Public Private Partnerships momentous for growth

Gladly not classified as nascent, it seems that the climate for public private partnerships in the country has not been amongst the worst in Asia, as pointed out by the recent study by ADB in collaboration with Economist Intelligence Unit. Post FY09, the stunning recovery process of the Asian region has made it one of the most economically vivacious spots on the world map. That said, undeniably the long term economic growth hinges greatly on infrastructural development and even today the shortfall of investment in infrastructure is widespread in the region. Though the growth in some economies of Asia has been surpassing the developed world, it still faces many holdups due to weak infrastructure. Pakistan managed to occupy a slot in the emerging category, thanks to the slightly improvement and changes in policy framework and approval of new public private partnership (PPP) laws. The positive side of the legal framework of the country is that it is not that restrictive as it allows national level concessions. However, the regulatory framework is seriously controlled by the poor execution of decisions, lack of transparency in the bidding and conflict resolution process. Due to political turmoil and lack of a comprehensive supervision, the institutional framework of the country is not very attractive either. The maturity of the country in terms of its operational capability is strained by the little experience and expertise held by the agencies and the entities involved in public private partnership where no factors besides the cost are considered while awarding projects. Since there is not much use of hedging instruments, the risk of renegotiations has never been sidetracked completely. One constructive fact that ADB has highlighted is the number and success rate of greenfield projects and water, electricity and transport concessions. However, it also indicates that all such projects have little future given the investment climate in the country, which is the weakest - amongst all those that are part of the study - due to political instability, government policy effectiveness, corruption, investors perception and terrorist activities. Summarily, there exists political will to engage private sector in infrastructure development and greenfield projects but the system lacks execution. The laziness in implementation coupled with the government frequently falling short to fulfill its financial obligations towards PPP initiatives subdues the hopes of such public private infrastructure partnerships. Though ADB sees bright prospects for Asia regarding public private partnerships due to mounting magnetism of Asian business environment and financial facilities availability, it is not to be forgotten that the situation within Pakistan is highly threatened by the poor policy implementation and falling investor confidence in the region.