Ppp in Bangladesh
For the purpose of the analysis, different types of data and information were used as measured to identify the feasibility of public private partnership in our country. In this paper we examine the different information of PPP activities in different countries like India, Malaysia, South Korea and Philippine. From that information we found that there is a close relationship between PPP and the growth rate. If we deeply concentrate on PPP activities in our country then we can easily achieve high GDP growth. So the development of our country mostly depend on how we efficiently done the PPP activities.
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Most of the People believe that PPP is a idea to develop a country. Key words: Public Private Partnership (PPP), Gross Domestic Product (GDP), development. Introduction A public private partnership is a legally-binding contract between government and business for the provision of assets and the delivery of services that allocates responsibilities and business risks among the various partners. In a P3 arrangement, government remains actively involved throughout the project’s life cycle. The private sector is responsible for the more commercial functions such as project design, construction, finance and operations.
At present per capita income in Bangladesh is only USD 695 (BDT 47,955) and almost 40percent (58 million) of population live below the poverty line. Income from industry is 29. 7 percent of total national income, and external trade is 40 percent of total national income. However, we are still considered as one of the least developed countries. Present government has vowed to eradicate poverty, attain highest possible growth by 2021, and build the country such that a thriving economy will fulfill basic human needs. Increased investment is a must for attaining higher growth.
Bangladesh economy failed to gather momentum until 1990. Average growth rate during this time was stagnant at less than 4 percent per year. The growth rate is also on the decline due to impact of the global economic downturn. Lack of investment in infrastructure, especially energy and power, port and communication has been identified as root cause behind sluggish growth. In order to achieve 8-10 percent growth, rate of investment needs to increase from 24-25 percent of GDP to 35-40 percent of GDP. A lot of resources are required to raise rate of investment to 35-40 percent of GDP.
It is challenging for the government to arrange such huge resources. Moreover, due to current global economic downturn, the prospect of receiving foreign assistance has diminished. Resource mobilization is not the only challenge for the government. It is also imperative to ascertain whether the government has skilled manpower and required institutional framework to implement mega infrastructure projects. So, the government of Bangladesh has taken the initiative of public private partnership to increase the GDP growth.
Objective of the Study The objective of the paper is to investigate the impact of PPP on GDP growth of Bangladesh. The concept of the study is taken from one of the working paper of Finance Division “Invigorating Investment Initiative through Public Private Partnership A Position Paper”. Moreover after completion of this paper we will know the rules and regulation of PPP contract, the pros and cons of PPP, how many project has already been taken under PPP contract, what are the other countries follow the PPP contract.
For the purpose of the study we have selected different countries from south Asia whose are the follower of PPP and by the help of PPP they develop their country. The ultimate objective of this paper is to identify whether any importance of PPP in economic development of Bangladesh or not. Historical perspective of PPP In 1996, the government adopted a private sector power generation policy to promote private sector participation. In 1997, under administrative control of the Economic Relation Division, Infrastructure Development Company ltd (IDCOL) was established in order to promote private sector investment in infrastructure development.
Similarly, Infrastructure Investment Facilitation Center (IIFC) was established by the government to assist relevant ministries, divisions or agencies with formulation of project proposal and screening as well as to provide technical assistance. Later in 2004, under Public Private Partnership initiative, Bangladesh Private Sector Infrastructure Guidelines (PSIG), which forms the basis of the current PPP, were issued in order to boost individual investment in the development and maintenance of infrastructure.
In 2007, a 5 year term Investment Promotion and Financing Facility (IPFF) endowed with BDT 4. 18 billion (equivalent to USD 60 million) was set up in Bangladesh Bank to finance government approved PPP based infrastructure development projects to be implemented by the private sector. Later in 2008, policy to promote private sector participation in power sector was formulated. Although these initiatives have been successful in financing and implementing a few small scale infrastructure development projects, they are not sufficient to cater to the requirements and potential of the country.
Therefore, to reduce the plight of the public and to boost economic development, an initiative is being undertaken to revisit the current PPP framework and facilities. Benefit of PPP The government, the private sector investors, and public can all benefit if private sector can be enticed into infrastructure development under PPP. The likely benefits to the relevant three parties are as follow: Public Sector ?? Maintaining Economic Stability ? Since the private sector invests in the infrastructure development, there is no need for the government to take loans and pay interests.
This does not exert excess pressure on money market, thereby diminishing upward pressure on interest rate and inflation. ?? Gains from Private Sector Innovation and Expertise ? Since the private sector is responsible for developing infrastructure, they use the most cost? effective and innovative means and technologies. This enables the best source of value for money gain. ?? Logical Estimate of Expenditure during the Lifecycle of the Infrastructure ? The private sector promoters coordinate and implement different aspects of the project such as designing, financing, construction, maintenance, and management.
Therefore, it is possible to make logical estimate of expenditure during the lifecycle of the infrastructure. ?? Achieving Desired Growth Rate ? Desired growth rate cannot be achieved if the government is unable to invest in infrastructure development at the appropriate time. Participation of private sector allows additional investment and increased production capacity that feeds into higher growth rate. Private Sector ?? Expansion of Business ? PPP facilitates expansion of business. The private sector can engage in sectors where conventionally public sector invests. ?? Innovation ?
Under PPP the private sector not only supplies materials, they are also engaged in multitude of activities such as financing, construction, ownership, maintenance, and management. As a result they have to be very innovative. Public/ Users ?? Accountability ? Since services are purchased from the private sector by paying fees or charges, the service providers remain accountable to the government and public. ?? More Responsible Government ? Since the government approves the PPP projects, it has to supervise whether the private service providers are abiding by the contracts. ?? Guarantee of Safety ?
Since the private sector has to bear the costs resulting from accidents and damages, they use reliable and quality materials to ensure safety. Risks Associated with PPP Implementation There is no apparent fiduciary risk if infrastructure is developed under public? private partnership as government does not invest or invests very little in such schemes. However, there might be some other risks as follow: ?? Loss of ownership of public properties ?? Approval of inflated costs ?? Overlooked public interest when pricing the services ?? Dysfunctional Infrastructure once ownership is handed over to the government