Public-Private

Partnership
Prajwal Mani Pradhan
Taifa Siddika
Moyeenul Islam
er • What is PPP?

vie


• Key questions revolving around PPP

w 

• International instruments
of 

• PPP Theories
th 

e • Balancing the score board



pr • Six keys for successful partnership



es • PPP making Sense

– Bangladesh
en – Nepal

tat
io
INTRODUCTION (P3)
Address PPP as
 Public :
 Of or concerning the people as a whole;
open to or shared by all the people of an
area or country (oxforddictionaries.com)
 Government and all its form, federal,
state, UN.

 Private:
 Belonging to or for the use of one
particular person or group of people only.
(oxforddictionaries.com)
 Corporations, MNC, foundations, NGO

Address PPP as
 Partnership:
 An association of two or more people as
partners: a business or firm owned and
run by two or more partners.
(oxforddictionaries.com)

Introduction
 It is also referred to as PPP or P3 or P₃.

 PPP’s are used to provide both economic and
social infrastructure.

 The ultimate goal of PPP is to obtain ‘value
for money’.

 Based on the concept that citizens are
considered as client or customer.
 History
 Long history in many countries but grew popular
in 1980.


 longest tradition in the USA. In the 1950’s and

1960’s P3’s were used as a tool for stimulating
private investment in the inner city
infrastructure and regional economic
development.


 UK, 1979 Conservative government concluded

that government is too involved in the
economy and needed to step down in favor of
private capital. Thatcher administration turned
to P3’s as a method of economic regeneration.
 History
 Spain; early examples 1960’s; Toll roads developed
by 1968.


 Netherlands introduced the P3 idea in its

government policy statement of 1986.


 Australia; started back in early 1990’s and

developed toll roads, hospitals, water and power
plants, schools, courts, sea ports and airports.


 Norway initially did not need private capital due to

its oil revenues, but is cooperating with the
private sector now for infrastructure projects.
 Definition
 ‘… is a contractual agreement formed
between public and private sector
partners, which allow more private sector
participation than in traditional’.
 (U.S. DOT 2004)


 “…a cooperative venture between the public

and private sectors, built on the expertise
of each partner, that best meets clearly
defined public needs through the
appropriate allocation of resources, risks
and rewards.”

OBJECTIVES OF PUBLIC-PRIVATE
PARTNERSHIPS
1.to ensure government services are delivered in
the most economical, effective and efficient
manner;
2.
3.to create opportunities for private sector
growth and to contribute to the overall
economic development through the
stimulation of competitiveness and
initiative;
4.
5.to ensure the best interests of the public, the
business sector and the community are
served through an appropriate allocation of
PPPs how does the public
sectors role change
Required shift
From
  To
 Hit or miss  Sustainable standard
 Uniformity  Diversity
 Provisions  Choice
 Inputs  Customer/citizen
 Generalization
 Outcomes

 Talk equity
 Specificity
 Deliver equity
 Received wisdom
 Data and best practice
 Regulations
 Incentives
 Haphazard
 Continuous development
development  Flexibility
 Demarcation
 Looking beyond the restricted
 Looking up area
 Reason and Typical uses
v To keep pace with infrastructure investment needs
and the growing public demands for services.
v
v Increased mobility of capital (availability in the
private sector).
v
v Dominance of new ideas and reliance on market
incentives.
v
Contracting with a private company to-


 Renovate
 Construct
 Operate
 Maintain
 Benefits
For Govt. and Taxpayers-


 Improve service delivery.

 Improve cost effectiveness.

 Increase investment in public

infrastructure.
 Reduce public sector risks.

 Deliver capital projects faster.

 Improve budget certainty.

 Expedited project completion.

 Access to new sources of private capital.

 Benefits
For private sector-


 Access to secure, long-term investment

opportunities.


 Expansion of capacity and expertise.



 Generation of business with the relative

certainty and security of a govt.
counterpart.


 High return with low risks, at the long term

expense of taxpayers and the public.
Four Basic Dimensions of
P3
 Although each is unique, all P3’s include
four basic characteristics:


Shared goals
Shared resources (time, money, expertise,
people)
Shared risks
Shared benefits

 Risks
 Financial risks.

 Performance/availability risks.

 Demand risks


 Construction risks.

