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PPPs: Making a real difference in delivering public services in Bangladesh

Syed Afsor H Uddin's picture
Who first introduced Public-Private Partnerships (PPPs)? This is a question that often leads to endless discussions, provides an opportunity for one-upmanship and is an entertaining diversion for practitioners on the margins of international PPP conferences.

During these debates many examples are quoted – the early 20th century oil concessions in the Persian Gulf, the late 19th century cross continental railway in the USA and the İzmir-Aydın railway concession in present-day Turkey, the Rhine river concession granted in 1438[1] and so on.
 
Photo: Rezwan/flickr

As debate on the origin of PPP continues, the modern-day popularity of PPPs is more commonly acknowledged to have emerged from the United Kingdom, following the introduction of Private Finance Initiatives in 1992’s autumn budget statement by RH Norman Lamont, then Chancellor under John Major’s Conservative government.[2]

In the intervening years, many developed and developing nations have started PPP programs of their own. Indeed, the growth of PPPs in developing countries is nothing short of phenomenal, with the mechanism being used in more than 134 developing countries and contributing to 15–20 percent of total infrastructure investment[3].

This is also true of Bangladesh. In 2009, the Government of Bangladesh announced the introduction of a revised PPP program[4] in the 2009/10 Budget Session, and then introduced a new PPP policy in August 2010 (PPP Policy 2010[5]).

PPPs are not new in Bangladesh. Before the mid-1990s, the Government of Bangladesh had entered into a number of individual PPP transactions. However, 1996 marked the first time that a policy framework was introduced for PPPs in order to enable private sector partnerships in power generation[6]

Through this policy, Bangladesh witnessed early success in PPPs. By 2001 – with the support of the Asian Development Bank (ADB) and the World Bank – two large power projects, the 450MW Meghnaghat and 360MW Haripur power plants, were successfully contracted. This success in the power sector has continued with approximately 2000 MW of installed capacity through Independent Power Producers (IPPs), nearly 2500 MW of IPP projects in implementation and more than 3000 MW of IPP projects in procurement.

To build on this success in other areas of infrastructure, the Government of Bangladesh introduced the Private Sector Infrastructure Guidelines in 2004. This marked the start of the program-based PPP initiatives in Bangladesh. However, the results during this period were more modest, with only a handful of projects coming to fruition. There was an urgent need to revise the PPP program so that it could match the Government’s long term vision of growth and prosperity.

In 2010, the 6th Five-Year Plan[7] was launched, outlining the Government’s vision to improve the country’s trajectory of economic growth and lead the country to an enhanced level of prosperity by reaching Middle-Income Country status by 2021.
 
Photo: Asian Development Bank/flickr
The Plan focuses on the enhancement of infrastructure investment from approximately two to six percent of GDP, using PPP as a key tool in meeting this infrastructure gap. PPPs would supplement traditional procurement in the development of social and economic infrastructure in Bangladesh to deliver the public services that can enable private sector entrepreneurship and unlock the country’s growth potential.
 
The PPP Policy 2010 introduced a comprehensive range of reforms, including tax incentives for PPP projects, designed to develop a sustainable PPP program across multiple sectors. These reforms were reinforced by the strong demonstration of government commitment through the allocation of more than US$300 million for PPPs in the 2009/10 Budget to support the development, financing and funding of PPPs. The Ministry of Finance instituted a Viability Gap Fund for financing up to 30 percent of capital costs of PPP projects.

The PPP Office became operational in 2012 under the Prime Minister’s Office, and has been a key component of the new reforms. Since then, with the support of ADB’s technical assistance project[8] and the World Bank’s IPFF[9] project, the PPP Office has spearheaded the development of PPPs in Bangladesh.

Starting from a handful of projects in 2012, the PPP Office is now supporting the development and implementation of more than 40 PPP projects with a capital value of around US$13 billion; this supplements a pipeline of over 20 projects in the power sector. Projects in many new areas are being developed such as the haemodialysis project, structured with the support of IFC and recognised as a pioneering PPP in KPMG’s Infrastructure 100: World Markets Report.

With strong political support and enhanced institutional capability, underpinned by real financial commitment and a PPP Act in the final stages of enactment in the parliament, the key fundamentals are in place for an enabling PPP environment in Bangladesh. The first signs of success are there, and a clear path has been laid out for this success to continue and grow in the years ahead.

As PPP projects are delivered one after another, as lights get switched on in homes, as industries get powered, as new roads mitigate transport bottlenecks and as new health services save lives, it is worth sparing a thought for the one who introduced PPPs. Through PPPs, developing countries now have an additional delivery mechanism to meet their public service commitment and drive increased prosperity.  PPPs have provided an enhanced opportunity to make a real difference in the delivery of public services.

Perhaps we will never be able to identify who introduced PPPs.  But let the debate continue, as whoever did introduce PPPs has done the world’s developing countries a wonderful favor …

(Editor's note: the observations and opinions in this blog post express the individual views of the author, not the World Bank Group.)
 
[1] IJRM, Volume No. 4 (2014), Issue No. 08 (August)
[2] The Private Finance Initiative (PFI). House of Commons Library Research Paper 01/117
[3] World Bank Group Support to Public-Private Partnerships: Lessons from Experience in Client Countries, fy02–12
[4] 2009/10 Budget Speech by Hon. Finance Minister A. M A. Muhith
[5] Policy and Strategy for Public Private Partnership (PPP) 2010
[6] The Private Sector Power Generation Policy 1996
[7] Sixth Five Year Plan, FY2011-FY2015, Strategic Directions and Policy Framework, Planning Commission, Ministry of Planning, Government of the People’s Republic of Bangladesh
[8] TA-7691 (BAN): PPP Program Operationalization (completed December 2013)
[9] IDA Credit # 4693-BD: Investment Promotion and Financing Facility (IPFF) Project (due to complete December 2015)

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