Rethinking public-private partnership regime

Public Private Partnership (PPP) regime in Pakistan, although still in its infancy, has made significant strides in the last eight years. Substantial progress has been made on the regulatory and legal side.

The PPP Act, 2017, which has gone through several amendments, provides a solid foundation for developing and executing projects on the basis of partnership between the government and the private sector. However actual project execution remains weak. Not a single PPP project has seen light of the day in the country.

While the government has approved on papers projects worth billions of rupees, no project has achieved financial close nor-commencement of actual physical work. So where is the fault in the ecosystem? That question needs to be explored.

The current process of approval of PPP projects under the Planning Commission is cumbersome and mired in bureaucratic red tape. Every project has to go through six different committees before the final approval letter is issued.

First the Board of the relevant ministry or implementing agency e.g., NHA, Railway, etc. recommends the project and forwards the same to the federal P3A Authority under the Planning Commission. In P3A, the project is examined threadbare by three committees including the Board of P3A. Once the board clears the project, the same again passes through the bureaucratic machinery at the Planning Commission.

Two more committees, the Central Development Working Committee (CDWP) and ECNEC re-examine and approve the project. This “death by committee” syndrome discourages the private sector from entering into PPP agreements. The private sector does not have the appetite to go through this time-consuming process. The average approval process of the PPP projects in Pakistan is between eight to twelve months.

The process can be simplified through an amendment in the law. The only two committees relevant for the approval of PPP projects are the Board of the implementing ministry and the P3A Board.

Since PPP is a regime different from PSDP, there is no need to pass it through the labyrinth of committees at the Planning Commission. The PM and the Cabinet can delegate powers of CDWP and ECNEC to P3A Board as far as the approval of PPP projects is concerned.

Secondly, the composition of the P3A Board under the current law is highly skewed towards the government. The powerful positions of Chairperson and Deputy Chairperson are assigned to government functionaries and the bureaucratic representatives from Finance and Planning, two most powerful federal ministries, also sit on the board.

There is a need to amend the law to give the positions of chairperson and deputy chairperson to the private sector. Moreover, the number of private sector professionals on the board can be increased. PPPs are different from PSDP projects in the sense that they require innovation and ingenuity of thought and process.

The civil servants, because of the nature of their jobs and training, are not well equipped to bring that clichéd out-of-the-box thinking to the process of project identification, development, financing, and execution.

Then there is the attitude of the bureaucracy in ministries in Islamabad. Unlike PSDP projects, PPPs are complex transactions which require in-depth financial modeling, risk assessment, and estimation of future contingent liabilities. Pakistan’s generalist bureaucracy has neither the capacity nor the willingness to engage in such thought processes.

The bureaucrats do not want to undertake complex transactions which neither they nor a future IO of NAB have capacity to understand. Unfortunately, there is no short-term panacea for this skepticism of bureaucracy.

Last but not the least, the focus of Pakistan’s PPP regime is on infrastructure projects. Pakistan’s current PPP project portfolio includes motorways, railway and aviation projects, and a couple of luxury hotels and hospitals.

There is a need to move away from the realm of brick and mortar and focus more on policymaking directed on financing private sector initiatives in the new and emerging technologies. A few examples may explain my point.

In early 2010, the US Department of Energy gave a $465 million dollar loan to a private EV car manufacturer to produce electric cars and their batteries at the company’s California factory.

The company was none other than Tesla. The US Department of Energy cited benefits to the US economy including technological innovation, job creation, and climate mitigation while sanctioning the loan. The loan was for a period of ten years.

Tesla took the loan, invested the money in its factory, and the project was so successful that Tesla repaid the loan to the US government just three years later in 2013. Shortly after taking the loan in 2010, Tesla went public in NASDAQ at a valuation of $1.7 billion.

Today Tesla is a company worth $800 billion and Elon Musk is the richest and perhaps the most influential businessman in the world. The US Department of Energy loan played a vital part in Tesla’s success. It was one of the most successful models of pubic-private partnership in history.

Recently, the US Government has again tried to replicate this successful financing model and passed the CHIPS and Science Act, 2024. Under this Act, the American government will provide $53 billion in federal subsidies to the semi-connector manufacturing companies to spur scientific innovation in America.

Three quarters of this funding, around $39 billion, will be earmarked for the construction of high-tech semiconductor fabrication plants or “fabs” in America. The programe has encouraged companies like TSMC and Intel to invest in chip manufacturing in the US.

Our Planning Commission and P3A Authority should take cue from these initiatives and should use federal funding to sway Pakistan’s private sector away from investments in housing societies and dairy farms and towards investments in tech and software.

This will spur technological growth in the country. Infrastructure-led growth may not solve our balance of payment problem, rather it would exacerbate it. Investments in technology will bring us valuable foreign exchange and make us relevant at the world stage.

The development of a modern and robust PPP regime with a focus on technological innovation and active private sector participation is the need of the hour for Pakistan during these challenging times.

Copyright Business Recorder, 2025