Bangladesh University of Professionals

Term Paper on

A study on

Assignment on
Public Private Partnerships in Bangladesh

Course Name: New Public Management: Concepts and Strategies

Course Code: PA-3626
Submitted to

Md. Nasir Uddin

Lecturer
Department of Public Administration
Bangladesh University of Professionals (BUP)

Submitted by

Md. Abubokkor Siddik

ID: 16161020
3rd Year, 6th Semester
Department of Public Administration
Bangladesh University of Professionals

Submitted on: 22 October, 2018

May 08, 2018
Lecturer,
Md. Nasir Uddin
Faculty of Arts and social Science
Department of Public Administration
Bangladesh University of Professionals (BUP)
12, Dhaka 1216, Mirpur Cantonment, Bangladesh
Subject: Public Private Partnerships in Bangladesh

Dear Sir,
It is a great pleasure for me. I have submitted my assignment on the topic of “Public Private
Partnerships in Bangladesh”. I have prepared this assignment, as an accomplishment of the
course requirement. To make this assignment up to the standard, I have tried my level best to
fulfill the requirements. I hope that it will help us in our future practical life.
Sincerely yours,

……………………
Md. Abubokkor Siddik
Id: 16161020
1st Batch,
6th Semester B.S.S (Hons)
Session: 2015-2016
Department of Public Administration
Bangladesh University of Professionals (BUP)
 Public Private Partnerships in Bangladesh

Public- Private Partnership (PPP) describes a government service or private business venture
which is funded and operated through a partnership of government and one or more private
sector companies. The term public refers to government including both central and local level
state institutions. This review has grouped both the profit private sector, and non-profit NGOs
under the term private sector. It also highlights PPP potentials, infrastructures, roles of PPPs as
well as advantages and disadvantages of PPP in Bangladesh.

1. Introduction

PPP involves a contract between a public sector authority and a private party, in which the
private party provides a public service or project and assumes substantial, technical and
operational risk in the project. In some types of PPP, the cost of using the services is borne
exclusively by the users of the services and not by the taxpayer. In other types (notably the
private finance initiative), capital investment is by the private sector on the strength of a
contract with government to provide agreed services and the cost of providing the service is
borne wholly or in part by the government. Bangladesh has been facing many development
challenges since gaining independence in 1971. To overcome some of these challenges, the
country requires significant investment in energy, transport, and water supply infrastructure
and several other sectors. In mid-2009, a policy encouraging public-private collaboration was
included by the Government of Bangladesh in the national budget legislation, but it lacked
clear guidelines on how to put the government's intentions into practice. Due to the absence of
clear guidelines, most of the budget allocated for partnerships by the government was not
utilized and the intended public private engagement did not take place. The PPP policy is
currently administered under the Prime Minister's Office (PMO), indicating high level support
for its effective implementation. The PPP policy and strategy was published in August 2010.
The government has also allocated a significant amount of money in the FY 2011 budget to
take PPPs forward.

1.1 Present state of socio-economic development of Bangladesh

Bangladesh is an E9 country and a ‘least developed country’ with deep-ridden and inherited
extreme poverty and hunger, growing social and economic disparities, frequent cases of
political and civil unrest and the daunting challenge of natural hazards, likely to be further
compounded by climate change in the years to come.

According to the Human Development Report (HDI) 2010, Bangladesh is one of the countries
that made the greatest progress in recent decades, as measured by the Human Development
Index (HDI). Bangladesh’s HDI has increased by 81 per cent in the past 30 years. Even with
such impressive relative gains, Bangladesh remains a country in need of continued and
coherent development assistance.
The Monitoring of Employment Survey of Bangladesh 2009 estimated that 53.7 million from
the working-age population (15 years and above) are in the workforce. 40.2 million Workers
are male and 13.5 million are female. The female labor force increased by nearly 12 per cent
between 2006 and 2009, while the male labor force increased by nearly 8 per cent. This
indicates increased presence of women in the job market, bolstered by the readymade garments
sector and opportunities created by microcredit operations in both rural and urban areas for
various income generating activities.
The Labor Force Survey (LFS) 2010 estimates that about 89 per cent of jobs in the labor market
fall within the category of informal employment. This is more prevalent in rural areas than in
urban areas and women are more likely to employ under informal arrangements.

