Public private partnership: an
effective formula for development
By Alauddin Masood

As limbs are vital for a man’s movement, progress and prosperity, so are the economic and social infrastructures for the continued all round development of a country. On the other hand, inadequate infrastructure facilities and services (like water, affluent treatment, power supply, telecommunications, education, health and welfare) adversely impact production and transaction costs, levels of social and personal health as well as welfare, thereby, impeding development efforts and a country’s realisation of its full development potential.

In Pakistan, much needs to be done to upgrade the country’s infrastructure so as to ensure its continuous growth and prosperity. After monitoring the present situation, key international donors – the World Bank, the Asian Development Bank and the Britain’s Department for International Development, have urged Islamabad to work towards removing the bottlenecks in infrastructure which, they believe, will require large-scale resources in the next five years.

There can be no denying the fact that the quality of a country’s infrastructure has a significant effect on industrial productivity, costs, and competitiveness and thus on its investment, employment and export earnings.  Infrastructure services can also have a direct and immediate effect on the living standards of the people and the poverty alleviation efforts of the governments. For example, potable water and sanitation can dramatically reduce debilitating and life-threatening diseases. Electricity can transform the quality of life for urban/rural inhabitants. Better roads can connect isolated communities to markets that buy their produce and supply their household needs, while availability of modern telecommunication services can empower people by putting them in touch with a range of markets/services as well as the society at large.

Meaning “forms of cooperation between the public and private sectors for the funding, construction, renovation, management or maintenance of an infrastructure or the provision of a service,” the Partnership also allow the stakeholders to concentrate on activities that they are best suited for. 

To meet the complex challenges of globalisation, the experts believe that the Partnership are critical to Pakistan’s accelerated development. Given the importance of the Partnership for a country’s fast track development, it augurs well for Pakistan’s progress and prosperity that the authorities recognise the importance of improving and expanding infrastructure services for sustaining economic and social development in its Medium Term Development Framework (2005-2010) (MTDF).

In fact, the successive governments in Pakistan have been cognisant of the vital need for improved quality and service coverage in power and water supply, sewerage treatment, transport and logistics for the country’s economy and the livelihood of its people. However, fiscal constraints required innovative approaches – away from the traditional role of the government as the service provider – to ensure that the massive investment needs are financed with the assistance of the private sector. By adopting the PPPs module, the government estimates that less than 50 per cent of the infrastructure investment needs can be covered by public funds under MTDF. 

The government has, therefore, quite understandably, embarked on a programme of structural Partnership, based on international best practice, to accelerate the pace of infrastructure development and thus achieve sustainable economic development in the country. To facilitate PPP projects by providing expertise and hands-on support to the public sector implementing agencies, the government has recently established Infrastructural Project Development Facility (IPDF), under the aegis of the Ministry of Finance and Economic Affairs, as a dedicated agency to pursue this task with a focused approach.

In addition, a PPP Policy Task Force, under the chairmanship of Advisor to the Prime Minister on Finance Dr Salman Shah, has also been constituted to provide a forum for the stakeholders to formulate recommendations on various components of the PPP framework, i.e. legislation, risk management framework, standardisation of contractual provisions and viability gap funding.

In pursuance to the government’s desire to initiate a consultative process between the public and private sector stakeholders for finalising a framework for PPPs, recently IPDF arranged a series of three seminars at Islamabad, Lahore and Karachi. Leading bankers and investors, representatives from the federal, provincial, city and local governments as well as public sector agencies (line ministries, provincial governments, local bodies, and state owned enterprises), executives from law firms and insurance companies and other stakeholders actively participated in these seminars.

In addition to making projects affordable, other key advantages of using PPP procurement mechanism include: (1) PPP mode maximises the use of private sector skills; (2) ensures maintenance of quality of service for the life of PPP; (3) encourages development of specialist skills, such as life cycle costing; (4) allocates risks to the party best able to manage or absorb each particular risk; (5) delivers budgetary certainty; (6) forces the public sector agencies to focus on outputs and benefits from the start of a project; (7) enables the public sector to pay when services are delivered; and, above all, allow the injection of private sector capital for establishing and/or improving infrastructure services.

Some other projects, which the authorities propose to execute under the PPP Modality, include: Karachi Circular Rail, Bus Rapid Transit System Karachi, Intra-City Bus Terminal Facilities Karachi, Hyderabad-Mirpurkhas Road (Dualisation & Tolling), Sindh Coastal Highway (Expansion & Rehabilitation), Karachi Desalination Plant, Rawalpindi Solid Waste Management, Lahore Solid Waste Management, Low Cost Housing Hyderabad, Car Park Garages Karachi, Transportation of Garbage in Karachi, Lahore WASA Overhead Reservoirs, Power Generation in LIEDA, 7-MW DG Khan Link-III Hydro Power Project, Office Complexes Islamabad and Industrial Park at Bostan in District Pishin. Recently, the IPDF has signed an agreement with Pakistan Tourism Development Corporation for the provision of technical assistance in the construction of a Corporate Complex, over an area of 7544.44 square yards, in Islamabad, under the PPP mechanism. In addition to head office, the complex will house PTDC's corporate offices, auditorium, audio/visual centre, tourism facilitation centre, and additional office floor space.

The construction of PTDC's Corporate Complex is part of a business plan drawn-up to make PTDC self-sufficient within the next two years. It is expected that other similar projects would also be coming up, as part of strategic developmental plan wherein more assets of PTDC are planned to be developed into Tourism Complexes, like motels, beach resorts, spas, etc. under the PPP modality.

In brief, PPPs provide a strong base for taking the country on the path to rapid progress, involving the sharing of risks and rewards of multi-sector skills, expertise and finance to deliver the desired policy outcomes. Due to the numerous advantages that PPPs enjoy over the traditional role of the government as the sole service provider, public-private partnership is going to be the buzz word for fast-track development of infrastructure facilities in the future.