Bangladesh has drawn praise for its regulatory framework regarding the PPP -Public Private Partnership - framework but continues to wrestle with lower investment than needed. Asian Development Bank says. Bangladesh has been ahead of many of its Asian peers and has evolved with a strong public-private partnership (PPP) regulatory structure that supports private sector investments in infrastructure.

It has also created an empowered institutional structure, working directly under the Prime Minister's Office to drive facilitation of PPPs, ADB reports says:

• "A policy and strategy for PPP was introduced in 2010, followed by the PPP Act in 2015, which aimed to spur development of core sector public infrastructure and services. The PPP Act provided a legal framework for the creation of PPPs by involving private sector participation along with the public sector, attracting local and foreign investments, and establishing a reliable authority for driving PPPs."

• "Owing to the well-developed institutional structure and regulatory framework, Bangladesh has been able to successfully close several PPP transactions, reports ADB. A policy and strategy for PPPs were introduced in 2010, which improved the regulation of PPP projects and established an office to promote PPPs. However, the PPP Authority has no statutory authority."

EIU evaluation

The Economist Intelligence Unit has evaluated 19 countries and Bangladesh has been ranked 7th as far as institutional structure and market maturity is concerned. While it has been on the positive side, the needed investment in the sector remains low. The ADB has evaluated the scenario as it exists in Bangladesh and spelt out both the achievements and shortfall. What seems obvious is that the bureaucratic system has worked as far as regulations and structural mechanisms are concerned but the private sector investment part of the partnership process has not been strong. The key focus would now be about drawing more investment.

Bangladesh aimed for a GDP growth rate of 8.2 % for fiscal year (FY) 2021 in which infrastructure was a major priority area. " The top five sectors-transport; physical planning, water supply, and housing; power; education and religious affairs; and science and information and communication technology-have received 70.5% of total ADP allocation, 0.4% higher than the ADP for FY2020. Within that allocation, the ADP for FY2021 earmarked the highest share, 24.6% (for 298 projects), to the transport sector (roads, railways, bridges, and others related to transport). That was followed by the physical planning, water supply, and housing sector with 12.6% (for 270 projects); and power with 12.1% (for 88 projects)."

Investment targets:

The PPP investment targets in the Seventh Five-Year Plan (2016-2020) are as follows:

• 1.8% of GDP per year,

• Tk3.9 billion per annum,

• 0.8% power sector,

• 1% transport infrastructure, and

• 30% of infrastructure ADP must be PPPs.

A total of 69 PPP projects across various sectors were implemented till 2019. The energy sector has seen widespread interest in PPPs in Bangladesh. All except one, all the PPPs have been successful in this case. In the ICT sector, two were rated as distressed assets as of June 2020.

Energy leads followed by ports

Energy hogs the majority interest of investors, the report says. "PPP projects have attracted investments of $6.74 billion (Tk571.57 billion), 76% of which was contributed by the energy sector. The ports sector also attracted over 12% of PPP investments. The water and wastewater sector (6%), roads sector (4%), and ICT (2%) have accounted for the remaining 12% in investments.

Ports attracted the highest average investment. In 2018, a project was awarded with $327 million (Tk27.73 billion) for a water treatment plant, leading to a high average project size in the water and wastewater sector. It is the second-largest sector by average project size.

Major players

As per the report the major players in the PPP sector are:

• Summit Corporation Limited Bangladesh

• Orion Group Bangladesh

• General Electric United States3

• Marubeni Corp. Japan

• SembCorp Industries Singapore

• Long King PRC

• Al Jomaih Holding Co. Saudi Arabia

• Malaysia Development Behard Malaysia

• SUEZ France

• General assessment

• Project granting process

From 1990 to 2019, 18 PPP projects were procured through direct appointment, 29 through unsolicited bids, and 25 through a competitive bidding process (including competitive bidding and license scheme).

From 1990 through 2019, 32 PPP projects in Bangladesh had attracted foreign sponsor participation, of which 28 are currently active while the others are either canceled or lapsed.

