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Don’t select bad PPP projects

PMO principal secy asks PPPA

  • Staff Correspondent
  • 15 October, 2021 12:00 AM
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Don’t select bad PPP projects
Prime Minister Principal Secretary Dr Ahmad Kaikaus, Financial Institutions Division Secretary Sheikh Mohammad Salim Ullah and PPP Authority Chief Executive Officer Sultana Afroz are seen at an MoU signing ceremony on PPP Financing Partnership with 15 interested banks and non-banking financial institutions at a hotel in the capital on Thursday.

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Principal Secretary to Prime Minister Dr Ahmad Kaikaus asked Public-Private Partnership Authority (PPPA) not to make any “adverse selection” of projects as it could lower effectiveness of work.

“PPPA signed Memorandum of Understandings (MoUs) with 15 banks and financial institutions in 2016 for financing partnership, tenure of which have already ended. But only four of them came up with PPP project financing in nearly five years,” he said.

Of the financiers, he added, IDCOL and BIFL are government institutions, while National Bank owner was associated with the project implementation.

“So, it can be said, the financing partnership initiative was not that much productive.” 

Dr Kaikaus was speaking as the chief guest at an MoU signing event with 15 banks and FIs for PPP financing partnership with PPPA at a hotel in Dhaka.

“Prior to signing new MoUs, the cause of failure of the previous MoUs should be investigated first. Otherwise, the MoUs will remain in picture frames only,” he told the PPPA officials. PM principal secretary observed that financing is the most important part of the PPP projects and the issue should be integrated from the very beginning of the project launch.

Mutual Trust Bank (MTB) managing director Syed Mahbubur Rahman identified the funding mismatch as a serious problem in PPP project financing.

In contrast to the bank’s regular credits to clients, usually a PPP project takes long time to be accomplished, which shoots up the financing bank’s NPL and enhance other regulatory requirement against that NPL, he said.

“It is not clear when a PPP project will finish or its cost will go up to what extent. Banks don’t have long-term liquidity,” he pointed out.

“PPP projects will not progress, if the financing procedural process is not addressed,” said Syed Mahbubur Rahman, a seasoned banker and former president of Association of Bankers Bangladesh (ABB). 

PM principal secretary Kaikaus drew a line between general joint venture projects and PPP projects, saying that resources of both the parties can be mortgaged in joint venture projects but in PPP the private partner can’t mortgage the land obtained from the government.

However, he assured that it is not going to be a very big problem and a way out can be found out once it is carefully thought of.   

“Let us try not to go for adverse selection, remove project barriers and build up relations,” he suggested PPPA.

PPPA CEO and secretary Sultana Afroz also expressed frustration over the “lukewarm response” from banks and FIs in a PPP project financing after the 2016 MoU signing.

She informed that some PPP projects, not seemed to be viable or having potential of little progress, are being scrapped.  

Additional secretary at the ministry of finance Ruhul Azad asked the authorities to inform them of what PPP supportive clauses should be included in laws, saying that some financial laws are under the process of amendment.

Compared to two years term of previous financing MoUs, the tenure of new financing MoUs will be five years.

The new banks and FIs are: Eastern Bank, Prime Bank, HSBC, The City Bank, Standard Chartered Bank, Mutual Trust Bank, Southeast Bank, Midland Bank, Lankan Alliance Finance, Prime Bank Investment, NDB Capital, Industrial and Infrastructure Development Finance Company, BRAC EPL Investment, Riverstone Capital and UCB Investment.

According to the long-term development plan of the government, the estimated amount of investment from the PPP projects is about $3.8 billion per year.

In addition, 5.5 percent of total SDGs financing requirement has been targeted through PPP. 

PPPA Director General Abul Bashar also spoke at the event.