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Public Private Partnership (PPP) concept to expedite development

By Sujan Ghimire, N24:
143 out of 144, second last from 144 countries surveyed, this is the rank of Nepal in Infrastructure as given by the Global Competitiveness Report 2012-2013 produced by the World Economic forum.  This shows how worst is the level of infrastructure development in Nepal. On the basis of this report can we say approaches for the infrastructure development in Nepal are really the effective one? Poor infrastructure has always been the hindrances for the economic development of the country. To achieve meaningful growth, developing countries like Nepal have to promote infrastructure development, which has a positive ‘knock on’ effect in catalyzing continuous economic development, apart from meeting basic needs. However, Budgetary constraints and lack of advanced technology have always been the drawback for Nepal. So it is the need to come up with alternative ways to finance and deliver needed infrastructure. And on the basis of the experience of other developing countries and countries like England, France, Spain and Italy Public Private Partnership (PPP) can be one of the best alternatives to boost the infrastructure of Nepal.

PPPs are projects jointly undertaken by governments, public sector bodies and entities with private sector partners to provide infrastructure services of the required / improved quality to the public and consumers at large and involve balanced sharing of the risks and benefits.  The basic intent of PPP is to encourage the private sector to dedicate its capacity to raise capital and the ability to complete projects on time and to budget for the welfare of the community. Civil infrastructure is vital to the nation’s economic growth. It includes highways, railways, ports, bridges, hydraulic structures, power plants, tunnels, municipal facilities like sanitation and water supply, and other facilities serving public needs. Such Infrastructure projects are complex, capital intensive, having long gestation period and involves multiple risk to the project participants. So for the developing countries like Nepal where the shortage of public fund has always been perennial problem, local and foreign private sector involvement in the provision of infrastructure projects or services must be encouraged.
PPP, which has attracted worldwide attention, has acquired the new resonance in the context of developing countries. In the context of our country, where there is increasing gap between the infrastructure demands and dedicated funding sources, PPPs can be the best way to expedite critical infrastructure that otherwise may not be built. Nepal government must turn to the private sector for relief in the form of contractual PPPs representing a wide variety of financing and delivery approaches to access capital markets , implement new technology and expedite project delivery, operations and maintenance in a more cost effective manner.  This does not imply ‘less government’ but different governmental roles in infrastructure development. PPPs are considered best for risk mitigation and sharing of risk among the stakeholders as large infrastructure project are always with the probability of political, financial, constructional and operational risks.
Though the Government of Nepal has recognized PPPs as an important approach for development but country has not been able to implement PPP infrastructure project in a substantial way. Lack of clear-cut vision, political transitions, economic instability, unstable government and social transformations have been the constraints for the PPP approaches to be executed. There are various sectors of infrastructure in Nepal where PPP can be practiced. Transportation, hydropower, water supply, irrigation are major among these. Though Nepal’s electricity supply system is  among the least reliable in south Asia, characterized by long period of scheduled supply outages, but still a significant economic opportunity for Nepal exist in hydropower generation, especially in the context of south Asia region, which suffers from power shortage. Though some hydropower projects are going to get started under this model, Government should come up with more strategy for catalyzing private sector participation in domestic and export oriented hydropower projects. Highway project always require more amount of funding. So PPP project in highway sector is the dominating one among other PPP projects in the world. Highway and road network of Nepal is very poor. So the next important sector for PPP approaches is highway. One important Highway project ,Kathmandu-hetauda tunnel road has  already been awarded to Nepal Purbadhar Bikas Company(NPBC) to build, own, operate and transfer under PPP and another next national glory highway project ,Fast track is on the process of awarding contract under similar PPP model. These two projects will be as the demo project for PPP approaches in highway sector. Keeping this consideration , the concerned authority must be concentrated to bring out these projects more successfully because these will not only be addition to highway network but most important is that success and failure of these projects will be the fate for the birth of other more PPP projects . Similarly PPP  model can be adopted for maintenance of roads , metro railway in Kathmandu valley, East-west railway, dry ports, airport maintenance, proposed international airports in Bhairawa, Nijgadh and Pokhara, Water supply and solid waste management in urban area, food green city concept and so on.
Private sector participation in infrastructure is however not a simple matter is. It requires framework that enable private sector to secure reasonable return at manageable risk. Because of multiple stakeholders risk mitigation arrangements are usually complex. If authorities like National Planning Commission, concerned ministries and departments are not serious regarding adequate preparation to framework PPP projects, selection of private participants and drafting of contracts, it will lead to increase cost, delay in project and poor quality. Even after completion such projects will become the victim of high cost low demand syndrome.
As in the present context unstable government, lack of predictable investment climate and more important week security has not motivated private sector to invest in infrastructure in Nepal. In such situation Government should not give up rather should be committed to implement PPP approach attracting private sector by sharing the risk and benefits among the partners. So it’s the time for government to come up with proper framework, strategy, plans and full equipped technical and managerial manpower for implementing PPP approach in Infrastructure development.

-Ghimire is a Civil Engineering Student at National Institute of Technology, Warangal in India and pens on Nepal’s political, development and social issues. He can be reached at sujanghimire14@gmail.com.

Published Date: Saturday, January 12th, 2013 | 09:03 AM

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