Bangladesh suffers from chronic underdevelopment of key infrastructure that slows economic development and negatively impacts poverty alleviation, health and public service issues.
The public sector has traditionally been relied upon to develop, deliver and maintain infrastructure with rare exception. Lack of needed project design and preparation, inconsistent bidding processes, and poor project implementation and management compounded by chronic shortage of funding have led to under-performance against targets set under the Annual Development Plan. Tariff rates and tax and non-tax fee support is widely below cost of service across nearly all infrastructure sectors. While the Government has sought to increase the involvement of and the number of private sector participants in infrastructure sectors, the aforementioned factors raise caution amongst interested parties.
Bangladesh's previous PPP infrastructure development program had not delivered a significant volume of needed projects, and poor procurement performance has held back expanded use of this investment modality. Government entities have tended to take an ad hoc approach to PPP projects, often focusing solely on technical matters at the expense of equally critical commercial, legal, and financial constructs. As a result, bidding processes have suffered from lack of proper preparation compounded by skewed risk allocations in the bid documents and leading to low levels of bidder interest, inconsistent bidding outcomes, and allegations of mis-procurement. Such results can result in driving serious value-added infrastructure participants away from the market. A revised approach to development, bidding and management of PPP infrastructure is required to create a robust and dependable approach to privately-invested infrastructure development and to regain stakeholder confidence.
In 2010, GoB sought to address the identified weakness in its infrastructure development program by making PPP a national priority by passing a series of comprehensive policy and support measures:
i) Adoption of the Policy and Strategy for Public-Private Partnership (PPP), 2010 (the PPP Guidelines) governing PPP infrastructure development and procurement for small, medium and large project activities (August 2010)
ii) A decision to establish a PPP Office within the Prime Minister's Office (PMO) (September 2010)
iii) Incorporation of the Bangladesh Infrastructure Finance Fund (BIFF) Limited to provide co-financing to PPP infrastructure investments with Tk 16 billion in capital (March 2011)
iv) Allocation of significant budget amounts in the FY 2011 and FY2012 budgets to support the above activities comprised of:
a. Tk 16 billion (~US$ 200m) for BIFF (June 2010)
b. Tk 1 billion to seed a Technical Assistance Fund, under management of the PPPO
c. Tk 26 billion to establish a Viability Gap Facility under management of the MOF PPP Unit
The GOB has chosen to house the PPPO within the PMO in order to provide a higher level of impetus to implementing a sustainable operational structure for the new PPP Guidelines. This is backed with sufficient financial resources to jump-start the PPP program nationally.
To support implementation of the above elements of the GOBs PPP program, the GOB has requested ADB to provide TA support for comprehensive, holistic assistance across key government ministries and to help GOB in developing implementing the policies and procedures needed to fully operationalize the PPP program. Through operationalizing the GOBs PPP Guidelines, the envisaged TA seeks to put in place the people, policies and operating procedures that will address past shortcomings in PPP infrastructure development, promote greater development efficiency of such projects, and facilitate the broader delivery of PPP infrastructure in Bangladesh.