Prospect Of Public Private Partnership In Bangladesh
Introduction
Public private partnership has emerged in Bangladesh quite recently. Traditionally the country has been heavily relying on Nationalization. But it proved to be quite ineffective in many cases. PPP emerged as a remedy to this. PPP can be defined as a cooperative venture involving the public and the private sector with agreed tasks and risks associated with a project. Each of the parties have their own responsibilities and operates under a unified system set through negotiation. PPP’s are usually medium term or long term where the involved entities work towards achieving shared objectives by utilizing individual skills and competencies. The entities share a symbiotic relationship where one’s weakness is mitigated by another’s strength.
In case of Bangladesh, the Public entities are usually providers of monetary resources and access to other areas necessary for accomplishing a project. Whereas, the private entities are responsible for executing the project under government supervision. Co-financed ventures can also be seen in some cases (Aminur Rahman, 2016). The need for PPP is growing at a significant rate due to increase in infrastructural demand and limited public funds. PPP functions on the principle that the entities involved in a project will be able to do what they do best. As general consumers are becoming globalized, it has become very important to provide them with proper infrastructural facilities and services. Due to this PPP has received positive attention rather than denationalization or nationalization. This report focuses on discussing the prospect of PPP in Bangladesh and its scope in contributing to the national economy.
PPP in Bangladesh
Currently, there are about 49 PPP projects in Bangladesh in different sectors including health, transport, zone, education textile, civil accommodation, tourism, housing, energy and shipping (Pppo, 2018). A very few of them are operational and a significant of them are under construction or development stage. If we draw attention to some significant PPP projects done in the past, like the Gulisthan-Jatrabari flyover, it can be observed that it does not follow general PPP schemes. The government was observed to play the role of a facilitator rather than a significant source of funding or technical expertise. PPP requires the involved entities to be more engaged and to play more active roles in the project. But there is a justifiable explanation to this. As PPP is fairly new step for the government, there are many gaps of knowledge and limited proof of concept. Under such circumstances, a completely effective PPP mechanism is quite difficult to establish. In addition there are challenges of a developing country and conditional funding form donor agencies also limit the activities (Bahmani-Oskooee & Chang, 2015).
Why is PPP necessary?
PPP introduces whole new dimensions in management and execution while working on a project. The techniques and expertise it brings to the table are much more effective and efficient in serving intended purpose. Some benefits of PPP have been outlined as follows: i) Access to new sources of fundingii) Minimizing the strain on public resourcesiii) More effective outcomesiv) Risks are allocated to the entities who are most competent to handle them. v) Risks come with significant rewards which work as incentives for the entity to which the risk has been allocated. vi) It can introduce proprietary technologies developed by the private sector which can be utilized to improve service delivery of the public sector (Basher & Mohsin, 2004). vii) It empowers private sector entities to be more invested towards serving the people which might influence their corporate social responsibility. viii) It can gradually increase participation of the private sector which will help to transfer relevant skills which will ultimately bring about a change in the efficiency of the public sector. ix) Can produce significant value for money. x) Can make a transition towards a diversified economy which will strengthen the country as a whole. The aforementioned aspects are necessary for making a transition towards a developed state. Moreover resource sharing can produce more efficient outcomes.
Advantages of PPP
Cost efficient: Private entities are always in pursuit of forming alliances with the government as it provides them with increased exposure and significant benefits. So it is very competitive in nature. As a result more cost effective options are available. On the other hand, the culture of innovation also helps to produce higher value for undertaken projects. This would result in more cost efficient measures and less wastage of resources. Responsive to market forces: Publicly funded transportation projects usually generate the operating cost from user fees. These user fees are assigned according to the speculation made by specific departments. The urgency to address supply and demand is not present. But PPP is responsive to such market forces and can make payment schemes flexible and feasible so that the maintenance cost, operating cost and lifetime expenditure can be stabilized without any major setback (Ghatak & Sánchez-Fung, 2007).