1.2 The development challenges Bangladesh is facing

Economic development without socio-economic challenges is inconceivable. The journey to

development has never been easy for any nation and it is always a long hard battle to turn
promises into achievements. Bangladesh is a developing economy growing with an annual
growth rate of around 6 per cent, striving to become a member of the middle income group.
The per capita income and GDP size of Bangladesh are also growing with time. The country’s
economy is changing from traditionally agro-based to industry-based entity.
The country is making progress which is more or less visible. At the same time, it is also visibly
clear that the growth is not inclusive. Economists have defined economic growth as the increase
in the market value of the goods and services produced by an economy over time. It is
conventionally measured as the percentage rate of increase in real gross domestic product, or
real
GDP. In our case, not all the people are getting better off, rather it is a group or few groups of
people who are getting richer every day and amassing wealth beyond measure. An average of
the income of the common people and that of rising wealthy community may rise from time to
time, but that does not indicate a real income growth. Parameters of growth stretch far beyond
and involve series of socio-politico-economic challenges, some of which are mentioned below:
1. Absence of inclusive growth:

2. Absence of family/ social bonding:

3. Ensuring institutional capacity building and good governance:

4. Providing equal opportunities for local and foreign investors:

5. Maintaining a balance between local versus imported products:

6. Maintaining political stability:

7. Managing rise in unemployment:

8. Ensuring demand driven and profession oriented education:

1.3 The 7th Five Year Plan and Vision 2021

Bangladesh is a nation endowed with enormous potential that is yet to be realized. The year
2021 marks the 50th anniversary of independence. In recognition of the long -term
development challenges, the Government adopted the Vision 2021. The Vision 2021 and the
associated Perspective Plan 2010-2021 have set solid development targets for Bangladesh by
the end of 2021. Vision 2021 calls for Bangladeshi socio-economic environment to be
transformed from a low income economy to the first stages of a middle-income nation by the
year 2021, when poverty would have all but disappeared, where society would be full of caring
and educated people living healthy and happy lives. In line with constitutional obligations and
international commitments to human rights, Bangladesh in 2021 shall be a country in which (i)
every citizen has equal opportunities to achieve his/her fullest potential; (ii) all citizens enjoy
a quality of life where basic health care and adequate nutrition are assured; (iii) all citizens
have access to a modern, technical, and vocational education tailored to meet the human
resource needs of a technologically advancing nation; (iv) sustainability of development is
ensured through better protection from climate change and natural disasters; (v) there is respect
for the principles of democracy, rule of law, and human rights; (vi) gender equality is assured;
so are the rights of ethnic populations and of all other disadvantaged groups including persons
with disability; and (vii) the diversity and creativity of all people are valued and nurtured.
Finally, the public and private sectors will collaborate effectively and efficiently through public
private partnership (PPP) projects and other innovative models to deliver infrastructure, utility
and other services in an environment-friendly manner. Vision 2021 Goals:

1. To become a participatory democracy,

2. To have an efficient, accountable, transparent and decentralized system of governance,
3. To become a poverty-free middle-income country,
4. To have a nation of healthy citizens,
5. To have a skilled and creative human resource,
6. To become a globally integrated regional economic and commercial hub,
7. To be environmentally sustainable and 8. To be a more inclusive and equitable society.

A Perspective Plan (2010-2021) and two five year plans, 6th (2011-2015) and 7th (2016- 2020),
were to implement Vision 2021.

Plan Goals and Targets 7th FYP

• Income and poverty
• Sector Development
• Macroeconomic Development
• Urban Development
• Human Resource Development (Education, Health and Population)
• Water and Sanitation
• Energy and Infrastructure
• Gender equality, income inequality and social protection
• Environmental Sustainability
• ICT Development
2. Current status of Public-Private Partnerships in Bangladesh

In August 2010, the Government of Bangladesh issued the Policy and Strategy for Public
Private Partnership (PPP) to facilitate the development of core sector public infrastructure and
services vital for the people of Bangladesh. The PPP program is part of the Government's
Vision 2021 goal to ensure a more rapid, inclusive growth trajectory, and to better meet the
need for enhanced, high quality public services in a fiscally sustainable manner. Under this
new national policy, the PPP Office was established as a separate, autonomous office under
the Prime Minister's Office to support sector line ministries to facilitate identification,
development and tendering of PPP projects to international standards. A PPP Unit under the
Ministry of Finance was established to foster an environment of fiscal responsibility and
sustainability in PPP projects.

2.1 Definition of ‘public-private partnership’

A public private partnership can be described as a co-operation between the public and the
private sector, in which the government and the private sector carry out a project together on
the basis of an agreed division of tasks and risks, each party retaining its own identity and
responsibilities.
There is no broad international consensus on what constitutes a public-private partnership
(PPP). Broadly, PPP refers to arrangements, typically medium to long term, between the public
and private sectors whereby some of the services that fall under the responsibilities of the public
sector are provided by the private sector, with clear agreement on shared objectives for delivery
of public infrastructure and/ or public services

2.2 Comparative analysis of advantages and disadvantages of PPP in Bangladesh

Advantages of public private partnerships:

The advantages of public private partnerships can be defined as follows:

A. Value for Money

The most important advantage of a public private partnership is the creation of value for money.
There are six primary values for money drivers:
• Risk Transfer
• Output based specification
• Long-term nature of contracts (including whole life costing)
• Performance measurement and incentives

Other value for money drivers have shown to be:

• Innovation.
 • Alignment of interest of authority and contractor.
• Public sector project development skills.
• Quality of advice to public sector and bidders.
• Transparency of process.
• Public sector implementation.
• Release of hidden asset value.

