Sorry case of public private partnership

The stories sound hauntingly familiar. Plans for highly ambitious development projects are taken by the government but years later the projects hardly make any headway for lack of foresight, administrative issues and inefficiencies. Public Private Partnership (PPP) is one such area.

 The concept of Public Private Partnership in infrastructure development with the private sector's involvement was introduced in the country in the fiscal year 2009-10.

In the national budget for that year, the then finance minister, Abul Maal Abdul Muhith, presented the idea of implementing projects under the PPP model and allocated Tk2,500 crore for this purpose.

After that, 12 years have elapsed. During this period, Tk33,500 crore was earmarked for 77 projects to be implemented under PPP.

However, only one project has so far been implemented at an expense of Tk223 crore.

The government's high ambitions centring on PPP projects began to fade away from the very beginning owing to bureaucratic tangles, inefficiency on the part of the departments tasked with implementing the PPP projects, and the authorities' inability to select profitable projects for private investors.

The initiative has practically come to a grinding halt after a decade or more.

While placing the budget for FY10, Muhith said, "I firmly believe that ensuring successful implementation of the PPP mechanism will pave the way for increasing domestic and foreign investment. Thus, economic growth will accelerate."

Dr Ahmad Kaikaus, principal secretary to the prime minister, in a recent meeting of the Executive Board of the PPP Authority, expressed frustration over the overall progress in the PPP projects.

The meeting decided to enhance the capacity of the PPP Authority by recruiting skilled manpower and reduce the number of projects to be implemented after a more in-depth review of the selected projects.

The meeting also suggested excluding the projects which are less likely to be implemented.

Opposing the reduction in the number of PPP projects, Dr Shamsul Alam, member of the General Economics Division (GED) at the Planning Commission, told The Business Standard that Bangladesh is facing a resource gap equivalent to $928.48 billion to achieve Sustainable Development Goals (SDGs) by 2030.

About $51.90 billion or 5.59% of the resource gap should be collected through the PPP mechanism. There is no scope to reduce the number of projects under the PPP.

A lack of momentum in project management under PPP is frustrating for the economy. It will not be right to cut the number of projects without giving importance to solving this problem, he added.

In the last 12 years, only Tk223 crore has been released from the total allocation of Tk33,500 crore for the Dhaka eastern bypass project. Apart from this, an approval in principle has been given to provide Tk2,414 crore from the PPP allocation for the Dhaka Elevated Expressway project, no money has been released yet for it.

Moreover, there are two dialysis centres in Dhaka and Chattogram under the public-private partnership. The government has given only two parcels of land for the two hospitals. No money is required as it was a profitable investment for the private investors.

The planning ministry had directed to implement at least 30% of the total projects in the infrastructure sector through PPP under the Annual Development Program (ADP) for the fiscal 2018-19. Nothing has been done on this directive.

Although there has been no significant progress in the PPP projects since it came into an institutional shape, at least 50 small and large projects, including flyovers, telecoms, land ports and power plants have been implemented in public-private partnership before the fiscal 2009-2010.

Of them, the landmark project is the construction of an 11km Mayor Hanif Flyover in Dhaka. The flyover construction began in 2006 and ended in 2013. This project was implemented by Orion Infrastructures Limited.

Despite the failure in Bangladesh, there are examples of good progress in the implementation of PPP projects in neighboring countries. Some 24 infrastructure projects in India, 11 in Pakistan and 37 in Malaysia have been implemented under the PPP mechanism.

When contacted, Dr Md Shamsul Hoque, a leading transport expert and professor at Bangladesh University of Engineering and Technology (Buet), told The Business Standard that despite having a huge potential, private investors in Bangladesh are not showing interest in PPP due to a lack of trust.

He cited the example of the Dhaka Elevated Expressway project. Although it was decided in 2004 that the project would be implemented under PPP arrangement, an agreement was signed in this regard in 2010.

