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Promotion of public-private partnership

  Development of infrastructure

ASHISH GAJUREL

It is said that the idea of a PPP in general is theoretically appealing but its practical implementation in developing countries is not that easy. Nepal needs to analyze the successes and failures of PPP in the world‚ and develop a model that best suits its economic and political situation

PPP projects have been in vogue in developed as well as developing world for the public infrastructure development. The public fund has to cover all the country´s expenditure including health, education, poverty reduction, water supply, irrigation, garbage management, power supply, and transport infrastructure among others. The government fund is distributed among all expenditures on a priority basis. Health and education have always been the priority. The developing countries need far more funds for infrastructure development than available through public financing. Considering this fact, around the mid-1980s, a new strategy based on the use of public-private agreement was developed to promote the quality of the projects and raise profitability and was gradually implemented for the development of public infrastructure.

Nepal is one of the poorest countries in the world, but the demand for infrastructure investment is enormously high. With the existing economy it is not possible to fulfill the fund requirements to develop the required infrastructure in Nepal. Considering this fact, the Nepal government is convinced that PPP is the way out to solve public financing deficit. Thus, they have developed programs and policies to promote PPP. OECD defines PPP as a way of delivering and funding public services using capital assets where projects risks are shared between the public and the private sector. It is a long term agreement between the government and private where the service delivery of the government are aligned with the profit objectives of the private partners. They join hands to design, plan, construct, finance, operate, maintain, and manage the project under long-term contract. The contract can ne for up to 45 years. The nature of the contracts requires stable government, policies and continuous supervision from the state.

The government as well as the private entities are educating and promoting PPP through seminars and public awareness programs. Recently, Kathmandu– Kulekhani-Hetauda tunnel (58 km) received the permission from the government to develop the project under BOOT (Build-Own-Operate-Transfer), a form of PPP. This project has been the focus and attracted attention of the general people, international investors, and the Nepal government. Its success and failure will have great impact on the PPP development in Nepal. All stakeholders need to join hands to make this project a success. The faith on PPP in Nepal is largely dependent on its success.

Countries like UK, Korea, France, Australia, Portugal, and Germany increasingly use PPP to deliver infrastructure projects. This clearly suggests that developing countries like Nepal should put clear focus on developing projects through PPP. Most of Nepali projects are built through foreign grants, loans and aids, but now time has come that projects be developed on its own and PPP could be the way out. PPP has been successful in India as well. The requirement of fund to fulfill the demands for urban infrastructure is enormously high, therefore the Indian government has clear policies to encourage PPP model developing infrastructure across the country to fulfill the gap of fund availability and what is required. According to the World Bank´s private participation in infrastructure database, India stands second to China in terms of the number of PPP projects and second to Brazil in terms of investments. Since Indian geography, culture, and politics etc. are similar to Nepal’s, the success story of PPP in India is encouragement for Nepal. Nepal needs to learn the policies that are applied in India to develop the PPP projects and adopt similar policies, if required with necessary amendments.

International experience of developed as well as developing countries clearly suggests promoting and implementing PPP in Nepal. Kathmandu-Kulekhani-Hetauda tunnel highway would provide the base for developing PPP. This project has even drawn attention of the private banks. Some of the banks have already agreed to invest in the project. Nepal should immediately set up independent institutional structure for handling PPP projects and develop the sector specific regulatory mechanism. Unless and until the government supervises, and regulates PPP projects, the private sector won´t be motivate and feel secured to make investments. A strong government supervision enforces proper practice and strengthens the belief of the investors. The PPP has strength to combine the comparative advantages of involving parties providing facilities in a efficient and effective way.

It is said that the idea of a PPP in general is theoretically appealing but its practical implementation in developing countries is not that easy. Nepal needs to analyze the successes and failures of PPP in the world, and develop a model that best suits its economic and political situation. Since the contract is long-term one, the focus should be on developing policies that enforces the stakeholders to remain in the partnerships. The PPP model has the advantage of making the private partners invest in a big way so the government is not strained for making investments for projects that the private sector is interested in making investments.

Gajurel is a traffic engineer

gajurelashish@gmail.com

Comments1

The concept is really fantastic! Last couple of days I was hearing about Kathmandu-Kulekhani-Hetauda Tunnel Highway in radio. The news was about Prabhu Finance financing for the project. I though that it was providing the loan but from this article it is pretty clear that it was all about partnering to build the project. The examples of international projects under PPP really promote us to focus on PPP projects. Raman Jha, Bhakatpur

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