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$500m infrastructure investment fund likely

PPP Office toying with concept

Syful Islam | August 20, 2019 00:00:00

A US$500 million fund is likely to be created with contributions from the government, bourses, banks and financial institutions to invest in various infrastructures, officials said.

The private sector people will enjoy tax and duty waiver if they invest in the proposed National Infrastructure Fund, they said.

The Public Private Partnership Authority (PPPA) has recently forwarded a draft concept paper of the fund to the finance ministry seeking its opinion.

A committee led by a director general of the Prime Minister's Office is overseeing the formation of the fund.

According to the concept paper, of the total $500 million, 20 per cent will be contributed by the government while the rest will be raised from the private sector.

The fund will issue unit trust/participation certificates, bonds and other debt instruments to raise the required financing.

Banks, insurance companies, pension funds, and mutual funds will be drawn into the fund.

It will also raise money from the market through debt/unit trust certificates.

The fund will also be allowed to raise more assets directly from development partners or through their support for bonds or other debt instruments under the partial risk guarantees by multilateral development agencies like the World Bank and the Asian Development Bank.

The draft concept paper has proposed incentives to attract private sector financing to the national infrastructure fund.

Exemptions will be offered from income tax on interest income/coupon, capital gain tax on the transfer of instruments, and on advance income tax.

VAT (value added tax) waiver will be given on various services, while tax relief will be offered under investment allowance based on the amount of investment in the fund, similar to those provided to savings certificates.

The stamp duty and transfer tax will also be exempted, the concept note said.

It said the fund will need waiver from market exposure cap imposed on banks by the central bank, withdrawal of restrictions from the Insurance Development and Regulatory Authority on investment by insurance companies, and approval under the labour law to allow pension funds to invest.

It will also require the first loss guarantees and liquidity guarantee from the government, and waiver from exchange control and restriction on foreign investment.

The national infrastructure fund will mainly invest in public private partnership (PPP) and independent power producer (IPP) projects.

The concept paper also noted that Bangladesh has developed a pipeline of more than Tk 487 billion of PPP and IPP projects in addition to the already awarded projects worth Tk 250 billion.

The total amount is over 10 per cent of Bangladesh's total banking sector lending, which the local banks would not be able to finance.

The capital markets cannot provide equity and debt financing for the PPP projects while there is no liquid and effective listed bond market while greenfield companies cannot raise equity from there.

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