KARACHI: The Asian Development Bank (ADB) has said that political risk is a major concern for public-private partnership (PPP) projects in Pakistan.
“Pakistan is, of course, a politically troubled country, and depends on external receipts (that is, aid, principally from the United States and tied to foreign policy objectives) to remain solvent, presenting a non-payment risk,” the ADB said in a report on “evaluating the environment for the public-private partnerships in Asia-Pacific” released on Wednesday.
The availability of long-term infrastructure financing is also very limited, although short-term financing is available from commercial banks, it added.
“Pakistan’s public-private partnership environment is still evolving, and, despite government support, a stable, coherent system is still some way off,” according to the report.
Public-private partnership laws in Pakistan are currently awaiting ratification, and, as such, these projects will continue to be subject to other general and sector-specific laws, according to the ADB.
The policy framework being developed by the Infrastructure Project Development Facility (IPDF) is still a work-in-progress, and limited experience in areas such as risk-allocation, which means that it will be difficult to live up to expectations, the ADB added.
According to the Public-private Partnership Policy (2010), conditions such as VFM (value for money) and viability must be met when awarding projects, but it is generally acknowledged that there is a lack of consistency in the application of such a criteria. “Legally, the government must follow the Public Procurement Rules (2004) and treat bidders equally; however, according to the World Bank, only 50-75 percent of the public-sector procurement contracts are awarded on the basis of open competition,” the ADB said. A relatively small field of bidders also limits competition, it added.
The donor agency said that the public-private partnership is the key to meeting Asia’s $8 trillion infrastructure needs. It said that Asia and the Pacific has seen a boom in the public-private partnerships in the last decade, but it needs more effective public sector oversight agencies, and in some instances more political will, to advance the process even further.
“In order to leverage $8 trillion required over the next decade for physical infrastructure in Asia, public financiers such as the ADB must undergo a complete change of mindset and shift their focus from sovereign projects to the public-private partnerships,” Woochong Um, deputy director general of the ADB’s Regional and Sustainable Development Department said in a statement.
“Studies such as this one will help our developing member countries address the areas of public-private partnerships that need to be strengthened,” the statement added.