Doubts cast over execution of PPP projects this fiscal year

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Nazmul Ahsan
Doubts have been raised over the execution of large projects through the novel Public Private Partnership (PPP) investment as a 'detailed action plan' devised to implement the key initiative sees more hurdles and extra-time than originally thought.
Finance Minister AMA Muhith last week approved the plan, which has highlighted the concern as it says the government requires 10-12 steps of formalities, a raft of regulations and a series of terms of references to make sure a PPP project sees the light of the day.
A high official in the finance ministry told the FE Saturday that plan of action is one of a series of steps needed to spend the Tk25 billion PPP fund set aside in the current budget for large projects in power, road and energy sectors this year.
"It is very minor step towards a long list of requirements," the official said, commenting on the plan.
"We still need a lot of paper work and clear a number of legal and policy hurdles. So, it is very unlikely that large projects under the new and invigorated initiative could be implemented in the current fiscal year," he said.
The official who is conversant on government policy process regarding public projects said they "still don't know about the extent of constraints on financing issues standing in the way to implement the projects under the PPP."
According to the action plan, the finance ministry will have to establish a working group and a high-powered task force as part of its primary tasks to look after major issues under the PPP.
The plan says the ministry will review the current private sector investment guidelines and prepare a background paper highlighting the areas where modification would be required.
The finance ministry will assess the likely role, objective and staffing of a proposed PPP cell, which will deal with all the projects under the new initiative, it said.
A preferential tax package to attract investors will be prepared for projects to be implemented under the PPP funding, it said, adding an advisory council will have to be set up through a gazette notification, with the finance minister as its head.
In addition, the plan says the government needs to prepare separate guidelines for technical assistance fund and viability gap fund and establish an effective coordination between different groups and the advisory council.
With the multilateral agencies seen as the likely financier of some of the key projects, the government will also need vetting by the World Bank and Asian Development Bank before the PPP initiative kicks off.
The finance ministry official said all these steps would eat up major parts of the year, making it impossible to execute in 2009-10 any of the top projects seen as likely candidates for PPP funding.
"Even if we work day and night, we don't think we can get things ready within the next six-seven months," he said.
Another official said already they got lukewarm response from government ministries and divisions for the projects to be included in the PPP initiative.
"After we get the list, a good deal of time would be needed to short-list and finalise the PPP projects eligible for technical assistance and feasibility studies," he said.
He added that an acute shortage of expert manpower in the finance ministry has also slowed down the preparatory work.
The finance ministry sought names of projects from all government ministries and agencies for inclusion in the PPP in May this year. Only a handful of ministries have so far submitted a small number of projects for the PPP funding.
A total fund of Tk 25 billion has been earmarked in the current budget against PPP projects. Of the total amount, Tk 21 billion has been earmarked for loan or equity, Tk 3.0 billion for Viability gap funding (VGF) and the rest Tk 1.0 billion for technical assistance.
The government in its budgetary documents for 2009-2010 fiscal year estimates a fund requirement of $1.04 billion for the PPP investment initiative and $28.06 billion by 2013-2014.
Already, the government has placed some mega projects under the PPP initiative. Among them, the Dhaka-Chittagong access control highway would cost $3.02 billion, Sky-train encompassing the Dhaka metropolis $2.80 billion and Dhaka City Subway $3.10 billion.
Roads and Highways Division has said it would also execute the Dhaka city elevated expressway valued at $1.23 billion and Dhaka-Narayanganj-Gazipur-Dhaka elevated expressway at $1.90 billion through the PPP investment initiative.