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ë Service or a business venture funded, managed,
and operated through a partnership between
government and one or more private sector
entities
ë Rationale: Model with enhanced role of private
sector in government initiative relaxes
government͛s resource constraint, ensures
greater efficiency and better management
resulting in improved service delivery while
maintaining public accountability of service
provision ë
 ààà variants
ë Simple form: Government provides capital for
investment, while operations run jointly with
private sector or under contract. It could be other
way round as well.
ë Contract: private party assumes financial,
technical, and operational responsibilities and risk
in venture.
ë Infrastructure: àay contracted price for services
that is financed, built, managed, and maintained
by private sector enterprise
G
 ààà variants (contd.)
ë Social enterprises: unite public sector͛s
commitment to social goods with private sector͛s
expertise in product development and marketing

ë Different approaches to ààà based on activity and

country characteristics

£
 ºlternative modes of operation
ë Cost of using service borne by users (e.g. toll
roads)
ë Capital investment by private partners, cost of
providing service borne (wholly or partly) by
government
ë àublic contribution in kind (transfer of existing
assets)
ë Government provides subsidy (one time grant)
for creating public good (infrastructure)
ë Government provides revenue subsidies (tax
breaks or guaranteed annual revenue for a fixed
period) Ñ
 Implementation options
ë One option: form a consortium, called ͚Special
àurpose Vehicle͛ (SàV) to plan, construct,
maintain, and operate. Government holds an
equity share in SàV. SàV signs contract with
government and with subcontractors to build
and maintain facility

ë For infrastructure, complex arrangements and

contracts needed to guarantee and secure cash
flows
[
 Issues and problems
ë Infrastructure projects: àààs entail higher costs
than under standard models (mainly due to
higher rate of return demanded by private
investors although income risk is borne by public
sector)
ë Low quality of ààà schemes relative to standard
model of public procurement
ë One reason: central assessment focus on ͚value
for money͛
ë The issue is whether guidelines designed are
appropriate and correctly applied  
 Regional experience
ë India: ààà mode of infrastructure delivery
launched a decade ago; accepted as an efficient
and effective methodology

ë Indonesia: Emphasis on financial and technical

aspects; Malaysia: political and social motivations;
Singapore: value for money; Thailand:
infrastructure in many sectors notably in power,
electricity, telecom, and transport services

å
 Regional experience (contd.)
ë Developed countries: set up specialized ààà units
to facilitate and manage large infrastructure
projects. Establish public institutions to support
ààà development

ë Lessons: no unique formula for developing a sound

ààà framework. Needs clear policy and legal
frameworks for ààà that ensure right balance
between public and private interests

*
 ààà in Bangladesh
ë Experience of IDCOL established in 1997 under
ERD: few small private investments in
infrastructure projects
ë No integrated policy for execution of ààà
projects; needs a new phase of ààà
implementation
ë Revisit past operations and other experiences to
identify what works and what does not


 ààà in Bangladesh (contd.)
ë 


  


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ë Fast growing economy with dynamic and healthy
financial system
ë Stable policy environment, robust legal and
business support systems, institutions
guaranteeing rule of law
ë Large and growing domestic market
ë Sound economic fundamentals
ë Steady economic reform regime
ë Regulatory framework rewarding entrepreneurship
and risk taking
ë
 Xay forward: specific issues
ë Create the institutional framework
ë New window: legal basis for project implementation and
contract execution, devise ways for independent
operation and management outside the purview of public
procurement, install mechanism for accountability, design
and planning
ë Formulate policy framework, incentive packages,
mechanism for implementation
ë Ensure competitive bidding to meet transparency,
accountability, and creditworthiness of projects
ë Bring clarity on fiscal incentives, life-cycle, financing
requirements and modalities, project management and
operation G
 Xay forward: specific issues (contd.)
ë Involve negotiators with technical knowledge and
experience in project design, financing, and
management in ààà operations

ë Create bridge between public and private sector

interests using incentives and financial instruments

ë ºdopt flexible models and approaches of private

participation along with collaborative innovative
partnership based processes
£
 Implementing FY10 budget initiative
ë Tk. 25 billion for ààà projects: government
partnership in equity and loan assistance to
different projects
ë Identify projects that are sound, viable, and
somewhat easy to implement
ë ºdopt some guidelines: for power and energy
infrastructure, private partner may invest up to
70-75 percent of entire investment; for health,
education and social sectors, government may
contribute major part of total investment Ñ
 FY10 budget initiative (contd.)
ë àSIG 2004 guidelines not backed by law; To start,
ààR 2008 (Rule 129) and àຠ2006 (Section 66)
may provide legal basis for ààà initiative
ë ºdopt project implementation within a flexible
framework covering BOO, BOT and BOOT as
necessary
ë Initially, negotiate àààs as one-off deals with aim
to install a systematic program in phases
ë Finalize detailed action plan on how to proceed in
a time bound manner; streamline processes,
regulations, requirements, legal/policy hurdles [
 FY10 budget initiative (contd.)
ë Înact new act to develop comprehensive legal and
institutional framework for administration,
monitoring, professionalism and accountability
ë Create legal framework for pooling of funds from
various sources (banks, insurance companies,
pension funds, etc) as government can only
provide equity or loans to infrastructure related
funds at present through IDCOL
ë Establish a ààà cell to move forward
ë àrepare guidelines for Tº and viability gap funds
 
 FY10 budget initiative (contd.)
ë Remove weaknesses and limitations of àrivate
Infrastructure Committee (àICOM) under àSIG 2004 in
terms of its size, scope, and other institutional and
organizational framework and structure
ë Set up a dedicated unit for ààà budget formulation
and implementation
ë ºdopt measures to build trust and confidence of
investors; simplify legal and regulatory frameworks;
streamline decision making process; remove
implementation constraints; ensure procedures of
accountability
ë Create broader political consensus on needs and
imperatives especially for large ààà projects with
longer implementation periods å
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*
 Conclusions
ë There can be initial hiccups in ààà as with any new
initiative, but prompt action would deliver desired
outputs
ë For successful implementation of ààà projects,
political support is critical
ë There is no unique model or mechanism of
implementing ààà: explore collaborative
modalities and partnership based approaches best
suited to specific contexts
ë
Thank you

ë