ADB approves $100mln loan for infrastructure development

KARACHI: The Asian Development Bank (ADB) on Monday approved $100 million in loan to co-finance a project aimed at improving public-private partnerships for infrastructure developments in Sindh.

The UK government’s Department for International Development will also co-finance the project with $19.23 million in grant and $4.75 million in technical assistance, while the provincial government will contribute $65 million. The project’s combined cost is estimated at $188.98 million. 

The Manila-based lender, in a statement, said the loan will strengthen the standards in the development and delivery of the public-private partnership (PPP) projects and help bridge the infrastructure investment gap.

“Sindh province continues to have large infrastructure and social service needs, which PPPs can assist in addressing,” the statement quoted Werner Liepach, ADB’s country director, as saying. “The project will strengthen the provincial government’s capacity to identify, develop and implement PPPs as well as boost private sector participation.”

Sindh accounts for 32 percent of Pakistan’s GDP and it represents 23 percent of the country’s population. 

“Annual infrastructure investments in the province have been minimal over the last few years, representing only four percent of the total investment requirements in transport, electricity, water supply and sanitation, solid waste, telecommunication, and irrigation,” the ADB said. “Limited resources coupled with the local government’s lack of expertise in effectively utilising its budget for meeting infrastructure needs through public procurement have contributed to the investment gap.” 

The provincial government has been promoting public-private partnerships since the enactment of a PPP law and promulgation of new rules in 2010. 

In the past six years, only Hyderabad-Mirpurkhas dual carriageway project was completed under the PPP mode, according to the provincial PPP unit’s website. Two other infrastructure PPP projects, including Jhirk Mulla Katiyar bridge and Karachi-Thatta dual carriageway are at different stages of completion.

“There is still a strong need to address inefficiencies in the way PPP projects are identified, developed, and fiscally supported, which can expose the provincial government to unforeseen fiscal risks,” said the bank.

The financial and technical assistances will help in leveraging private capital to augment infrastructure investments. Infrastructure developments will create jobs, generate income and improve economic growth in the province.

The ADB stressed on the need of institutional adjustments, including, “development of robust frameworks and policies in the selection of eligible and commercially viable PPP projects, structuring efficient risk participation between the Sindh government and the private sector, and rigorous risk assessments that will deliver sustainable and fiscally responsible PPP projects.”