WB exploring ways to provide support under PPP initiatives
Friday, 21 August 2009
FE Report
The World Bank (WB) is exploring ways to extend technical support to the government for implementing public projects through private investors, finance officials said Tuesday.
The officials said the Washington lender has fielded a mission to Dhaka to identify areas for possible assistance that could be useful for moving forward the government's projects, especially in the infrastructure sector.
"The idea is certainly new for us. So, it will require technical support from organisations like the World Bank," a Finance Ministry official said.
"The bank has global experience and can share the international best practices with us. And that will help us replicate," he added.
The current 2010 fiscal budget has introduced the concept of public private partnerships (PPPs) as a vehicle for infrastructure investment and set aside Tk 21 billion for the initiative.
"The move to leverage private sector resources for investment in infrastructure arises from the government's desire to boost investment as a critical vehicle for attaining its growth target of 8 per cent by 2013 and 10 per cent by 2017," the bank says in a recent analysis.
But the global lender said Bangladesh would not be able to mobilise additional investment of US$28 billion, which is needed by the fiscal 2014 to attain the growth target.
"The private sector can share the risk while government can complement funds to ensure commercial viability," a bank official said.
Experts say the PPP mechanism is not only effective for pooling private investments, but also needed to ensure "economic use of resources and better service delivery."
The budgetary PPP includes three major components: Tk 1.0 billion for PPP technical assistance fund, Tk 3.0 billion as Viability Gap funding to attract private initiatives and another Tk 21.0 billion for setting up an Infrastructure Investment Fund (IIF) to be used as equity or loan support to the private investors.
"Creation of the Infrastructure Investment Facility, along with a PPP technical fund and viability gap fund is a good starting point to combine the strengths of the public and private sectors," the bank said in its analysis.
Power generation tops the government's priority list and it is moving ahead with implementing four coal and gas-fired power plants.
In the transport sector, the government identified Dhaka-Chittagong access control highway, sky-train, Dhaka city subway and expressways within the capital and another one linking Narayanganj, and Gazipur.
Deep sea port will also be implemented under the PPP model.
The global bank said the success of the effort would depend "to a large extent on transparent sector regulation, the regulator's independence and clarity on risk sharing between the government and private sector."
A key factor of the PPP programme's success is contingent upon political will and, equally important, on the quality of human and other resources dedicated to the PPP cell.
At the sector level, a transparent and sound regulatory regime, including independent regulation, fair tariffs are preconditions for interest in PPP projects among reputable investors.
Since sharing of risk between the private and public sectors is a major issue, the bank said that this needed to be addressed clearly and transparently. "Failure to do so could lead to major contingent liabilities for the government."
The World Bank (WB) is exploring ways to extend technical support to the government for implementing public projects through private investors, finance officials said Tuesday.
The officials said the Washington lender has fielded a mission to Dhaka to identify areas for possible assistance that could be useful for moving forward the government's projects, especially in the infrastructure sector.
"The idea is certainly new for us. So, it will require technical support from organisations like the World Bank," a Finance Ministry official said.
"The bank has global experience and can share the international best practices with us. And that will help us replicate," he added.
The current 2010 fiscal budget has introduced the concept of public private partnerships (PPPs) as a vehicle for infrastructure investment and set aside Tk 21 billion for the initiative.
"The move to leverage private sector resources for investment in infrastructure arises from the government's desire to boost investment as a critical vehicle for attaining its growth target of 8 per cent by 2013 and 10 per cent by 2017," the bank says in a recent analysis.
But the global lender said Bangladesh would not be able to mobilise additional investment of US$28 billion, which is needed by the fiscal 2014 to attain the growth target.
"The private sector can share the risk while government can complement funds to ensure commercial viability," a bank official said.
Experts say the PPP mechanism is not only effective for pooling private investments, but also needed to ensure "economic use of resources and better service delivery."
The budgetary PPP includes three major components: Tk 1.0 billion for PPP technical assistance fund, Tk 3.0 billion as Viability Gap funding to attract private initiatives and another Tk 21.0 billion for setting up an Infrastructure Investment Fund (IIF) to be used as equity or loan support to the private investors.
"Creation of the Infrastructure Investment Facility, along with a PPP technical fund and viability gap fund is a good starting point to combine the strengths of the public and private sectors," the bank said in its analysis.
Power generation tops the government's priority list and it is moving ahead with implementing four coal and gas-fired power plants.
In the transport sector, the government identified Dhaka-Chittagong access control highway, sky-train, Dhaka city subway and expressways within the capital and another one linking Narayanganj, and Gazipur.
Deep sea port will also be implemented under the PPP model.
The global bank said the success of the effort would depend "to a large extent on transparent sector regulation, the regulator's independence and clarity on risk sharing between the government and private sector."
A key factor of the PPP programme's success is contingent upon political will and, equally important, on the quality of human and other resources dedicated to the PPP cell.
At the sector level, a transparent and sound regulatory regime, including independent regulation, fair tariffs are preconditions for interest in PPP projects among reputable investors.
Since sharing of risk between the private and public sectors is a major issue, the bank said that this needed to be addressed clearly and transparently. "Failure to do so could lead to major contingent liabilities for the government."