PPP policy‚ Act to rope in private sector in infrastructure development
January 21: The Ministry of Finance (MoF) has begun preparing drafts of policy and Act on public private partnership (PPP) to systematise the practice of pooling resources of private and public sectors for infrastructure development.
The ministry started drafting these legal documents after the government failed to raise private sector’s participation in infrastructure development despite introducing the concept on PPP around one-and-a-half decades ago.
“The documents are being prepared by Deloitte Touche Tohmatsu India and its associate Total Management Services. They will be presented during a meeting scheduled for February 6,” chief of MoF’s economic policy analysis division, Navraj Bhandari said.
Once the documents are endorsed, a separate body to look into PPP projects is expected to be established. “This body will coordinate with various ministries while implementing PPP projects,” Bhandari said.
Nepal recognised PPP as one of the best options to execute development works long ago as the government has limited financial resources to meet infrastructure needs of the country. This concept is also popular in many developed and developing nations, where the government only plays the role of coordinator, while the private sector raises funds to build projects like roads and railway networks. Once the projects are completed, the government allows the investors to use them for certain period and upon completion of that tenure, the project has to be handed over to the state.
“Benefits (of mobilising private sector in infrastructure development) include more innovative delivery approaches, better service quality, greater productivity and better use of public resources,” says a white paper on PPP made public in 2011. Despite these advantages the government has largely failed to rope in private sector due to absence of clear policy guidelines on PPP. Also, hassles faced during land acquisition has been another turn-off factor for the private sector.
Many developers of projects, such as hydropower and roads that require acquisition of large plots of land, often complain about hefty compensation demanded by locals while trying to pool land. An example of this is around Rs eight billion demanded by locals of Khokana to hand over their land for Kathmandu-Terai Fast Track project. Such ‘unreasonable demands’, according to project developers, raise the cost of projects.
“We know the cost of acquiring land and resettling people is very high in Nepal, and we will try to address these issues through new laws,” Bhandari said.
Also, the country lacks expertise in creating a win-win situation for both the private sector and the government, which deters investors from pursuing projects under the PPP model.
“In this regard, Deloitte has agreed to conduct a pre-feasibility study of at least one project and prepare bid as well as contract documents. We hope these documents can be used as templates while negotiating with investors in the future,” Bhandari said.
(Source: THT)
