The Ministry of Finance (MoF) has opposed forming the proposed national infrastructure fund and suggested enhancing the lending capacity of two state-run financers instead of funding public-private partnership projects, officials said.
The MoF has decided to provide Tk 20 billion from the public exchequer to the state-owned Bangladesh Infrastructure Finance Fund Limited (BIFFL) and the Infrastructure Development Company Limited (IDCOL) for the purpose of funding projects under public-private partnership (PPP) modality.
The development came about as the PPP office has recently sought the finance ministry's opinion on a draft concept paper of the proposed $500 million national infrastructure fund.
The proposed fund is designed to finance infrastructure development in the country to facilitate the growing economic activities.
According to the concept paper, the government should pay 20 to 30 per cent as seed capital amounting to between Tk 8.45 billion and Tk 12.68 billion. The remaining amount will be raised from the private sector.
The finance ministry, in its opinion, said the government has already established BIFFL and IDCOL with paid-up capital of Tk 21.08 billion and Tk 6.0 billion respectively to finance infrastructure development under the PPP initiative.
The BIFFL has already invested Tk 7.20 billion in three PPP projects and the process of investing additional Tk 16 billion is underway.
The IDCOL has so far invested Tk 22.50 billion and an investment of additional Tk 5.0 billion is in the pipeline.
"These two companies can be involved more closely in PPP project implementation taking into consideration the experiences they gathered," said the finance ministry.
The ministry has also noted that the cost of fund to be mobilised from the private sector for the infrastructure fund will be very high and thus may not be suitable for the purpose of investment in the PPP projects.
Ministry officials said a liquidity guarantee was sought from the government for the proposed infrastructure fund. Usually, such guarantee means assurance of continuous financial assistance until the fund's financial strength reaches a specific level.
But there is no scope of providing such guarantee as per the present 'guarantee guidelines of the finance ministry', said the officials.
Sources said Finance Minister AHM Mustafa Kamal has recently approved the Finance Division's proposal in this regard, which suggested empowering the BIFFL and the IDCOL instead of forming the National Infrastructure Fund.
He also approved a proposal to provide Tk 20 billion to BIFFL and IDCOL so that they can contribute more to the implementation of PPP projects.
The finance division insisted that the fund should solely be utilised for implementation of PPP projects.
According to the concept paper, the infrastructure fund had identified public exchequer, bourses and various banks and financial institutions as sources of money.
To this end, it has planned to offer tax and duty waiver facility to attract the private sector to invest in the fund.
The fund also planned to issue unit trust/participation certificates, bonds and other debt instruments seeking assets directly from development partners.
The concept paper also noted that Bangladesh has developed a pipeline of more than Tk 487 billion of PPP and IPP projects in addition to the already awarded projects worth Tk 250 billion.
The total quantum is over 10 per cent of Bangladesh's total banking advances which the local banks would not be able to finance, it said.
The capital markets cannot provide equity and debt financing for the PPP projects while there is no liquid and effective listed bond market and greenfield companies cannot raise equity from there, the concept paper stated.