Renewed faith in PPP
Posted : 12 Jun, 2015 00:00:00, Source
Even six years after the incumbent finance minister first mentioned it in his budget speech in 2009, the public-private partnership (PPP) initiative has remained almost a non-starter. The government has taken up projects after projects over the years under the PPP and the number has gone up to 32. But not a single one has been implemented until now. Finance officials tend to show the Gulistan-Jatrabari Flyover as a PPP success story. In reality it is not. Originally, it was not conceived as a PPP project. It has been more of a ritual for the finance minister to keep aside a sizeable amount of fund for the PPP projects in the national budget since the fiscal year 2009-10. But the allocations have remained unused.
In his latest budget speech, the finance minister has admitted the lack of progress in the PPP initiatives and pinned hope on a new PPP bill that is now awaiting the lawmakers' nod. Mr. Muhith did no wrong by demonstrating his faith in the PPP concept that has produced remarkable results in a number of both developed and developing economies. The concept could be a very effective way of implementing large- to medium-scale projects, particularly relating to physical infrastructural facilities, in a resource-strapped country like Bangladesh. In neighbouring India, quite a number of large projects have been implemented under the PPP initiative. However, things have slowed down of late there and the Indian government is trying to trace the reasons behind it.
The government of Bangladesh has formulated a few guidelines to facilitate investments under the concept and created a fund, styled, Viability Gap Financing (VGF). A PPP office, created under the control of the Prime Minister's Office (PMO), is responsible for selecting projects and overseeing those after their implementation. Now a PPP law is in the offing. Given the response received so far from the private sector in the case of PPP projects, it is hard to believe that enactment of a law would alone make things better than before as far as the implementation of projects under the new initiative is concerned.
In fact, local or foreign investors would be interested in PPP projects only when they are assured of a reasonable rate of return on their investments. Besides, another factor they abhor most is the bureaucratic hassle. Until and unless this particular issue is resolved, not many investors would come forward to be a partner in the PPP projects. However, other hurdles including scarcity of land, inadequate infrastructural facilities and shortage of power and gas need to be removed to get a reasonable response from the private investors. The selection of private parties, local or foreign, is yet another important issue. A wrong choice at times could mar the prospect of an important project.
A case in point is the Dhaka Elevated Expressway. Nearly two years have gone by since the signing of the deal with a private joint venture (JV) company. But the JV is yet to firm up fund for the project. Similarly, two years after the approval, the Rajdhani Unnyan Kartipakhha (RAJUK) is still to find out a private partner for its Shantinagar-Mawa flyover project.
Undoubtedly, it is important to have a legal framework that would guarantee unhindered investment opportunities for both public and private partners and ensure a fair rate of return on their investments. But the government should also find out some other major reasons for lack of response to the PPP projects initiated until now and try to address them.