25, 2017 03:05:36

Lankabangla and Fianancial Express Lankabangla and Fianancial Express
Pinning hopes on PPP initiatives

The Public-Private Partnership (PPP) initiatives of the government are reportedly getting good response, slowly but steadily. After completing the groundwork for more than five years to make it operational, the country now expects to net some $1.5 billion in foreign direct investment (FDI) a year.
The PPP Authority, according to a recent FE report, believes that an enabling environment has now been created for investment under the PPP. Contracts on seven PPP projects had already been signed which started fetching investment worth $1.3 billion.
During the next five years, the Authority expects investment flow worth $6.0 billion when other projects in the pipeline, which are now at different stages of procurement, will be ready for implementation. Initially, the PPP initiative did suffer some setback due to lack of confidence and coordination.
The PPP Authority claims it has now the necessary set-ups, from formulation of projects to their monitoring arrangements. Related policy, law, institutional set-up, marketing, monitoring mechanism etc., have thus been developed. It now ensures government's institutional, regulatory, project preparatory capacity building as well as financial support to the investors from the private sector.
The country, to mention, has seen many projects to be implemented or being under implementation, resembling more or less private-sector partnership for long. At present, 43 PPP projects are in the pipeline. Of them, 13 in transport sector, 10 in economic zones, nine in health sector, five each in civil aviation and tourism and one in energy sector, reports say.
A number of economists, however, still blame lack of professionalism for, what they consider, a dismal situation about PPP-related projects. They have urged the policymakers to let the PPP office work under the ministry of finance, instead of Prime Minister's Office (PMO), in order to avoid political influence and ensure prompt decisions.
The pace of success under the initiative could have been much faster, had there been no conceptual problems among the ministry officials on the PPP-related regulations. Alleged misconception among bureaucrats and potential local investors, they said, do still persist, making the process lengthy.
On its part, the government claimed that the progress of the PPP-related projects would now be much faster as necessary rules and regulations had been in place to attract investors. Also, it will not sign any contracts in future without having any appraisal or feasibility study of the projects to be implemented. Many investors were earlier reluctant to channel their money for the projects without appraisal.
However, a number of business leaders claim lack of cooperation and trust between the public and the private sectors is still posing as a challenge to successful implementation of the PPP projects. In most cases, entrepreneurs fail to get the details of such projects due to lack of proper coordination.
For encouraging investment and providing jobs to three million people who join the country's labour market every year, the PPP can play an important role. In fact, such an initiative has the ample scope to contribute a lot to the sectors like infrastructure, health, energy, social services etc., in Bangladesh.
It has been observed that the PPP as an operational model can readily be applied to financially free-standing projects to generate high revenue while allowing the full cover of investment, debt servicing, operation and maintenance. Telecommunication, oil and gas, electricity etc., fall into this category. These projects are profit-making ones and can be financially sustained.
With a view to accelerating the pace of the economy's development process, infrastructure, as analysts note, is required to be developed rapidly and the PPP initiative can be an alternative option to ensure expensive infrastructure development through the involvement of the private sector.
Finance Minister AMA Muhith, on quite a number of occasions, expressed his dissatisfaction at the slow pace in implementation of PPP projects.  The entrepreneurs, he was reported to have observed, should come in a bigger way to invest in power and energy sectors. The good news is that the country's banking sector is also considering financing the PPP projects in the wake of a sharp decline in domestic investment demand. The banks, according to reports, have excess liquidity, amounting to an estimated Tk 1.31 trillion until last year.
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 is now pinning much hopes on PPP initiatives.
Balancing the country's public sector's goal to provide quality services and the private sector's interest in getting reasonable rates of return on investment is somewhat difficult. As such, it is very much essential to have a well-defined legal framework for regulation and transparency of the PPP enterprises.
The risks associated with a PPP project, while putting in place an appropriate legal framework to distribute the risks, resources and rewards among the public and private partners, are, as analysts believe, some of the components that need to be identified and solved. Since the government is taking up the PPP projects in priority areas with the goal of speeding up the outcomes, the procedural delays of such projects may jeopardise its avowed objective.
The PPP initiative is, in essence, purported to bringing together the expertise of the government and the private sector to meet the needs of the people effectively and efficiently. If it is properly restructured, it is certain to deliver services that can better meet the needs of the public without compromising public policy goals.
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