Thukten Zangpo

The Public Private Partnership (PPP) Policy 2016 needs clear objectives to encourage and move forward with PPP projects, according to the private sector representatives.

This was one of the issues and challenges submitted by the private sector to the Ministry of Industry, Commerce and Employment while reviewing the business process regulations a week ago.

The PPP policy lacks defining priority sectors, short-term and long-term targets, and type of PPP model to be adopted, the business sector added. “There are no clear directives issued to all the public agencies to engage in PPP projects.”

The business representatives also recommended to include the list of the priority sectors and project name to develop or operate under PPP in the five-year plans.

“The dissemination of such information will enable private sectors to explore, study and prepare project feasibility reports in their area of interest,” it stated, adding that the public agency can complete the bidding process based on the number of proposals received.

Businesses also stated that there will be added advantages to the public agency in achieving the set targets and also will enable public agency or government to determine and segregate viability and non-viability projects from the list of planned projects at no cost to the government.

At the same time, it would help the government to identify where the government needs to intervene and provide financial incentives or budget support.

Under unsolicited proposals, one of the provisions of the PPP policy 2016 stated that the project proposals that have not been identified or selected by the institutions or government will not be accepted under the policy.

The business proposed to exempt this provision to encourage private participation to service the public facilities unless there are valid reasons from the government.

The businesses stated that such restrictions will hinder the effective implementation of the policy as it increases the administrative process or workload and expenditure (budget constraints) in identifying the projects with pre-feasibility reports.

Moreover, it would discourage the private sector participation and the whole purpose of this policy to leverage private sector resources for development of the public infrastructure is nullified.

The private sector also recommended developing tariff determination principles in progressive manner depending on the priority sectors of the government.

For example, if priority sectors are to address the housing shortage for low income groups or to construct new office structures under PPP model, then the focal agency can draft the principles of tariff determination in the housing sector.

The businesses also recommended a need to link or mention the PPP in the Fiscal Incentive Act to build confidence in the private sector. Currently, the Fiscal Incentives Act does not mention PPP model project incentives.

There are also no proper guidelines on allocation of land to the PPP project, lease period, rent charges, obligations among others.

Concerns were also raised on understanding the project risk treatment, assessing the project risk, risk shared between the public and private, and treatment on residual risk.

To achieve the government’s ambitious target of a USD 10 billion economy by 2034, the Asian Development Bank recommended to promote the private sector through PPPs by simplifying rules for PPPs to allow unsolicited proposals and differentiate projects based on risk profile to fast track the approval process.

ADB suggested reducing overlap between state-owned enterprises (SOEs) in areas where the private sector can operate, review and rationalise the role of SOEs and promote digitisation, easier access to finance, and foster entrepreneurship.