B. cost efficiencies
C. Time-to-delivery savings
D. Improved response to market forces
E. Broad support

Disadvantages of public private partnerships:

The disadvantages of public private partnerships can be defined as follows:

A. Poor Value for Money

The most important advantage of a public private partnership is the creation of value for money.
However, value for money also consists of some disadvantages:

1. Higher transaction cost

2. Higher capital cost
3. Advantages which can turn into disadvantages

B. Insecurity
C. Inefficiencies
D. Culture gap
E. Short term rigidities
F. Hold-up problem
G. Public sector staff concern

2.3 Current regulatory and administrative framework for PPP in Bangladesh

For accelerating identification, formulation, appraisal, approval, monitoring, and financing of

PPP projects, a simplified and dedicated institutional framework is required. This institutional
framework is designed to streamline the approval process, to ensure a smooth and linear
process of approval.

Each of the following institutions is involved in the strategy development, identification,

formulation, appraisal, approval, monitoring, and evaluation of PPP projects. Details on their
roles are available in the Policy and Strategy for PPP, 2010.

1. Public-Private Partnership Advisory Council (PPPAC);

2. Cabinet Committee on Economic Affairs (CCEA);
 3. Office for Public-Private Partnership;
4. Line Ministry/implementing agency;
5. Finance Division;
6. Planning Commission
3. Public-Private Partnerships: The way forward
3.1 Existing PPP projects/programs in Bangladesh

 Dhaka-Elevated Expressway
 Hemodialysis Centre at Chittagong Medical College Hospital
 IT Village at Mohakhali
 Development of Integrated Tourism & Entertainment Village at Cox’s Bazar
 Upgrading of Dhaka Bypass to 4 Lane
 Flyover from Santinagar to Mawa Road
 Dhaka-Chittagong Access Controlled Highway
 Economic Zone 5: Anowara, Chittagong
 Improvement of Hatirjheel
 New Modern Medical College & Hospital of 250 beds on the unused land in Khulna
 2nd Padma Multipurpose Bridge at Paturia-Goalundo

3.2 Potentials of PPPs for infrastructure development in Bangladesh

Potential benefits:

a) Benefits for the private sector: generate a profitable revenue stream or expand
market access.
b) Benefits for the consumer: delivery of a service that people want and would not
have access to at the same price, in a business as usual situation.
c) Benefits for the government: fulfillment of a political need, social obligation,
development imperative.

3.3 Role of PPPs in the social development sector in future

PPP can promote local economic growth and employment opportunities. The third world must
not depend only on the donors for infrastructure investments. Private-public combined efforts
will have the greatest effect in this sector. The previously predominant areas like energy,
transport, water and sanitation, education and health provide a good offer for the private
organizations and the public bodies to apply the financial acumen and managerial skill while
sharing the risks associated.

The prospective sectors under PPP could be the following:

 Power and Energy

 Solar System
  Transport Infrastructure (roads, rail, sea-ports, airport and water
transport) Tourism and Air Transport
 Information Technology
 Pure Drinking Water
 Industry
 Health and Family Welfare
 Education (particularly secondary and technical) and Research
 Housing
 Climate management

4. Conclusion and Recommendations

4.1 Recommendations

1. Arrange required consultations between the Government and private sector to start
direct dialogue on PPP, and to work out the specific issues and recommendations, and
operational implications for those.
2. Legal and regulatory issues in relation to PPP should be sorted out. PPP should be kept
out of all political and bureaucratic influences.
3. Conduct policy research and analysis on PPP issues and make recommendations for
reform, and craft a PPP roadmap to be adopted by the Government and the private
sector.
4. There should be greater representation of the private sector in the PPP committees
including the Advisory Committee.

4.2 Conclusion

PPPs have become more globally prominent in recent decades as contractual partnerships
where responsibilities and risks are shared between the public and private sectors. My findings
on the effectiveness of these partnerships are mixed: while there is some evidence of production
cost efficiencies arising from PPPs, much of this may be cancelled out by higher transaction
costs. On balance, evidence suggests PPP performance is probably no worse than traditional
public sector operations done under contract with private sector, and better than older forms of
public works department projects. PPPs also appear to deliver infrastructure more quickly than
through traditional methods. There is not much to cheer about PPP in Bangladesh. Every year,
PPP allocation had to be reverted due to lack of implementation. Unlike Bangladesh, many
countries have succeeded in implementing PPP projects. It is a matter of optimism for
Bangladesh that many ASEAN and SAARC countries are among the list of the stand-out
performers. In the process, countries have managed to increase productivity without putting
any stress on government revenue.