Presentation on PPP Seminar -Dr. Mustafa K. Mujeri
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Transcript of Presentation on PPP Seminar -Dr. Mustafa K. Mujeri
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8/8/2019 Presentation on PPP Seminar -Dr. Mustafa K. Mujeri
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8/8/2019 Presentation on PPP Seminar -Dr. Mustafa K. Mujeri
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Concept and rationale
Service or a business venture funded, managed,and operated through a partnership between
government and one or more private sector
entities
Rationale: Model with enhanced role of private
sector in government initiative relaxes
governments resource constraint, ensures
greater efficiency and better management
resulting in improved service delivery while
maintaining public accountability of service
provision 2
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PPP variants
Simple form: Government provides capital for
investment, while operations run jointly with
private sector or under contract. It could be other
way round as well. Contract: private party assumes financial,
technical, and operational responsibilities and risk
in venture. Infrastructure: Pay contracted price for services
that is financed, built, managed, and maintained
by private sector enterprise3
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PPP variants (contd.)
Social enterprises: unite public sectors
commitment to social goods with private sectors
expertise in product development and marketing
Different approaches to PPP based on activity and
country characteristics
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Alternative modes of operation
Cost of using service borne by users (e.g. toll
roads)
Capital investment by private partners, cost ofproviding service borne (wholly or partly) by
government Public contribution in kind (transfer of existing
assets)
Government provides subsidy (one time grant)
for creating public good (infrastructure)
Government provides revenue subsidies (taxbreaks or guaranteed annual revenue for a fixed
period) 5
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Implementation options
One option: form a consortium, called SpecialPurpose Vehicle (SPV) to plan, construct,
maintain, and operate. Government holds an
equity share in SPV. SPV signs contract with
government and with subcontractors to build
and maintain facility
For infrastructure, complex arrangements and
contracts needed to guarantee and secure cash
flows
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Issues and problems Infrastructure projects: PPPs entail higher costs
than under standard models (mainly due to
higher rate of return demanded by private
investors although income risk is borne by public
sector) Low quality ofPPP schemes relative to standard
model of public procurement
One reason: central assessment focus on valuefor money
The issue is whether guidelines designed are
appropriate and correctly applied 7
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Regional experience
India: PPPmode of infrastructure deliverylaunched a decade ago; accepted as an efficientand effective methodology
Indonesia: Emphasis on financial and technicalaspects; Malaysia: political and social motivations;Singapore: value for money; Thailand:
infrastructure in many sectors notably in power,electricity, telecom, and transport services
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Regional experience (contd.)
Developed countries: set up specialized PPP unitsto facilitate and manage large infrastructureprojects. Establish public institutions to supportPPP development
Lessons: no unique formula for developing a soundPPP framework. Needs clear policy and legalframeworks for PPP that ensure right balance
between public and private interests
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PPP in Bangladesh
Experience of IDCOL established in 1997 under
ERD: few small private investments in
infrastructure projects
No integrated policy for execution ofPPP
projects; needs a new phase ofPPP
implementation
Revisit past operations and other experiences toidentify what works and what does not
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PPP in Bangladesh (contd.)
Infrastructure Investment Facilitation Center(IIFC) to assist in preparing proposal andscreening; Bangladesh Private Sector
Infrastructure Guidelines (PSIG)2004 formsbasis of current PPP; Five year InvestmentPromotion and Financing Facility (IPFF) in BB in2007 to finance approved PPP infrastructure
projects; policy for private participation inpower sector in 2008: indecisive about size,institutional framework, organizationalstructure, and implementation modalities
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Way forward: general prerequisites
Fast growing economy with dynamic and healthyfinancial system
Stable policy environment, robust legal andbusiness support systems, institutionsguaranteeing rule of law
Large and growing domestic market
Sound economic fundamentals
Steady economic reform regime
Regulatory framework rewarding entrepreneurshipand risk taking
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Way forward: specific issues
Create the institutional framework
New window: legal basis for project implementation and
contract execution, devise ways for independent
operation and management outside the purview of public
procurement, install mechanism for accountability, design
and planning
Formulate policy framework, incentive packages,
mechanism for implementation
Ensure competitive bidding to meet transparency,accountability, and creditworthiness of projects
Bring clarity on fiscal incentives, life-cycle, financing
requirements and modalities, project management and
operation 13
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Way forward: specific issues (contd.)
Involve negotiators with technical knowledge andexperience in project design, financing, andmanagement in PPP operations
Create bridge between public and private sectorinterests using incentives and financial instruments
Adopt flexible models and approaches of privateparticipation along with collaborative innovativepartnership based processes
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Implementing FY10 budget initiative
Tk. 25 billion for PPP projects: governmentpartnership in equity and loan assistance to
different projects
Identify projects that are sound, viable, andsomewhat easy to implement
Adopt some guidelines: for power and energy
infrastructure, private partner may invest up to70-75 percent of entire investment; for health,
education and social sectors, government may
contribute major part of total investment15
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FY10 budget initiative (contd.)
PSIG 2004 guidelines not backed by law; To start,
PPR 2008 (Rule 129) and PPA 2006 (Section 66)
may provide legal basis for PPP initiative
Adopt project implementation within a flexible
framework covering BOO, BOT and BOOT as
necessary
Initially, negotiate PPPs as one-off deals with aim
to install a systematic program in phases Finalize detailed action plan on how to proceed in
a time bound manner; streamline processes,
regulations, requirements, legal/policy hurdles16
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FY10 budget initiative (contd.)
Enact new act to develop comprehensive legal andinstitutional framework for administration,
monitoring, professionalism and accountability
Create legal framework for pooling of funds fromvarious sources (banks, insurance companies,
pension funds, etc) as government can only
provide equity or loans to infrastructure related
funds at present through IDCOL
Establish a PPP cell to move forward
Prepare guidelines for TA and viability gap funds17
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FY10 budget initiative (contd.)
Remove weaknesses and limitations ofPrivateInfrastructure Committee (PICOM) under PSIG 2004 interms of its size, scope, and other institutional andorganizational framework and structure
Set up a dedicated unit forPPP
budget formulationand implementation
Adopt measures to build trust and confidence ofinvestors; simplify legal and regulatory frameworks;streamline decision making process; remove
implementation constraints; ensure procedures ofaccountability
Create broader political consensus on needs andimperatives especially for large PPP projects with
longer implementation periods18
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Risk factors
Remove perception that public money
diverted through PPP to meet private ends
Three factors important to highlight in PPPoperations: transparency, consultation with
stakeholders, sound regulatory framework
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Conclusions
There can be initial hiccups in PPP as with any new
initiative, but prompt action would deliver desired
outputs
For successful implementation ofPPP projects,
political support is critical
There is no unique model or mechanism of
implementing PPP: explore collaborativemodalities and partnership based approaches best
suited to specific contexts
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Thank you
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