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PPP needs more homework

Says top WB official in an interview with THE DAILY STAR

Sajjaduk Rahman
Loads of talks have been centring public-private partnership (PPP) programmes over the months that the government has decided to implement from the next fiscal year, mainly to improve the coun try's poor infrastructure.
The government has already identified six projects for implementation on a 'very urgent' basis under the PPP. Except construction of a deep-sea port in Chittagong, the rest of the projects are estimated to cost $11.05 billion or nearlyTk 75,900 crore.
But this is not too easy to execute as it is being discussed, said a top World Bank (WB) official in an exclusive interview with The Daily Star yesterday.
“It's a critical issue and needs detailed homework before undertaking any such project,” said Sadiq Ahmed, WB regional director forSouth Asia.
Ahmed, who joined the multi lateral donor agency in 1981, has vast experience with the PPP in South East Asian countries and in Pakistan as well during his tenure as a WB official in those countries. He served as a country director in Pakistan and Afghanistan and as a chief economist for South Asia region.
He said in principle PPP is a very good concept. It helps governments, such as Bangladesh, that have limitation in financing large-scale projects with additional funding from private sector, including from foreign countries.
There are many challenges: Pricing and financing aspects, regulatory and legal framework, competitiveness in bidding process, careful match between asset and liability and cash flow, and finally the reality issue on the country’s perspective.
"The government has to review the financial and economic viability of a PPP project because success will depend largely on costing and pricing issue,” said Ahmed.
"How revenue will be generated is crucial,” said the economist who studied in London School of Economics.
He said die legal framework would lay down obligation to private sector partners, keep provision for cost recovery and address the issues of compensation and redress mechanism.
"Actions will be required to establish a comprehensive policy and regulatory framework for competitive and transparent bidding, sharing risks and
rewards and dispute settlement mechanism,” he said.
Ahmed said PPP projects will be very capital-intensive and there is the fear of ransacking as happens in third world countries. “So ensuring competitive bidding process is very vital,” he said.
A match between asset and liability and cash flow is also crucial. "In terms of foreign partners, repatriation of foreign currency may create some sort of pressure on the reserve,” he said.
The WB official said Southeast Asian nations faced this type of situation during 1997 crisis because of massive outflow of capital. Pakistan also faced the same situation in 1995-96.
To review the private partner’s financial and technical capacity would be a big job for the government, he said.
On the country's capacity in implementing PPP projects, Ahmed said: “It has quality engineers and experts."
"If the government wants, we are ready to extend all cooperation," Ahmed said.
He suggested the government officials visit the countries, which have successfully implemented the PPP projects. "Even the WB can facilitate the visits," he added.
Infrastructure projects need large-scale funding and without international partners it will not be possible to undertake those projects, Ahmed said.
Besides PPP, the WB official also focused on deep-sea port,
regional trade and power issue
He said Bangladesh is still a poor country although its per capita income crossed $600 mark from $100 in post-liberation period.
“Bangladesh needs to do a lot to reach the next step," he said adding that developing human 1 resources and giving easy access v to the ports to other countries could turn Bangladesh into a modern country.
' First open up the ports, both Chittagong and Mongla and let other countries use it,” he said. "A huge amount of revenue will be generated from the activities." He cited example of Singapore and Hong Kong that have become rich by allowing other countries to use their ports.
Ahmed who is known as an expert on South Asia also asked Bangladesh to open regional trade and transit.
He termed South Asia as an 'inward-looking' region. Europe has become integrated, even African countries are integrated with each other, he said.
The WB official said while Bangladesh is badly in need of electricity, some South Asian countries, particularly Nepal, Bhutan and northeastern India, are hydropower-surplus regions.
"Nepal has the capacity to V generate 83,000 megawatt hydropower and Bangladesh i consumption requirement is only 7,000 megawatt," said Ahmed.
He emphasised regional integration also for addressing water issue. "Water will be the biggest challenge in the 21st century Bangladesh is a low-lying country and the water issue will be more critical for it than upper countries," he added.
sajjad@thedailystar.net