Even after 10 years, the government has not been able to hand over 100% of the land for the project. Land acquisition, removal of existing service infrastructure and other works took extra time here. Investing in such a slow project with high interest rate loans from banks will never be profitable for the private sector, he added.

Dr Zahid Hussain, former lead economist at the Dhaka office of the World Bank, told The Business Standard that the biggest failure in PPP management in Bangladesh is that the authorities concerned are not being able to present any significantly profitable project before the private sector.

Referring to the existing bureaucratic complexities, he said it took five years to formulate a law after the then finance minister AMA Muhith introduced a PPP model in the national budget. Yet, the law could not be enforced properly even in the following five years, he added.

However, the PPP Authority claimed that expected responses cannot be received from the private sector in these kinds of projects.

Private-sector investors seek profit immediately after investing, the authority said, adding that the investors are less interested in putting their money in PPP projects for a period of 20-25 years.

Sultana Afroz, chief executive officer (CEO) of the PPP Authority, said it takes a long time to finalise the preliminary works including project selection, project formulation, and deal signing etc.

However, it is a matter of hope that implementation of several projects is going to start, she said.

The PPP Authority was set up in 2010 under the Prime Minister's Office (PMO) to do everything from formulating PPP projects to signing agreements. The PPP Authority has a board of governors. Headed by the prime minister, the board also has the finance minister and ministers and state ministers from all relevant ministries.

There is also the Executive Board of PPP Authority under the chairmanship of the principal secretary to the prime minister. In addition, each ministry has a PPP cell to coordinate with the PPP Authority.

Executive Board expresses disappointment

A recent board meeting chaired by Dr Ahmed Kaikaus, principal secretary to the prime minister, suggested reducing the number of PPP projects under implementation and implementing those with the government's own funds.

The executive board also called for increased scrutiny before selecting new projects and boosting the capacity of the PPP Authority through recruitment of skilled manpower.

Ahmad Kaikaus stressed analysing the rationality of any proposal or application of incentives for any PPP project before forwarding it to any authority. Special incentive for any projects would be an example for other investors, he argued.

Addressing the meeting, Tofazzel Hossain Miah, secretary to the PMO, said the private sector would not be interested in investing in a project if there is no probability of making profits.

"Many ministries and divisions have no likelihood to implement or offer commercially profitable projects following their existing scope of works. Therefore, it is the time to analyse the reality of the instruction to implement 30% of total projects under PPP arrangement," he maintained.

Expressing similar views, Abdur Rouf Talukder, senior secretary to the Finance Division, said a project should not be presented under PPP arrangement if the project is not bankable.

The officials also emphasised the need for modifying the list of PPP projects considering the capacity and availability of private investors, after a list of 77 projects to be implemented under PPP arrangement was presented at the meeting.

The chairperson of the meeting was sceptical about the probability of execution of all of the projects in the list under PPP arrangement.

He said a list of implementable projects should be prepared to analyse the status of the projects.

The principal secretary suggested conducting a proper verification selection survey to identify the projects to be implemented under PPP.

"Whether the PPP Authority has conducted a detailed feasibility study of the projects or not is very important. It is also important that the authority has skilled manpower to conduct detailed studies," he opined.

He also recommended hiring consultant firms or recruiting human resources if the PPP Authority lacks skilled manpower.

A rapid change in the modality of any project by implementing agencies is the main obstacle to implementing any project under PPP, said Ahmed Kaikaus, requesting the authorities to trim down the list of PPP projects.

Fatima Yasmin, secretary to the Economic Relations Division (ERD), told the meeting that implementing agencies forward requests to the ERD to find foreign finance, while the PPP Authority asks for finding private finance.

Implementing agencies inform the ERD that their projects have been approved to be implemented under PPP modality after finalising the negotiations with donors and taking the project to the foreign funding stage, she claimed.

It is, therefore, very difficult for the ERD to find foreign funding and negotiate with the donor agencies.