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A model for rapid investment

Habibuliah N Karim
In the classical economic paradigm, the state takes the responsibility for all public good, which arc paid for with moneys from taxa tlon on (he citizens. The expanse of public good includes external and internal security, provision of civic utilities, education, healthcare, infrastructure and social welfare
However, in the last two hundred years as economic theorists as well as political thinkers tinkered with the role of the state and the use of tax money, there has been a see-saw battle of large government versus small government -- higher tax to GDP ratio versus lower tax to GDP ratio (lower taxes usually mean smaller government and vice versa).
One inevitable outcome of this dichotomy and corresponding practices is the gradual encroachment of private enterprise onto areas for provision of public good that were once considered sacrosanct state functions. There are many such examples like armed and unarmed security services, garbage collection and disposal, utility services (such as water, gas and electricity), landline telephony, postal service, primary to tertiary level education, and many other services that were once in the exclusive domain of the state machinery but now have many providers from the private and NGO sectors.
It is apparent that the government and the ruling coalition have woken up to this reality and have literally seized the opportunity of welcoming the helping hands from the private sector through the public-private partnership (PPP) initiative.
Finance Minister AMA Muhith has made history by allocating Tk 2,500 crore for PPP — the largest chunk of block fund in the budget. PPP can open up huge avenues of synergy between the public and private sectors and also unlock the investment potential of the counted
Every taka that the government allocates for the PPP projects will be multiplied at least 20 times by private investments from home
and abroad. There is already talk of Tk75,000 crore worth of investments unleashed by the PPP seed fund of Tk 2,500 crore which is tantamount to an investment multiple of 30. PPP initiatives also have another great benefit -- they channel investment resources to demand-driven services ensuring high returns on investments (Rol). That is crucial for a country with competing demands on its limited resources.
In many state-sponsored investments for infrastructure, education, health services and others the lack of a Rol focus has resulted in underutilised and in some cases misplaced or wasted public development expenditures. PPP modality has the power to rein in such misuse of public funds because PPP invest-
ments are dominated by private money, which will never leave the starting block unless ensured of a healthy return during the life of the project. The most appealing aspect of PPP projects (from the taxpayers' perspective) is that the risk of performance or project completion totally devolves on the private partners allowing the government to extricate itself from the risk of non-performance and tying up funds and resources in projects that do not provide the intended results or services.
Since the private partners provide most of the funds and do most of the works, there is very strong ownership of such projects ensuring timely completion and conti-nuityofoperation.
Of course PPP projects will only
work where there is revenue generation potential. It will certainly not work for public services like civil defence (no amount of private fund can entice a person to jump into a fire to save another --only fire-fighters, dedicated to the ideal of service to save lives while endangering their own, are able to do this under public service that has no direct revenue generation potential) or for example national defence (can we put a price on laying down one's life to protect the country from external threats?).
Aside from such noble public services, which require great passion for human welfare or patriotism that cannot be bought with money - a passion that Plato describes as thumos’ — most other public services from educa-
tion and infrastructure to healthcare and utility services can very well be served by pure private initiatives and also PPP initiatives.
The advantage of PPP is that the state can use this vehicle to steer private capital to areas where normally it would shy away from. If Bangladesh is to attain a doubledigit economic growth and exile absolute poverty off the soil of this land then she would require torrents of investments in her social and physical infrastructure. PPP holds the key to such rapid growth in investments.
The writer is the founder CEO of Technohaven Company Ltd and is the current president of Bangladesh Association of Software and Information Services (BASIS). He welcomes feedback athnkanm@gmail.com.