Bangladesh Budget 2009-10 and Public-Private Partnership July 17, 2009Posted by bdoza in BANGLADESH, Budget, ECONOMY.
Tags: Bangladesh Budget 2009-10, PPP, Public Private Partnership
Public-Public Partnership is a concept added to the Bangladesh Budget more formally in this financial year.
In the Budget it is said that we need to take our economy to the higher trajectory of growth to take the people of this country out of the vicious cycle of
poverty. What is needed to meet this objective is a paradigm shift to bring qualitative change in the investment strategy.
Mr. MA Muhith, the Finance Minister states that in the Election Manifesto, the growth of GDP has been set at 8 percent to be achieved by the year 2013 and at 10 percent by the year 2017, which would be sustained until 2021. As a vehicle to attain this higher
growth, investment in infrastructure development, especially, power and energy, ports, communication, supply of drinking water and waste management, education and health will be given highest priority. A huge investment is required to achieve this target. In addition to the existing public and private investment programmes, an investment of US$ 28 billion will be required by FY 2013-14 to achieve the projected growth as per the preliminary estimates.
The Budget argues that the government alone cannot provide such huge amount of resources. It would be difficult to maintain macroeconomic stability if the government has to finance such huge investment by borrowing from domestic sources. Again, it will not be
possible to obtain such funds as concessionary loans from the development partners. Our past experience suggests that it has been difficult to ensure economic use of public resources and the quality of service delivery when Government is involved in infrastructure development and maintenance as its involvement is not determined through a competitive market process. At the same time, direct involvement of the government in project execution process takes away the focus from its basic obligation to provide social and other important
Since the implementation and funding of any infrastructure development projects is a long drawn process, the investment risk is much higher and at the same time, the investment is not, in many cases, commercially viable. It is therefore, difficult to attract private investment in all projects in this sector.
In this context the Government is going to take special initiatives to involve the private sector under Public Private Partnership (PPP) to meet the probable investment gap in infrastructure development and maintenance, alongside the government’s investment. FM believe that successful application of PPP
concept will open up the door for increased flow of investment from both local and foreign investors. This will accelerate economic growth. He asserted that PPP in Bangladesh commenced after the adoption of IPP Policy in 1996.
Around 50 initiatives in telecommunication, land port and other physical infrastructure projects have been successful. There has been remarkable progress in PPP sector in FY 1998-99 when initiatives were taken to build two mega power plants at Haripur and Meghnaghat with private sector involvement
for the first time. The two projects were implemented successfully and helped in mitigating power crisis. I would like to mention that the existing PPP framework and the institutions associated with PPP should be more transparent and should also be strengthened to
ensure the success of the PPP sector. At the same time it is essential to ensure the participation of the government in PPP projects.
Budget states that the present government is committed to take timely measurers to attract private investment in the country through PPP. Therefore, Finance Minister proposes to create three new ‘expenditure heads’ in the FY 2009-10 budget to facilitate new projects under PPP.
The first expenditure head will be named as PPP Technical Assistance to cover expenditure related to pre-feasibility studies and other preparatory work before asking the private sector to submit their bids for PPP projects. Relevant agencies will be able to receive necessary funds quickly from this head to prepare PPP
project documents and to appoint PPP consultants. He proposes to allocate Tk. 100 crore for this sector in FY 2009-10.
He also proposes to allocate Tk. 300 crore as Viability Gap Funding as subsidy or seed money to attract private initiatives for the construction of power
plants, hospitals, schools, roads and
highways which are non-profitable but essential for public services.
Budget also allocates Tk. 2,100 crore in the PPP budget to accelerate the process of investment through PPP. This allocation will be used for setting up an Infrastructure Investment Fund. Depending on the type of projects, the Government will provide equity
or loan to the private investors to ensure
Government’s participation. Different financial incentives will be extended from this Fund to encourage investments. We are presenting for the first time a position paper on invigorating investment initiative through PPP.
He added that the challenge before us, is to set up an institution for preparation and implementation of PPP budget which will ensure innovative ways, independent operation and accountability of planning and budget
process of the private sector. We trust that
this body will be able to provide incentives to PPP initiatives in different sectors and expedite project approval process. He hopes that this institution will follow the best practices of modern management philosophy of both public and private sectors.
According to the plan, PPP budget management will
be fully operational by September next.[Source:Bangladesh Budget 2009-10]
An ordinary citizen
In a recent discussion, Professor Anu Ahmed, an Economist of Jahangir Nagar University told that the concept of PPP is an extention of colonialism in modern times. Through PPP multinational companies will be allowed to hold the ownership of the our highways, factoreis, shipyards, seaports etc and through this we shall be subjected to the policy and programmes dicctated by them.
Some other views: