FORCED by growing fiscal constraints, the government may minimise its funding of the Public Sector Development Programme (PSDP) by initiating an enlarged plan of public-private partnership(PPP)for infrastructure projects from next financial year.

Depending on the size of the PPP participation, it is intended to be a departure from the traditional financing of the PSDP. Initially, a cut of 50 per cent in government's PSDP funding was mulled recently and the gap was proposed to be filled by the private sector investment. Much would depend on the response of the private sector and the enabling environment created by the government to achieve this ultimate target.

However, the World Bank and the Asian Development Bank (ADB) have indicated that they would provide the necessary support aimed at improving and expanding infrastructure services though public-private partnership.

The Planning Commission, Infrastructure Project Development Facility (IPDF)of the ministry of finance, and the international donors are in touch with leading investors to target the PSDP financing on a 50:50 basis, if possible, by the public and private sectors.

In view of the private sector, the achieving of the target does not hold much promise in the absence of regulatory partnership framework. The private sector maintains that the government should first come out with regulatory framework and settle fiscal issues to undertake the PPP plans on sustained basis.

Mr Nadeem Babar, chief executive of the Orient Power Company, who held negotiations with the government on behalf of the private sector, told Dawn that as security issues were still unresolved, adequate foreign capital to help finance the PSDP could not be expected in immediate future.

“But we are trying to lure the private sector to have PPP investments on sustained basis", he said and hoped the government would work out, before the start of the next financial year, various procedural and fiscal issues to facilitate the private sector.

The Independent Power Producers (IPPs) are already involved in their projects and now the private sector could provide its support to jumpstart the PPP in other sectors. Issues concerning investment risks were, however, needed to be sorted out to help undertake model projects. This could help the government overcome its financial difficulties in funding the PSDP.

Mr Babar called for an early finalisation of legal framework and modalities under which public and private sectors would undertake their joint ventures in various potential fields such as water treatment system and solid waste management.

A senior Planning Commission official, Mr Shaukat Ali Randhawa, when approached, said that three things were being finalised : the draft law, regulatory framework and the capacity building to effectively start the PPP preferably from next financial year. The job of the government would be restricted to ensuring service delivery for the BOT and the BOO projects as it was done in most of the countries.

"We hope to have this new initiative from the next financial year for which the Planning Commission and the IPDF are closely working", Mr Randhawa said. The international donor agencies are also supportive and would be ready to offer any help needed by the government, he added.

In the new PSDP, public and private sector projects, including those of the infrastructure, would be well defined. The private sector would be given guarantee for their investment through a law which was being drafted. "It will be a quid pro quo and will certainly help both the public and private sectors", Mr Randhawa said.

"The objective is to ease the financial pressure on the government", he said adding that a number of projects were already being processed under the public-private partnership programme.

Chief Executive Officer of IPDF Ijaz Ahmad told Dawn that the power and telecom sectors had witnessed increase in private investment, but other infrastructure projects could not lure investment. There were some failed public and private partnerships in the past mostly on the water distribution sectors. Many deals collapsed for want of cost recovery tariffs and absence of adequate government funding, he added.

Since the policy framework for the PPPs was approved by the Economic Coordination Committee (ECC) of the cabinet on November 30, 2007, some progress had been made by the IPDF to process joint venture projects.

The pipeline of infrastructure projects continues to grow as the IPDF currently has 44 projects, out of which 21 are on the active list while the rest are being developed.

The IPDF's active project portfolio consists of 44 such projects worth $1.4 billion. Mr Ijaz hoped that the public-private partnership policy,recently approved by the government, would enhance the confidence of the top international players to invest in infrastructure development projects.

The active projects also included Charsadda Solid Waste Management (NWFP), Kalinger Water Supply (NWFP), IT Park in Islamabad, PTDC office Complex in Islamabad, Islamabad-Rawalpindi Mass Transit, Environment- Friendly Public Transport, CNG Buses (Sindh), CBR Automation project, Lahore Solid waste Management (Punjab), Faisalabad Solid Waste Management(Punjab), Quetta Solid Waste Management (Balochistan), Bus Rapid Transit System (Urban Sindh), Lahore Wasa Billing/Metering (Punjab), Fisalabad Wasa Billing/Metering (Punjab), Hyderabad-Mirpurkhas Road (Sindh), Port Qasim Shipyard Project (transport & logistic, Sindh), Gwadar Shipyard Project( transport & logistics, Balochistan), establishment of Cargo Terminal at Multan (transport &logistic (Punjab), Bridges over River Indus in Sindh (transport & logistics, Sindh), Extension of Peshawar Airport Terminal (transport &logistic, NWFP), Development of Cargo City next to Karachi Airport (transport &logistic, Sindh) and Multi-Purpose Water Reservoirs (dams energy & water reservoir of Islamabad).

Asked about the role of public sector in the PPP, he said the "viability gap funding" also called targeted funding, could be provided by the government to help complete a project where the private sector failed to fulfil its obligations. This is where the risk management framework would take care of the investments of both the public and private sectors in any joint venture project.

The IPDF would also plan projects to have funding available for mega hydro projects like Bhasha, Kalabagh, Munda and Tungi.

For any hydro project, the private sector could be invited to invest in power house but roads, resettlement and downstream projects would be funded by the public sector. Supporting infrastructure, including transmission line to main grid station, would be provided by the public sector.

"This is an upfront funding to be made by the public sector while rest of the investment will be made by the private sector", Mr Ijaz said.

About Karachi and Gwadar shipyard projects, he said each project would cost around $500 million which would be shared by both the public and private sectors. The projects like national trade corridors, he said, needed to be completed through public-private partnership programmes. The IPDF's role would be, especially from the next financial year, to help arrange substantially private sector funding for PSDP, he added.

"After the local market, we can arrange liquidity from the Middle East market where investors are familiar with our circumstances including that of security issue", he said.

The IPDF is also closely working with the Board of Investment (BoI) to secure funding for infrastructure project. "The objective is to help remove fiscal pressures on the government by facilitating the PPP for which this organisation has been created", Mr Ijaz said.