On time delivery: The stakes of both private and public sectors are involved in PPP. Public sector is driven by the standard of service delivery whereas the private sector is usually driven by profit motives. Both of these forces act as accelerators of the projects which results in on time delivery. Besides this the focus on extensive accountability also helps in accelerating the pace and minimizing the time required for the completion of the project. Value for money: Value for money usually refers to the utility of a product or service and the value it creates when compared against the money spent for acquiring the product or service. The value created by a service or product should be equal or more for the tax paying consumers. Value for money for PPP’s can be speculated via some factors. These are discussed as follows:
- Output based goal setting: The goal setting process heavily relies on what is to be expected rather than the price or recurring costs. This allows the project to address the issue under consideration accurately. It also specifies the work roles of different entities involved in the process.
- Risk transfer: An extensive risk analysis is conducted at the beginning of the project. These risks are then speculated against the capacities of the involved entities. Finally the risks are allocated to the entities who are most competent and have the resources to tackle the challenges. This minimizes the chances of any potential damage that might have occurred due to lack of risk management.
- Long term contracts: PPP’s are usually undertaken for a long term. The involved parties are willing to get involved in the long term as they can reap more benefits for themselves. This allows projects to be sustainable and keeps the system flowing (PUTNEY, 2015).
- Competition: As PPP’s are usually more competent thane purely private or public ventures, the entities whoa are operating on singularly are intrigued to increase the quality of their services in order to stay in the competition. This competition enables the consumers or service users to make the best choice which creates most value for money.
Disadvantages of PPP
Insecurity: Different macro and micro environmental factors are always influencing the course of actions. In PPP’s as more than one party is involved, the factors might bring about different motivations and different agendas with time. This might put the completion of the project at risk as the stakeholders might get frustrated with existing terms. This type of behavior might also decrease the amount of bidders which will further narrow down the pool of potential candidates. Cultural differences: There exists a significant cultural difference between the public and the private sector. The public sector has an elitist attitude and is concerned with maintaining the status quo. Whereas the private sector will always try to maximize their profits. The interaction sometimes might not be effective due to the reluctance of sharing information and acting upon specific profit oriented options. The difference in culture might also produce varying views and contradicting arguments while might obstruct the process of reaching a consensus (Sajani et al. , 2014).
Overstaffing: As PPP’s involve both private and public sector, there is an abundance of staff. But, it might be difficult to synchronize these staff as they seldom share common set of skills and/ or goals. A fear of de-staffing might work among the individuals which might adversely affect the final outcomes. Hold-up issues: If one of the involved parties are not satisfied with the terms of engagement after the project has started they might become inclined towards making modifications to the contract. This might put the whole project on hold until the issues are resolved. This hold might prove to be quite costly and the project might exceed its initial budget and time constraint.
Possibilities and potential of PPP in Bangladesh
Bangladesh, being a developing country, the government has not yet reached full potentially for performing with maximum efficiency. This is due to lack of proof of concept, elitist attitude of bureaucrats and shortage of technical expertise. These factors add an added dimension of risk to any projects when undertaken singularly. Singular projects have been undertaken in many shapes and forms in Bangladesh but they have proven to be quite ineffective in terms of producing value and providing the intended service in the required fashion. Under such circumstances PPP is the only viable option which can utilize the strengths of both public and private sectors to minimize the weaknesses of each other and create an effective and efficient service providing mechanism in the process.
PPP projects does not only help to minimize weaknesses, but also introduces new dimensions of management and practices oriented to considering the general mass as customers (Shendy et al. , 2011). This is a prerequisite of New Public Management. In addition, PPP also intrigues other entities in the industry to make significant changes to their approaches and practices in order to maintain competitive advantage. Consequently, the consumers are provided with different choices and the most competent entity holds a leading position in the market. This urge of staying ahead of the competition produces sense of urgency for changing procedures and practices via innovation. Ultimately an efficient system is produced which can effectively help to become recognized on an international platform.
Conclusion
To conclude this report, it can be said that, PPP has its advantages with a fair share of disadvantages. When these aspects are speculated against the challenges of a developing country like Bangladesh, the potential of creating more value is observed (Yunus, 2015). In other words, PPP has the potential to make a system more efficient and effective in what they do. It also helps to realize proof of concepts which can intrigue further ventures.