 Residual value.
Typical Funding Sources
§ Tolls
§ Tax Increment Finance
§ Fees
§ Grants
§ Loans
§ Bonds
§ Other Revenue Streams
§
 Privatization vs. P3
 In privatization, Govt. has no longer a
direct role but , whereas with a P3 the
govt. retains ultimate responsibility.
(Grimsey & Lewis, 2005)


The level of public control and oversight

High Low
 Popular PPP Models

Source: IMF, Public-Private Partnerships, March 12,2004,p.8.

 Public-Private
Partnership
EEncourage
n co u ra g e Private
Priva te sector
se cto r iinvestment
n ve stm e n t
Promoting
Pro m o tin g FDI
FD I

Providing
Pro vid in g policy support
p o licy su p p o rtCby
bayp iPublic
Pu sector
ta lb aliccu
c semcto
u lra tio n a n d in ve stm e n t o f Pri
Trade
Tra d e liberalization
lib e ra liza tio n

1.Law and order.

2.Legal enforceability.
3.Required infrastructure. In d u stria l d e ve lo p m e n t

E m p lo ym e n t g e n e ra tioPo
n ve rty a lle via Ntioa ntio n a lw e a lth g e n e ra ti
Balancing the scoreboard
Strengths of private

 Strengths of Public sector
sector
 The Result of Serving The Result of Market
the Public Trust Competition
— Legal Authority
— Management Efficiency
— Protection of Procurement
Policies — Newer Technologies
— Broad prospective/balance
the competing goals to — Workplace Efficiencies
meet public needs
— Personnel – dedicated but — Cash Flow Management
constrained
— Capital resources — Personnel Development

— Shared Resources
 
http://www.ncppp.org/howpart/PPPfundamentals.html
Successful Partnership
 The secret is to balance the strengths of both
sectors
— Maximizes the use of each sector’s strength
— Reduces development risk
— Reduces public capital investment
— Mobilizes excess or underutilized assets
— Improves efficiencies/quicker completion
— Better environmental compliance
— Improves service to the community
— Improves cost effectiveness
— Shares resources
— Shares/allocates risks
— Mutual rewards



 Six Keys for Successful
Partnership
• Statutory Authority &
Regulations and
Political Leadership
must be in place
- Strong policy
statement Statutory
- Will to change the & Political
system
Environme
- Top nt
Administrative
officials 

engaged in
executionmakes all the factors together
Strong leadership
• http://www.ncppp.org/howpart/PPPfundamentals.html
 Six Keys for Successful
Partnership
—Call for a good
governance regime
- Best value
vslowest price
- Dedicated & Organized


trained Structure.
personnel to 
monitor
implementation

- Dedicated group
Strong leadership makes all the factors together
(tied to the
purpose http://www.ncppp.org/howpart/PPPfundamentals.html
of the
 Six Keys for Successful
Partnership
— Encompasses goal
oriented performances

- Specific milestones
and goals
- Reporting metrics Detailed
and frequency Business
- Risk Allocation Plan
- Dispute resolution
methodology
- Development of
workforce
Strong leadership makes all the factors together
• http://www.ncppp.org/howpart/PPPfundamentals.html
 Six Keys for Successful
Partnership
—Long-term financing
plan
- Availability of
Payments Guarante


- Underutilized ed
Assets Revenue
- Concession Model Stream.
- Creative
Approaches
•Strong leadership makes all the factors together
http://www.ncppp.org/howpart/PPPfundamentals.html
 Six Keys for Successful
Partnership
—Require open
discussions, knowing
the FACTS,
Translating each
other’s language
- Public & Private Stakehold

sector officials er
- Labor unions Support.
- End users
- Resolution of
Competing
interests makes all the factors together
Strong leadership
• http://www.ncppp.org/howpart/PPPfundamentals.html
 Six Keys for Successful
Partnership
— Long-term relationship
calls for each sector’s
motivation
- Technical capability
- Financial capability
Picking
- Reasonable Return
on Investment Partners
- Timely execution
vs. development
costs
- Political &
Strong leadership
statutory makes all the factors together
http://www.ncppp.org/howpart/PPPfundamentals.html
environment
P3 Pr oje ct m a na g e m e n t
 Crafting the partnership.


 Implementing the partnership.

INTERNATIONAL INSTRUMENTS
Initial steps

 ICPD (5-13 September, 1994)

Cairo, Egypt
 Phrases like public and private started
to appear in official documents often
involved NGO, never mentioned
corporations



Paris Declaration (2
march 2005)
 Ownership
§ Partner countries exercise effective
leadership over their development
policies and strategies and co-
ordinate development actions.
§
 Alignment
§ Donors base their overall support on
partner countries national
development strategies, institutions
and procedures
Paris Declaration (2
march 2005)
 Harmonisation
§ Donors actions are more harmonised,
transparent and collectively
effective.
§
 Managing for results
§ Managing resources and improving
decision-making for results.

