Public-private partnership (PPP) for economic development in Bangladesh
PPP is considered as the best window for the development of the infrastructure sector like Bangladesh. So, the government of BD took initiatives to attract private investment from people of home and foreign countries.
What is PPP?
PPP is the joint venture of Govt and one or more private companies that are funded and operated by them altogether. Public-private partnership is also called as PPP or P3.
PPP has contact between public authority and the private sector where the private sector provides a public service and takes all risks of financial and technical operation.
By this partnership, they can undertake a big project. In this model private sectors are eager to invest in big and long term projects. In these long term projects, the private sector has a huge time to recover its investment and earn profits.
The most attractive PPP models are BOO (Build Own Operate), BOT (Build Operate Transfer), BOOT (Build Own Operate and Transfer). The USA, the UK, China, India, Malaysia took those models to develop their infrastructure.
Scope of PPP in Bangladesh
The developing countries must not depend only on donors to invest in infrastructure. They can promote their economic growth and employment opportunities by PPP. The combined effort of the public and private sectors can faster a countries development.
Using PPP Bangladesh can invest in these sectors
- Transport infrastructure
- Power and energy
- Solar system
- Drinking water and sewerage system
- Education and research
- Health sector
- Climate management
PPP and Bangladesh
Bangladesh entered into this PPP system later. This country has a shortage of funds to invest in infrastructure and it required a lot of funds. So, the Bangladeshi Govt is working on it.
Bangladesh is lagging behind to attract foreign direct investment or achieving expected gross domestic product growth due to a lack of proper infrastructure.
To build those infrastructures, we need to allocate a huge amount on ADP. It will create pressure on our limited wealth, thus, we need to depend on foreign aid.
The PPP is the only solution to get rid of those dependencies. The private sector can participate in those big projects using their own fund or taking loans.
Over the last few years, our private sector has grown a lot and capable to handle big projects. So, the pressure of government on big projects is reducing.
In PPP projects, education, health, energy, telecommunication and housing are getting developed. The government has already set up a PPP office and made policy for PPP.
Some pilot projects have been undertaken under the PPP in the road, housing, healthcare. But, the progress is not good enough, the government should give more and more effort.
Govt. investment in PPP projects
In the fiscal year 2009-10, the government allotted TK 85 billion funds on PPP but TK 25 million remain unspent. in the fiscal year, 2020-2021 the government kept TK 3,500 million in the budget to financing their PP projects.
PPP projects in BD
Till 2018, the top three largest PPP projects of Bangladesh was Payra Sea Port Dredging Concession (financial closure in 2019), Total investment was $647.26 million, Munshiganj Mawa Orion-Long King coal-fired Electricity plant (financial closure in 2012), Total investment was $578.90 million and Sirajganj 4 Combined Cycle Power Electricity Plant (financial closure in 2017), Total investment was $412.00.
Government initiatives to attract PPP in Bangladesh
The govt has approved separate guidelines for all projects under PPP. Those guidelines are on viability gap financing, PPP technical assistance financing scheme and PPP technical assistance financing.
Under the prime minister’s office, a separate PPP office has been established. The govt issued the policy strategy for PPP, 2010 and appointed a chief executive officer there.
The main obstacles of PPP projects are corruption in the bidding process and sometimes the private firm violates their commitment. They get a small penalty or even no penalty if they renege their commitment.
The benefits of PPP
By combing the effort of the public and private sector, a countries infrastructure will be developed within a short time. The public sector, private sector and general public of a country will get benefitted.
The private sector is investing in infrastructure, so, govt is free from taking loans and pay interests. This will reduce pressure on govt and hold the interest rate and inflation.
Innovation and expertise
The private sector is developing infrastructure and they will use the best and effective technologies.
Logical estimate of expenditure
The private sector will implement different aspects of the project such as designing, financing, construction, maintenance and management. It will possible to make a logical estimate of expenditure during the projects.
Achieving high growth rate
Developing infrastructure at an appropriate time will increase the economic growth rate. Additional investment and high production capacity lead to a higher growth rate.
Expand own business
PPP facilities can expand their business. The private sector can invest in profitable big projects.
Introduce to something new
The private sectors are innovative in the financing, management, construction, maintenance and management.
The services are bought from the private sector, they are accountable to the public and government.
Govt approves and supervises those projects; the private providers are abiding by their rules.
Since the private sector has to bear the cost of accidents and damage; they will use reliable and quality materials to ensure safety.
- PPP projects are capital intensive, thus, matching assets, liabilities and cash flow is more important here.
- There required full support of the planning commission on the entire process.
- For competitive and transparent bidding there needs to establish a comprehensive and regulatory framework.
- The legal framework must have the ability to ensure obligations to private sector partners and keep provision for cost recovery and the issue of compensation
- The government should finance those projects from various sectors.
- Like other govt. the government can make the ministry of finance for the in-charge of PPP projects.
PPP Authority of Bangladesh