ISLAMABAD, Sept 8: The government has decided to improve the investment climate by expanding and modernizing its existing weak and inadequate infrastructure to bring it with international levels in capacity and standard.

Officials told Dawn here on Monday the Asian Development Bank (ADB) had initially approved roughly $0.5 million technical assistance for conducting feasibility report by January 2004 to address the issue.

The bank is also expected to offer a sizable funding for the proposed “Public-Private Infrastructure Financing Facility” in 2005 to help improve physical infrastructure consisting of power, telecommunication, roads, ports, railways, air transport, water supply, waste management, information technology cyber parks and industrial estates.

The public sector has been the main provider of basic infrastructure in Pakistan. However, the officials concede that large fiscal deficit and paucity of resources limit the government’s capacity to meet growing infrastructure needs, and this they said had emerged as a major constraint in the way of country’s efforts to improve the investment climate.

The existing infrastructure is largely inadequate to satisfy the needs of economic development as well as the demand arising from population growth. To augment limited resources for infrastructure, private sector participation, the ADB believes, needs to be encouraged by creating the enabling environment for increased private sector investment in infrastructure projects.

The government agrees with the ADB that provinces are not organized to deal with the private sector and the privatization efforts as they lack appropriate institutional structures due to which delays are common in seeking approval for projects, obtaining permits and clearances, negotiating and finalizing contracts and bringing infrastructure projects to financial closure.

The ADB technical assistance will provide guidance and recommendations to the federal and provincial governments for establishing the right market structures and incentives and suggest changes in terms of approaches, institutional reorganisations and appropriate policy.

A total of six international and domestic consultants are expected to join hands to make the study and recommendations more suited to domestic conditions for having new infrastructure in place as early as possible. They will assess the current activities and performance of key infrastructure sectors, identify and assess the legal, policy, regulatory and institutional impediments for involving the private sector in major infrastructure activities.

Consultants will be guided by a proposed steering committee to be headed by a senior official of the Ministry of Investment and Privatization to help provide liaison with the relevant ministries, Board of Investment, Wapda, ports and shipping, National Highway authority (NHA), public water supply, aviation, regulatory bodies and representatives from provincial governments.

They will submit an inception report within three weeks of the start of the services that outlines the approach and the key issues to be addressed. Later, an interim report within 10 weeks will be prepared giving preliminary findings and spelling out the general direction and a detailed plan to improve the country’s infrastructure.

According to a memorandum of understanding (MoU) signed between Pakistan and the ADB, the country’s infrastructure is grossly inadequate and Pakistan’s investment rates, low to begin with, declined during much of the 1990s.

Although public investment in infrastructure has declined as a percentage of GDP since the start of the decade, private investment has failed to fill the gap. As a result, total investment in infrastructure, as a percentage of GDP, is below the level 1991-93.