Primary obstacles

The report states that though the PPP market in Bangladesh is more adept than many other countries various challenges remain as far as implementation is concerned. The regulatory framework is there but more action is needed to make PPPs a more attractive destination to invest. "Developing sector-level frameworks and model documents or standard bidding documents is crucial in bringing added transparency and clarity..." This includes independent sector regulators and tariff policies for PPP projects.

• The lack of long-term financing is a major impediment for PPPs in Bangladesh.

• While a few specialized institutions have been developed, there is still a major gap in overall financing requirements of the country, which leads to heavy dependence on foreign or development funding routes. The dated laws in many sectors and commonly applicable regulations related to land acquisition will need amendments and rights for development by the private sector, stronger arbitration mechanisms, and tougher contractual frameworks.

• Another challenge of PPPs is the limited capacity of contracting authorities and experience in handling the PPP projects. While initiatives of the PPP Authority-including issuance of guidelines and manuals and undertaking capacity development programs-have led to improved understanding of PPPs, further steps are necessary. Finally, while the regulatory framework has been put in place, the country may also seek to develop standard bidding documents and model agreements for various

Investment and capacity

While the investment level is $6.74 billion , the requirement is $384 billion by 2030, says the Asian Development Bank (ADB "Public Private Partnership Monitor Bangladesh").

According to the PPP Monitor, the contracting authorities have limited capacity and experience in handling PPP projects. "While initiatives of the PPP Authority-including the issuance of guidelines and manuals and undertaking capacity development programmes-have led to improved understanding of PPPs, further steps are necessary."

The ADB recognizes the structural investment challenges which Bangladesh faces. "Governments' resources are constrained and we need to be more creative in identifying partnership models between the public and private sector that bring the desired developmental outcomes," said Ashok Lavasa, vice-president for private sector operations and public-private partnerships at the ADB, at the launching of the publication. (quoted in the Daily Star report )

While inaugurating the ADB's maiden PPP Monitor in Bangladesh, Planning Minister MA Mannan said that the government is serious about making PPPs successful as it can be the alternative initiative for development.

Challenges and alternatives

The report is a timely reminder that while opportunities remain, so do challenges and they are increasing on both sides. Nobody is denying that the regulatory framework is a positive but the lower level of investment is a reminder as well. It has also not been unable to draw as much investment as required and this applies particularly to the international investment aspect.

Thirty-two projects have attracted foreign sponsor-investors, of which 28 are currently active and four are either cancelled or non-functioning. All are linked to the infrastructure sector. 58 projects were under various stages of preparation and procurement as of mid-June 2020.

Discussants at the unveiling of the report in Dhaka said that a major impediment is the lack of confidence in the capacity of local companies in becoming partnerships. Local business leaders have stated about updating the PPP guideline. However the main gap is in lack of investment by Bangladeshis who have the resources but are not confident in the country's political stability. Nor have the authorities been realistic about the alternative resources and sources of the same.

The finger always goes to the general ignorance of the expatriate Bangladeshi communities as major source of investment. The lack of understanding is obvious in what foreign exchange reserve is calculated and the scenario of the same in actual terms. The expatriate income can be split into two ways. The remittance income which is deposited in the Bangladesh Bank coffers and the money that comes in through the informal hundi system.

Very little is known about the way the second informal method works but even if it is accepted that 40% of the remittance doesn't follow the formal route we have a situation whereby the money lies without investment. The number would obviously run into billions. There is no bond or savings instrument for this specialized market and the money goes mostly to land purchase or conspicuous or social consumption.

The second potential investor is the well- off expatriate investor living abroad. They have a reasonably high level of investment and are interested in Bangladesh for not just economic but social reasons as well. However, the focus is not there to attract their investment and only on the remittance flow.

This situation basically points to a capacity issue because the innovation needed to bring in new investment from the informal sector is not there. As a result, some investment comes in the informal sector but something large like the PPP has an investment shortfall.

PPP remains the most realistic arrangement for higher investment based on a partnership which reflects the reality of the economy. The Government has however yet to look upon it as a partnership and its focus has largely been on seeing it as a GOB project. This has reduced the capacity of the project to be more participatory which the strategy is basically anyway. The Government has produced and kept its part of the bargain as the regulatory framework shows but has not been able to attract enough attention of potential investors whether foreign or local. That's where it must put in more attention and energy.