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The Financial Express

Effective strategy to make PPP initiatives successful

Shahiduzzaman Khan | Published: May 13, 2020 21:38:13 | Updated: May 13, 2020 21:39:44


Effective strategy to make PPP  initiatives successful

The concept of the Public-Private Partnership (PPP) initiative has, of late, generated a lot of enthusiasm in many countries, including Bangladesh. 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, very few of them could be implemented so far. Every year, a significant amount of fund, to the tune of Tk 40 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 mulling introducing a new provision for entertaining unsolicited offer from the private sector to implement different projects under 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 bureaucrats do not, in fact, want proper implementation of PPP projects as it may restrict their power in the public projects. Absence of proper guidelines and bureaucratic tangles acted as the hindrances to implementing PPP initiative.

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.

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.

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.

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.

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.

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 capital market is a potential sector wherefrom some substantial funds can be mobilised.

 

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