Prospect Of Public Private Partnerships (PPP) In Bangladesh

Introduction

Bangladesh has been one the fastest growing economies in the recent couple of decades with massive infrastructure and development works being in progress. Throughout the period, much of the growth, has come from the private sector while public sector has lagged behind in the race since 1980s. Dhaka Tribune reported numbers from UNDP Bangladesh in 2017 that private sector is doing 78% of all development work in Bangladesh; indicating the strong private sector being capable to play a vital role in Public Private Partnerships.In light of achieving existing growth rate and even better standard of living, the infrastructure needs to notch up further. The need of higher infrastructure development requires a bonding/partnerships between the public and private actors. Public Private Partnership, or more commonly known as Public Private Partnerships, is a cooperation between public and private sectors with long-term motives and objectives in mind. This form of contractual arrangement is ideally set to deliver specific types of public services. It is, however, different from a typical joint venture because the ownership remained with the public authority, as pointed out by a PPP advocate.

Khan has elaborated the objectives and related benefits of Public Private Partnerships. The initiative aims at accelerating investments, improved quality, timely delivery, reduced costs and innovative solutions. These benefits make a case itself for promoting the scope of Public Private Partnerships in Bangladesh. Similar instances can be taken from overseas where the method yielded results, especially in developing countries. This will act as catalysts to achieving some other targets as a nation, such as the Millennium Development Goals (MDG) and Sustainable Development Goals (SGD). Public private partnerships have gained popularity all over the world in the recent time. Bangladesh is no exception to this global popularity with abundant opportunities prevailing with the country that seeks Public Private Partnership support. This continual advancement of PPP, among governments, is likely to ensure greater success rate. In this paper, the prospects of PPP with respect to Bangladesh will be put into focus, taking case studies and analysing the macro-economic environment in this regard. Bangladesh runs the PPP initiative through Public Private Partnership Authority under Prime Minister’s Office, maintaining the initiative as a centrally integrated programme for around a decade as of now.

Public Private Partnerships in Bangladesh

Government in Bangladesh has initiated the centrally integrated PPP programme as part of the Government’s Vision 2021 eyeing achieving inclusive growth, higher quality of public services in a fiscally sustainable manner, stated in the website of Public Private Partnership Authority (pppo.gov.bd). The initiation of the authority takes us back to 2010 with the issuance of Policy and Strategy for Public Private Partnership (PPP), which was later repealed and replaced by Public Private Partnership (PPP) Law 2015. Further guidelines followed in 2016, 2017, 2018 and finally the NPP Rules 2018.There is a total of 49 projects under the umbrella, of which 4 are in operational stage, 9 are in award stage – contract signed, 15 are in procurement stage, 17 are in project development stage and 4 are in approved stage. The four completed projects are Hemodialysis Centre at Chittagong Medical College Hospital, Hemodialysis Centre at National Institute of Kidney Diseases and Urology (NIKDU), Bangabandhu Hi-tech City and Dhaka-Elevated Expressway, of which two are in health sector while one in Zone and Transport sector. This shows the vast areas PPP can cover while it has started incorporating only a few sectors and few areas so far. There is a room for many such projects in every sector and any region in Bangladesh.

Opportunities prevail not only in the infrastructure segment but also in the service and manufacturing sector. Bangladesh’s strength primarily depends heavily on the RMG, remittance inflow with the GDP growth driven the most by Manufacturing and Services segments . This has been splendidly reflected in the proposed and in progress projects of PPP Authority. Overall 8 projects in progress are in Tourism and 3 on textile/garments of the total 45 projects. Each of the 53 ministries in Bangladesh can potentially promote at least 1 PPP project each year, that alone will double the total number of projects completed under PPP in the past 10 years. The growth in PPP in Bangladesh has been slow in comparison to the economy’s size and its growth trajectory in the past decade, i.e. initiation of PPP authority. It, therefore, holds a vacancy for growth of PPP in the coming years to fill the gap. PPP projects not being only specific to infrastructure development holds the key to higher queue of projects. Moreover, the improvements to PPP project efficiency will help further.

The Prospects of PPP in Bangladesh

Prospects of PPP in Bangladesh are vast and broad in nature to specify into a concise version. Sarkar back in 2016 has illustrated some of the key prospects of PPP in Bangladesh from a macro level. He mentioned the inadequate growth in foreign direct investment in comparison to Asian countries including India. FDI will shoot up amid introduction of mega projects under PPP, which will allow investors to gain more from these projects in the long-run. According to World Bank’s World Development Indicators on its website database provided many indicators that demonstrates the growth in population in Bangladesh is at a higher pace than growth in indicators that would be required for maintaining the same standard of living. For instance, life expectancy increased from 58.4 years in 1990 to 70.2 years in 2010, which will require more hospitals for the elderly, which calls for PPP initiatives to serve such needs. Data showed access to electricity, rural (as % of rural population) is 68.9% in 2016 against access to electricity, urban (as % of urban population) is 94%. This gap is expected to be filled amid increase of income and need for higher standard of living. Such demands forecasted in the coming years can be solved by PPP projects – drawing a beautiful picture of prospects of Public Private Partnerships in Bangladesh.

Public Private Partnership itself brings several benefits that uplifts the prospects of Public Private Partnership among its actors. These benefits include assurance for safe investment, tax and VAT exemption, public finance, all types of clearance from one window, availability of logistics support and many more. With a stronger track-record, the benefits will be more, such as improved quality and timely delivery with reduced stocks.Taking evidence, PPP can ensure total cost reduction and thereby maximize revenue for both the parties. Based on the study, Public Private Partnership in tourism sector typically provides 7-10% cost saving over the life of the project. The paper went further into identifying long term benefits of PPP projects. A well-designed project (via PPP) will eventually result in cost saving by reducing repair, maintenance and replacement costs over the entire life of the project. Nipa primarily focussed on involvement of private funds through PPP initiatives at opening doors to overcome the constraint of sufficient fund in the tourism industry, a promising industry that Bangladesh has yet to grasp the full benefits unlike the growth seen in countries like Sri Lanka.

Conclusion – Practising the Crucial Sectors

Asian Development Bank (ADB) has already highlighted Bangladesh and Philippines as the most suitable two models for emerging markets to follow when it comes to developing PPP programmes. Some international acclamation such as the World Bank Benchmarking of PPP Procurement in Bangladesh confirmed that standardized PPP model contracts documents have been developed. The development bank also illuminated some of the prospects like, although most of the projects have been in the transformation segment but there have been no PPP projects in the railway sector in Bangladesh. Similar to the road sector, the report suggested input from foreign contractors to help rebuild the existing rail infrastructure to an acceptable international standard. Bangladesh reportedly lacks effective linkages with its local network and infrastructure.Moving from transport, comes the energy sector in infrastructure. ADB’s analysis of the government’s initiation of a special status for independent power plant (IPP); These PPP plants have been successful in providing new generation capacity. IPP primarily sell energy under a purchase power agreement with one of the public companies and as per the policies, such contracts benefit from sovereign guarantees. Such rentals could have been considered as PPP projects if these had not lacked the required long-term obligations by each of the parities. This provides scope of PPP projects by turning the nature into long-term. Innovation within Public Private Partnership Authority is also notable, especially with the Fast PPP projects in water sector in 2017. These accumulation of innovative steps has the potential to amount much in coming years. In a nutshell, Public Private Partnership has the potential to become a well-oiled vehicle for Bangladesh to achieve long term goals. Opportunities room from foreign private partners to reaching out each nook and corner of the country to provide quality services to the people of Bangladesh.