Expediting PPP implementation  

Shahiduzzaman Khan     | Published: November 17, 2018 22:18:59

The government is reported to have decided on building a 217.5-kilometre (km) 'access-controlled' highway between Dhaka and Chattogram under public-private partnership (PPP) arrangement. The estimated cost of the project is Tk 169.89-billion, according to a report this week.

The expressway will be built alongside the existing Dhaka-Chattogram four-lane highway. Soon after getting approval of the project, the Roads and Highways Department (RHD) will start land acquisition, utility shifting and other necessary works for building the separate highway to ensure speedy traffic movement on the corridor.

RHD will mainly facilitate the PPP initiative for constructing the expressway through acquiring land and developing it. After providing the proposed support to Dhaka-Chattogram Expressway project until 2023, it will engage private firms with the government through PPP arrangement for building the main road.

The concept of the PPP has, to mention, generated a lot of enthusiasm in many countries, both developed and developing. Many developed countries have set up specialised PPP units to facilitate and manage large infrastructure investments. Others have established public institutions that support PPP development.

Such units have recently begun to proliferate also in the developing countries including in regions like Africa, East Asia, and South Asia. This has been driven by the increasing recognition of the need to boost infrastructure investment.

Although Bangladesh government undertook a number of large infrastructure projects under PPP, most of them could not be implemented as yet. Every year, a significant amount of fund, to the tune of Tk 30 billion, is allocated for PPP projects. Unfortunately, much of this amount remains unspent.

The authorities introduced a number of rules and regulations on different occasions to attract PPP proposals. But so far, success rate is very insignificant. On many occasions, 'unsolicited offers' come from different international companies to implement large-scale infrastructure projects. But those could not be entertained for lack of specific mechanism to deal with such projects.

As such, the government is now set to introduce a new provision for entertaining unsolicited offer from the private sector to implement different projects PPP. The proposed provision includes two systems - Bonus System and Swiss Challenge System - for entertaining private party's unsolicited offer for PPP projects.

Due to slow progress in implementation of PPP projects, overseas entrepreneurs are still hesitant to invest in Bangladesh. Reluctance of the bureaucrats in the implementation, traditional procurement system and delay in formulating appropriate legislation are the impediments to increased investment under PPP. 

A large number of the bureaucrats do not, in fact, want proper implementation of PPP projects as it may restrict their power in the public projects. Absence of guidelines and bureaucratic tangles acted as the hindrances to implementing PPP initiative. The bureaucracy, by its nature, does not encourage change. It is the same age-old bureaucracy that is inherited from British colonial regime.

In the PPP model, public and private sectors jointly undertake large projects on partnership basis. Through this model the private sector is encouraged to participate in large and long-term infrastructure development. Private sector arranges the resource or bears the cost of building infrastructure in the process.

In spite of formulation of some guidelines, potential infrastructure development projects can hardly be taken up for implementation. The process of engaging private developers for setting up of hi-tech parks or expressways through tender is reportedly being delayed for the same reason. This has caused some disappointment among the interested investors.

Facilitation of the operation of the would-be PPP projects under diverse conditions prevailing in the country, sooner than later, is a big challenge. Much here depends on effective staffing and institutional support for the PPP cell which should play a catalyst's role in coordinating the activities of different ministries, donor agencies, foreign and local financial institutions and the project sponsors.

The spirit of PPP is all about a shift towards leveraging government finances with private sector resources. Hence, the PPP cell needs to work out an effective strategy by which infrastructure projects can draw financing from all fronts. Country's burgeoning capital market is a potential sector wherefrom some substantial funds can be mobilised.

There is no denying that the private sector in Bangladesh is yet not strong enough to attract large capital, both from home and abroad. It is also physically constrained to implement large projects. In such a situation, PPP initiatives are unlikely to bear fruits, unless the government selects projects that are sound, viable and easy to implement. There is also a need to ensure competitive bidding process to meet transparency, accountability and creditworthiness of such projects.

Besides, there should be adequate discussion and analysis on the failure and success of PPP projects, and failed projects must receive punitive action. Every project can be divided into public, public-private and private in future in terms of prioritising public interests.

The government has, so far, been successful in branding its power plants in attracting local and foreign investors. But in respect of PPP projects, it didn't take such steps. It must share risks with the PPP projects. Guarantees on profit must be ensured otherwise the investors will not come here.

However, a recent study identified a number of factors including selection of appropriate projects, unusual cost and corruption as key impediments toward implementation of PPP projects. Other barriers include non-completion of projects within the stipulated time, inadequate feasibility study, lack of monitoring from the government and poor capacity.

An integrated infrastructure investment master plan is needed that complements but does not compete with sector-based developments. The country needs to raise investment in infrastructure requirements from the current $3.0-$3.5 billion to $12.5 billion a year to meet the development targets.

For making PPP initiatives successful in the country, the government needs to formulate a rational and attractive policy framework, ensure appropriate incentive packages and mechanism for implementation, and build trust and confidence of the investors as regards policy continuity.

As some overseas entrepreneurs are reportedly showing interest in PPP initiatives in Bangladesh, this should provide an opportunity to make the best use of foreign direct investment.                           


Share if you like