Opening remarks by Ashok Lavasa, ADB Vice President for Private Sector Operations and Public–Private Partnerships, at the PPP Monitor Launch in Bangladesh, 8 December 2022
Good morning. I am delighted to welcome you all to the PPP Monitor Launch. I would also like to welcome Honorable Minister from the Ministry of Planning, M. A. Mannan, Chief Executive Officer and Secretary, Public Private Partnership Authority Bangladesh, Dr. Md. Mushfiqur Rahman, and our other distinguished guests today from the government and the private sector.
This is the first time that we are launching the PPP Monitor in Bangladesh and I would like to touch on a few key points before we proceed with the event.
Today we live in a challenging world – many of our developing member country (DMC) clients have tight fiscal situations due to the combined impact of the pandemic, the impact on oil prices due to the Russian invasion of Ukraine, and other response spending. This means the screening of projects to be financed will be more stringent to ensure projects bring value for money and contribute to the economic and social goals of the country.
Given this backdrop, we must take this opportunity to re-engage with our DMC clients, including Bangladesh, and help address the effects of COVID-19 and ongoing global economic turbulence on infrastructure and other important considerations such as climate change. As recovery plans are being put together, we can enable governments to build back better by leveraging on private sector innovation and know how, with the private sector having the potential to bring in efficiency and financing to improve infrastructure and public services.
Governments’ resources are constrained, and we need to be more creative in identifying partnership models between the public and private sector which bring the desired developmental outcomes. We must help DMCs bring private sector into the fold by ensuring that the regulatory and institutional frameworks are conducive for private sector participation; there is adequate capacity in the public sector institutions to prepare projects; and there is balanced risk allocation in projects.
PPPs can actively support energy transition in terms of renewable energy generation but also in terms of energy efficiency and this is where private sector innovation and the long-term nature of PPP contracts can add significant value through whole-life cost efficiencies. In planning government’s PPP programmes, I encourage you to pro-actively include climate mitigation and adaptation factors, whether it’s energy efficient street lighting and electric vehicle charging networks on your road PPPs or PPPs to deliver low-carbon government buildings or to deliver e-bus schemes. In terms of climate adaptation, we need to consider how PPPs can include specifications for infrastructure to be designed and maintained to be climate resilient.
PPP is an effective procurement method. Numerous analysis and reports developed by, or for governments show PPPs deliver value for money. Studies from the United Kingdom indicate that government departments that implemented PPPs registered cost savings of between 10 and 20 percent. According to the 2002 census of the UK National Audit Office or NAO, only 22 percent of PFI deals experienced cost overruns and only 24 percent experienced delays, compared to 73 percent and 70 percent of projects undertaken by the public sector and reviewed in an NAO survey in 1999.
Australia’s National PPP Forum representing Australia’s national, state and territory governments, commissioned the University of Melbourne in 2008 to compare 25 Australian PPP projects with 42 traditionally procured projects. The study found that traditionally procured projects had a median cost overrun of 10.1 percent, and a median time overrun of 10.9 percent. PPP projects meanwhile had a median cost overrun of just 0.7 percent, and a median time overrun of 5.6 percent.
Public-Private Partnerships is the bridge to our public and private sector operations to deliver holistic ADB solutions and ADB has been supporting the Government of Bangladesh in its PPP programme for around 10 years, helping to improve the enabling environment and deliver capacity building, transaction advisory, financing and also supporting Government contracting agencies with post-financial close contract management.
ADB has supported the country’s PPP program since the very inception ranging from institutional set-up of the country’s PPP Authority, development of the PPP framework and legislation, capacity augmentation of key public sector organizations such as PPP Authority and Roads & Highways Division, providing transaction advice on pathfinder road PPP projects, and developing innovative structures to facilitate long-tenor local currency lending through BIFFL and IDCOL. The impressive progress made until 2018 led to PPP Authority being recognized in 2018 as the Government PPP Promoter of the Year by the prestigious Partnership Bulletin. We are hopeful that such global awards followed by track record of successful project deliveries would motivate the government to reinvigorate their focus on PPPs. OPPP’s 3 advisory mandates on road PPP projects, two of which have successfully achieved commercial close, have the potential to mobilize an aggregate of over $1 billion private sector investments. We would like to build upon our learnings and achievements till date and focus our support on other important sectors such as water supply, wastewater treatment, health sector, renewable etc.
The Dhaka Bypass PPP project exemplifies the synergy between the public and private sectors. A partnership between ADB, the Bangladesh Infrastructure Finance Fund Limited and the Dhaka Bypass Expressway Development Company, the project is the first road PPP in Bangladesh structured on international market standards. Through funding from partners, a four-lane tollway and a two-lane service road will be added to the Dhaka Bypass Expressway, a 48-kilometer road that is a strategic corridor for freight, linking the manufacturing center in the north of Dhaka with the center of shipping activity at the Chittagong port in the south. By doing so, it has restarted infrastructure development, spurred economic growth, and generated jobs during post COVID-19 recovery.
In today’s agenda, we will look at the highlights of ADB’s PPP monitor for Bangladesh, which provides detailed information on the PPP landscape in Bangladesh through hundreds of indicators, as well as an overview of the market and projects such as these.
The PPP Monitor provides investors with business intelligence on the enabling environment, policies, priority sectors and deals to facilitate informed investment decisions and also informs government counterparts with a diagnostic tool to identify gaps in its PPP legal, regulatory, and institutional framework or issues in particular sectors or with its financial markets. The PPP Monitor tracks the development of the PPP business environments as well as the challenges of doing PPPs in Bangladesh, with the goal of increasing the level and quality of private sector participation in infrastructure by serving as an active platform for dialogue between the public and private sectors. In particular, it enables us to identify the opportunities and the priority areas for potential ADB interventions to help PPP play an increasing role in delivering Bangladesh’s infrastructure requirements.
I encourage you today to take an active part in the discussions. This is a great opportunity to learn from others as well. Together, let us ensure that we find a way to work together to advance the PPP agenda of Bangladesh. Thank you and I look forward to today’s discussions.