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Focus on ADP out, PPP in

Zahid Hussain
Bangladesh needs to reduce its reliance on the Annual Development Programme (ADP) to deliver energy, infrastructure and social services. Notwithstanding continued attempts by successive governments to increase size of the ADP, protracted decision making processes and depleting implementation capacity in the line ministries have made ADP an increasingly ineffective instrument for development
This is evident from the declining rate of public investment in recent years. In this background, an introduction of public private partnership (PPP) in the 2009-10 fiscal budget is certainly a step in the right direction.
Under the proposed PPP initiative, energy and power, telecommunication and port development have rightly been attached high priority. In addition, health, education, information technology, tourism, drinking water, sanitation and the residential sector have also been opened to PPP initiatives. As in most cases, the success in making PPP deliver the goods will depend on the details of implementation.
International experience show’s that the institutional arrangement for implementation is the key. In countries like the UK, Netherlands, Czech Republic, Greece, Ireland, and Italy, specialised PPP units to facilitate and manage infrastructure investments have existed for years. Other high-income countries, such as Australia and Canada, have also estab-fished public institutions that support PPP development. Such units have recently begun to proliferate in the developing world as well.
Beginning in the late 1980s, in some countries PPP functions were simply added to the responsibilities of the centralised privatisation units. Countries like Zambia and the Cote d'Ivoire were leaders in creating privatisation agencies with necessary power, independence, resources and reputation. In other cases, new units have been created to focus only on PPPs. Consideration of such units in regions like Africa, East Asia, and South Asia has been driven by the increasing recognition of the need to boost infrastructure investment.
Some important lessons learnt from these experiences include: ineffective governments tend to have ineffective PPP units, a PPP unit will most likely fail without high-level political support and effective PPP units have tended to be attached to Ministries of Finance in parliamentary systems, reflecting the natural role of the treasury in coordinating government policies and expenditure, its mandate to manage fiscal risk, and the power treasuries derive from managing public finance.
Experience also shows there is no unique formula to develop a sound PPP framework. However, successful programmes are characterised by clear policy and legal frameworks for PPPs, competent and enabled institutions that can appropriately identify, procure and manage PPPs and efficient oversight and dispute resolution procedures.
Private sponsors in PPP ventures have a natural tendency to press for deals that effectively privatise the profits while socialising the losses. To guard against such magnification of risks bome by the government, the PPP unit needs to be staffed with technically Sound and experienced negotiators with sector-specific knowledge on project design, financing and management. Such expertise is unlikely to be available in-house and hence may need to be outsourced.
The wnler is a senior economist al the World Bank's Dhaka office.