The PPP inertia
Shamsul Huq Zahid | Published:
March 06, 2016 22:53:12
October 21, 2017 06:15:26
The government has been trying hard to sell Private-Public Partnership (PPP) concept since 2009 to help implement large projects that would benefit the people. But the response from the private sector has been lukewarm.
Finance Minister AMA Muhith dedicated a few paragraphs in his annual budget speeches and earmarked a sizeable amount for the PPP projects. But most of the allocations has remained unspent.
A sort of frustration also crept into the official circle concerned. However, the policymakers decided to give certain boost to the initiative. They made a few organisational changes, including creation of a PPP authority that is close to the highest seat of the government, the Prime Minister's Office (PMO).
Of late some movements are being noticed with the aim to infuse a sort of dynamism in the PPP initiative. It is hard to say what would be the ultimate outcome.
At the first ever Board of Governors meeting of the PPP Authority, held with Prime Minister Sheikh Hasina, who is also chairperson of the Board, optimism apparently also ran high about attracting $14 billion investments to a total of 43 PPP projects in the pipeline.
The finance minister in his last speech also did not hide his frustration over the PPP initiative. However, he appeared hopeful about turnaround because of the corrective measures taken in the PPP Act, adopted by parliament lately. Until now contracts against three PPP projects have been signed. The projects include the cost intensive elevated expressway. The fate of the project is still not clear since the private sector partner, a joint venture, had dragged its feet for long because of its failure to arrange finance for the project.
Undeniably, the legal and other procedural problems that surfaced since the government launched the PPP initiative have largely been solved. Yet the response from both local and foreign private sources has been well below expectation.
But a number of countries in this region and Southeast Asia have done well in this particular area. They have been successful in drawing large private investment in infrastructure projects.
The Mayor Hanif Flyover project, which has generated enough of controversies until now, and a few independent power plants (IPPs) are often presented by the government as successful examples of PPP initiative in Bangladesh. But in accordance with the PPA Act and rules thereof, these projects cannot be considered as PPP projects.
The private builder of the Flyover project that was built under build, operate, own transfer (BOOT) arrangement, is trying to squeeze the maximum possible benefit out of the project. It is out to inflate its investment as much as possible under different pretexts, including extending the length of the bridge by three kilometers from the actual one. Under PPP arrangement, neither private nor public partner can indulge in this kind of irregularity.
The PPP is an approach that is being exploited by both developed and developing countries since it helps the government ensure the use of resources and expertise of the private sector, primarily in infrastructure building. Bangladesh, with its resources scarcity, does also need to make use of the initiative to the maximum possible extent.
But the problem is that the government is very much willing to work with its private counterparts. Yet the latter, until now, seem to be unwilling. This is partly because of cultural barriers and lack of enough surplus resources.
Here, the role of foreign investors remains very important. The foreign investors would naturally prefer reliable local partner/s to form joint ventures. It is understood that the government would pay its part of equity in the form of land, a highly precious resource in the context of Bangladesh.
There is no denying that PPP is a very potential concept for development of any country, developed or developing, provided the government could successfully woo the 'right' kind of private sector partners.
The government should not select anyone as its partner in a PPP project without looking into his/her competence and ability, in terms of expertise and resource mobilisation. Wrong selection of partner might even jeopardize the fate of a project.
A major problem that the Bangladesh government has been facing is the lack of interest among local potential private entrepreneurs to become parties to PPP projects. So, it is important for the policymakers to discuss individually with these investors to remove misgivings, if there is any, and reply to their queries. It is also essential to know what should be done to ensure their participation in PPP projects, particularly those concerning infrastructures.