Paris Declaration (2
march 2005)
 Mutual accountability
§ Donors and partners are accountable
for development results

Other int’l instruments

 Istanbul 1996

 UN agenda 21, (3-14 June 1992)

 International Health Partnership
(Sept 2007)

 Agenda for action, Accra, Ghana (4
Sept 2008)

International Health Partnership signatories

The group

Joan Veon

CONTEMPORARY THOUGHTS ON
PPP (P3)
 Thoughts
• Uncertainty over a long horizon.


• Changing govt. objectives.



• Lack of commitment for both-

– Private sector (Bankruptcy/exit).
– Government (Break
contract/renegotiation)



 Thoughts
• Private financing is more costly and
risky than public financing.
•
• Risk transfer is mostly one-sided or
often results heated debate.
•
• Private sectors profit maximizing
tendency.

 Thoughts
• Public private partnership is just like
marriage, you discover each others
strength and weakness as time
passes by.
•
• Partners have different footings,
 (equal footing partnership needed)
•
 Joan veon
• Re-inventing government,1999


– Citizen/tax payers addressed as

CUSTOMERS!!!


• To the point where we won’t even

recognize the government.
 Joan veon
• How the private control over public asset
•
• Solution for government that is broke.
•
• GLOBAL CORPORATE FACISM
•
• Transfer of wealth
•
• Uses deceit, deception and distortion
•
• Fleecing of tax payers
 Joan veon
• A lady asked Franklin as they were
debating what kind of government
structure 13 colonies would have?
She asked what kind of government
do we have? He replied “Madam, you
have a republic IF you can keep it.”
“… the players with
the most money
control the
partnership.”

Joan veon

BANGLADESH

PPP MAKING SENSE

 History of PPP in Bangladesh
1996- Private Sector Power To promote private sector
Policy participation

1997- Infrastructure Development To promote private sector

Company Limited (IDCOL) investment in infrastructure
development

IIFC- Infrastructure Investment To provide Technical Assistance

and Facilitation Centre to ministries and divisions
 History of PPP in Bangladesh
2004- Public Sector Serve as the basis for present
Infrastructure Guideline (PSIG) PPP policy

2007- Investment Promotion and A fund of Bangladesh Bank to

Financing Facility (IPFF) support govt. PPP (4.18 billion)

2008- Public Private Partnership Policy to encourage participation

(PPP) in public sector
 Continues…..

• 1970 and 1980- BIRDEM Hospital Established

under ADP by diabetic association.


• One road in Sirajgonj district constructed which

is the first toll road in the country.
 Resource Gap
Fiscal Year 2009-10 10-11 11-12 12-13 13-14

GDP growth (%) 6.0 6.8 7.5 8.0 8.0

Required Investment 24.59 30.63 37.18 43.82 49.69

(billion USD)
Investment (billion 23.55 27.10 31.36 35.54 40.29
USD)
Deficit (billion USD) 1.04 3.53 5.82 8.27 9.40

Source: Preliminary Estimates of Finance Division under

Mid-term Macroeconomic Framework
 Benefits of PPP

Public Sector

qHelps to Maintain Economic Stability

q
qImporting Innovation and Expertise from Private
Sector
q
qCompetitive Costing and Efficient Management
q
qHelp to Achieve Desired Growth Rate
q
qHigh Quality Project Implementation.
q
q
 Benefit Continues…..

Private Sector
qExpansion of Business
q
qGet a Ground for Implementing Innovations

Public or User
qAccountability Ensured
q
qMake Government more Responsible
q
qRisk Avoidance
 PPP Models in Bangladesh
• BOO- Build-Own- • Private sector manages
Operate the infrastructure.

Example: Independent
Power Producer.
 

