Bangladesh has developed its foundation for public–private partnerships (PPPs) in a structured manner. A policy and strategy for PPP was introduced in 2010, which improved the regulation of PPP projects and established an office to promote PPPs. However, the Office for PPP has no statutory authority. Subsequently, a PPP Act was enacted in 2015, aiming to facilitate development of core sector public infrastructure and services.
Bangladesh has developed its foundation for public–private partnerships (PPPs) in a structured manner. A policy and strategy for PPP was introduced in 2010, which improved the regulation of PPP projects and established an office to promote PPPs. However, the Office for PPP has no statutory authority. Subsequently, a PPP Act was enacted in 2015, aiming to facilitate development of core sector public infrastructure and services. Following the PPP Act, the institutional set-up improved as the Office for PPP became the PPP Authority under the Office of the Prime Minister, with responsibilities including appointing advisors, developing and approving PPP contracts, and supervising the progress of PPP projects. A new PPP unit was established under the Ministry of Finance, and it approves government funding to a PPP.
The development of PPPs in Bangladesh is reflected further by the Economist Intelligence Unit Infrascope Index, which gives scores to countries across various regions. Among the 19 countries evaluated, Bangladesh scored an overall rank of 7th for PPPs, with strong showings in institutional structure and market maturity.
After the enactment of the PPP Act in 2015, the government has taken further measures to strengthen the regulatory framework and institutional set-up in the country. As part of the same, it published the Procurement Guidelines for PPP Projects 2016, followed by the Procurement Guidelines for PPP Projects 2018, the currently applicable guidelines setting out the process, time scales, and institutional roles and responsibilities for delivering each of the phases required in selecting a private partner. The country also has in place clear guidelines and rules related to project screening, technical assistance financing, viability gap funding (VGF), and handling unsolicited proposals-all of which are discussed further in this report. Owing to the well-developed institutional structure and regulatory framework, Bangladesh has been able to successfully close several PPP transactions.
In general economic outlook, Bangladesh has set the gross domestic product (GDP) growth target at 8.2% for fiscal year (FY) 2021. Infrastructure has been a priority area for the government. The proposed outlay for the Annual Development Program (ADP) for FY2021 stands at taka (Tk)2,051.45 billion ($24.19 billion), which is 6.5% of GDP in FY2021 and 36.1% of the total public expenditure/annual budget. 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). Sixty-one projects were included in a separate PPP list in ADP for FY2021 (compared with 62 in FY2020), which were mainly in transport (82%) and physical planning (18%) sector projects.
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.
Though the PPP market in Bangladesh is relatively mature, there have been various challenges to PPP implementation.
Bangladesh has a strong emerging regulatory framework, as indicated earlier. However, there are still many other steps needed to make PPPs more acceptable. Developing sector-level frameworks and model documents or standard bidding documents is crucial in bringing added transparency and clarity, with the hope that more in the private sector will bid for projects. A related goal in attracting more private sector interest is creating robust regulatory mechanisms through 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 sectors in which PPPs are encouraged.