• BOT- Build- • Private sector manages

Operate- the structure for a
Transfer 
specified time.
• • Pvt. sector manages for a
specified time then
• BOOT- Build- transfer to the govt.
Own- Operate -
Transfer

 Potential Areas of PPP in Bangladesh
• Power and Energy
• Transport Infrastructure
• Pure Drinking Water and Sewerage
• Information and Communication Technology
• Air Transport and Tourism
• Industry
• Education
• Health
• Housing
•
•
 Project Implemented under PPP

IDCOL 22 projects worth BDT 13 billion

IPFF 5 power sector projects worth BDT

8.67 billion. IPFF- 51%, Private
sector-32%, Banks- 17%

IIFC Under contract to design 30,

technical support to 8 and
consultancy support to 16 projects
Selection of Appropriate Options

Quadrant 3: Quadrant 4:
RTS-High RTS- High
RC- Low RC- High

Required
Technical
Skill Quadrant 1: Quadrant 2:
RTS- Low RTS-Low
RC- Low RC- High

Required Capital

In Energy Sector

GOVERNMENT PLAN FOR PPP

 Govt. Plan for PPP in Energy Sector

• Initial fund BDT 1500 crore

• A professional fund manager from pvt. Sector
• 5 member investment committee by FM
• Tenure 12- 15 years
• 7000 megawatts (mw) electricity by 2013 and
20,000 mw by 2021
• Next 5years govt. needs BDT 66,000 crore for
generation, transmission and distribution
• Saling of bond to expatriates/ share to stock
market
•
•
 Govt. Plan Continues…..

• Creation of 3 new expenditure heads-

• Technical Assistance- for feasibility study and
preparatory work- BDT 1.0 billion
• Viability Gap Funding- BDT 3.0 billion for
subsidy or seed money to attract pvt. Initiative
• Infrastructure Investment Fund- BDT 21.0 billion
to provide loan to pvt. Investor.
•
SUCCESS STORIES
 Chittagonj Custom House Automation

Policy Chittagonj Chamber

GoB of Commerce
Patronization
Fund Return on
Investment

Customs House Software Data Soft

Active
Stakeholders Support
(17)
Coordination
Communication
Facilitation
Army backed taskforce- ‘Bravo’

Source: Idea taken from Baniamin, H.M and Monem, M., 2010.
 Achievements of the Project
• Glowing example of ‘BOOT’
• 42 steps cargo assessment process decreased
to 6 steps only
• Entry cost reduced from BDT 180 to BDT 50
• Doubling of revenue income in 2 years
• Saving business cost up to 70%
• Saving custom processing time about 80%
• Ensuring transparency
• Better risk management.
 Partnership in EPI
Policy, Vaccines, Training,
Monitoring, Quality Assurance
Government
NGOs
Human Resource, Training, Coordination
Advocacy, Reporting

Dissemination Reporting
Community
Mobilization LG
UHFPO
UP
Coordination
Community Communication materials
and Community mobilization

Community Mobilization
Private Sector
Imams
 Involvements….
qDonors- JICA, WHO, UNICEF, USAID,
Rotary International, Swedish International
Development Agency, GAVI (Global Alliance
for Vaccination and Immunization).

qBRAC, CARE, RDRS (Rangpur Dinajpur

Rural Services), PROSHIKA and ICDDR,B.

qEPI program was launched in Bangladesh in

1979 but got the momentum in 1985-90 with
GO-NGO participation.

In

Bangladesh

TEAM PROPOSAL FOR PPP

 Manpower Development

Manpower

Training

Policy Loan Recruiting Agencies

Financial SupportSkilled Labor Force
Government
Remittance

Labor Market
Embassy and
High Commission
 Risks Associated with PPP
qLoss of ownership of public properties
q
qApproval of inflated costs
q
qOverlooked public interest when pricing the
services
q
qDysfunctional infrastructure once ownership
is handed over to the government.
 Challenges in PPP Implementation
qAbsence of unique formula to develop a sound PPP
framework.

qPrivate investors want to privatize the profit i.e. profit
will be personal but loss will be social.

qJudging the economic viability of the project (since
costing and pricing is crucial).

qFormation of a comprehensive policy and regulatory
framework.

qA match between asset, liability and cash flow is vital.
Because repatriation of foreign currency may create
pressure on reserve.
 Our Suggestions

qCareful and project specific policy formulation


qPublic ownership of the property is maintained

qTechnical assessment to be done meticulously

qFor pricing and costing people’s welfare must be kept
in mind

qQuality of the infrastructure ensured even after hand
over to the govt.
 Suggestions Continues…..

qOnly potential and high investment project

should be considered.

qPolitically non-biased projects should be

taken in PPP project so that continuity
maintained even after regime change

NEPAL

PPP MAKING SENSE

—Joint ventures: Salt Trading Corporation,
founded in 1963
—
—not quite a PPP: completely devoid of
competition and the full rigours of the
market mechanism.

http://telegraphnepal.com/news_det.php?news_id=5237
—Liberal economy in 1990 resulted in very
prominent Nepali innovations towards PPP
in the infrastructure sector, as for example,
—
—Hydropower Act 1999;


—BOT Policy 1999.

—
—Public private partnership, 2003 etc

http://telegraphnepal.com/news_det.php?news_id=5237
—After 2000 the concept got well underway in
full steam with the initiative of the UNDP to
bring about mass awareness and to
formulate and promote projects for
implementation at the level of the
municipalities.
—

http://telegraphnepal.com/news_det.php?news_id=5237
—first incorporated as a part of the national
budget for 2003-04 under the theme
‘people-public-private partnership’ (P4 as it
were) by Finance Minister, Dr. P.C. Lohani.
—
—The 4th P, so to speak, was added to imbibe
a sense of ‘people’s participation’ in
development at the grass roots by
mobilizing cooperatives and user groups in
the agro-forestry, irrigation and energy
sectors --- areas of opportunity not quite
yet perceived by the envisioned scope of
PPP http://telegraphnepal.com/news_det.php?news_id=5237
prevailing in Nepal at the time.
—FNCCI with its call for a One-Village-One-
Product (1V1P) based on the tried and
tested model of Thailand.
—
—e.g. cold storages; chilling centres,
cooperatives in the dairy product areas.
—
Different ppp models used in the
health sector of nepal
 Service Contracts
—Blood transfusion NRCC
—Family planning services FPAN
—Safe abortion service marie stoppes clinic
—Eye services with nepal netra jyoti sanga
—
 Management Contract
—Lamjung district hospital and dadeldhura
hospital with NGO human dev and
community services
—Jiri hospital with local community
—Build Own Operate and Transfer (BOOT)
—Maternity hospital thapathali by Paropakar
national NGO
—Manipal medical college, pokhara 50 years
contract
—Bharatpur medical college, chitwan 50 years
contract

—Build and Transfer
—Lahan hospital
—Several eye hospital
—
—Build Operate and Transfer
—Trisuli hospital, nuwakot
—
—Build, Transfer and Operate
—Western regional hospital, Pokhara with INF
—Joint Venture
—Nepal eye hospital
—
—Leasing
—Pharmacy services in several hospital
—
—Contracting + pay for performance
—Prevention and surgery of uterine prolapsed
cases (under design)
—
—Contracting via social franchising
—Potential model for drug supply management
—2005-06 Budget welcomed PPP in social
sectors like school education and public
health.
—
—They consume around 20% of the
national budget and employ most
human resources with the government.
—Budget of 2008-09 presented by the
Finance Minister, Dr Babu Ram
Bhattarai, accepts PPP as the basis
of the new economic policy for the
new Nepal.
—
—Prime Minster Pushpa Kamal Dahal,
alias Prachanda, is on record as
having said that there no
alternative to this model of
development.
—One perceives that the neo-Maoists ideology
believes that this is the only way forward
to build a ‘nationalist capitalist society’,
which is so vital, for them, to eradicate the
remnants of feudalism and thus move
forward rapidly towards socialism and
ultimately communism.
—
—Its projected 7% GDP growth in 2008-09 and
10 % per year in 3 years later is premised
on this model.
—2008-09 Budget, unlike 2005-06, totally
rejects privatization.
—
—On the contrary, it seeks to revive liquidated
public enterprises- albeit mostly founded
on Chinese aid to Nepal in the 1960s-70s.
—the concept of PPP seems, on the one hand,
to have received a national consensus as
an appropriate—or even ‘best’ -- model for
Nepal’s economic growth and
development.


—However, on the other hand, it remains to be

seen under what macro-economic
paradigm it is to proceed henceforth:
namely, in
—‘mixed enterprise system’ or
—‘liberal market system’ embodied in the full
and free play of market forces under WTO
regulations -- being duly regulated by law
to protect consumers, environment and
—Will the benefits and costs of
PPP be maximized under a
regime of ‘market capitalism’
or ‘state capitalism’?
—
—It also remains to be seen if the
scope of PPP is to be limited to
economic sectors or also
extended to social sectors.
 We may see many PPPs in such projects
as:


—Petrol pipeline from Raxaul to

Amlekhganj;
—
—Kathmandu- Terai Fast Track Road under
BOOT;
—
—Construction of an international airport
at Nijgarh, and
THANK YOU !!!

Address for correspondence

prdhan.pm@gmail.com