Public-Private Partnership in Nepal: Policy, Prospects and Challenges

1. Public-Private Partnership in Nepal: Policy, Prospects and Challenges Dr. Gopal Prasad Bhatta Director Research Department September 2016

2. Outline • Background • The PPP Policy in Nepal • Prospects • Challenges • Conclusive Remarks

3. Background • Poor Infrastructure • Insufficient Resource of GoN • Nepal’s position in global competitive report • Infrastructure Financing • Role of Private sector in infrastructure financing

4. Nepal’s Experience in PPP • Implicit PPP: Salt Trading Corporation (MKJBR) • Local Level experiences after BOOT, Policy 2057 and BOOT Act 2063 • Not National Level experiences

5. Defining PPP…. • PPP refers to the blending of resources and assets from both the public and private sectors for the benefit of all the parties and with an objective of providing a more efficient and cost effective means of the services…. • It includes Design, Construction, Financing, Operation and Maintenance of public infrastructure and facilities or the operations of services to meet public needs.

6. Benefits of PPP…. • Reduced cost • Better quality of services • Greater productivity • Better leverage of government resources to fulfill high cost • Risk sharing

7. PPP Policy 2072 • Explains the Vision, Goal, Objectives, Policies, Strategies and Working Policies of PPP policies • Priorities of the projects, projects to be implemented under PPP frameworks, execution of partnership framework, appraisal and approval of project, procurement of projects, unsolicited projects, land acquirement for the projects, sharing risks and profits, resolution of conflicts, institutional arrangements, PIA and PIU, VGF, Revolving fund and other economic aspects…

8. Concept of PPP in Public Entities • Contract between public and private sector for a fixed period • Public sector cooperation on policy, legal, institutional and financing to private sector • Return on investment by private sector • Public ownership after contractual period • Risk sharing

9. Eligible Projects for PPP • Physical infrastructure and transportation • Electricity and energy • Information and communication • Urban and rural environment( Sanitation, drinking water, sewerage etc) • Education, infrastructure and services in health, Tourism infrastructure (except hotel and residence) • Urban infrastructure in services

10. Project Generation • Project Implementation Agency (PIA) are responsible to conduct the pre-feasibility of the project • Take into consideration of: • Access to service and qualitative enhancement • Economic benefit • Maximum Utilization of government an local resources • Use of Newly high technology

11. Project Generation (2) • Identification of priority sector projects of all public agencies (may discuss with private sector • National Planning Commission (NPC) is authority to decide the project is to conducted as PPP or not • The project will be initiated to study as PPP project by PIA only after NPC’s approval

12. Project Appraisal and PPP Centre • PPP centre is responsible to appraise the projects • PPP Centre within NPC and… • Facilitation and coordination • Capacity building • Studying and promoting the best PPP practices • Prepare and implement directives and guidelines to develop PPP projects

13. Project Approval: Steering Committee • PPP Steering Committee chaired by Secretary (MOF) and members (secretaries of POM, NPC, MOHA, MOPIT, MOLRM, MOFLC, MOSTE, Mo project proposal, MOFALA, Member secretary…head PPP centre • Guide all PPP policy related issues • Identify projects (PPP attracting) • Approval for projects procurement • Coordination among the PIA’s

14. Project Implementation: PIA and PIU • PPP projects are implemented through PIA and each PIA contain one PIU. • PIU is responsible all PPP related project issues (Generation, correspondence, implementation etc.) • Financial closure project approved by IBN also implemented by PIA

15. PPP Project Regulation: Regulatory Committee • PPP Regulatory Committee chaired by Secretary: NPC, members JC’s of MOHA, MOPIT, MOFALD, MOLRM, Expert member, Member secretary: Head PPP Centre • Streamline the functions of PPP centre • Guide the PPP centre • Facilitate and Coordinate among PIAs

16. Project Procurement • Request for Expression of Interest (REOI) • Request for Qualification (RFQ): short listing of bidders • Request for proposal (RFP) • Evaluation of proposals and selection of bidder • Approval of Proposal • Concession Agreement

17. PPP Projects: Unsolicited Proposals • Proposals from Private sector-Not by PIAs • Previously requested but not selected projects • Proprietary assets only with the proposed bidder • GoN decided the project is strategically important

18. Land Acquisition • GON’s responsibility to acquire land for PPP projects • Reimbursement from private sector or Royalty for use of public land • No concession agreement until 80 percent of the required land is not acuired

19. Revolving Fund and VGF • Revolving Fund for Land Acquisition • Capital grant for financially weak project through VGF • VGF only as per the VGF guideline • Not applied to the projects for annual installment payment by PIA

20. Risk and Profit Sharing • Principle of Public Utility • Identification of all risk in concession agreement • Competent party will manage the highet portion of risk • Non controllable risks will be handled as per agreement • Profit sharing as per the agreement

21. Prospects • Nepal's upgrading objective for least developed country to developing one within 2022 • Need to increase per capita GDP USD 1242 (659), Human Assets Index 66 (68.7) and Economic Risk Index 32 (26.8) • Local success of PPP projects • Leading private sector • Success stories of Neighboring countries

22. Challenges • High political commitment • Public sector resistance • Private sector experience • Land acquisition • Expertise • Funding • Promotion of the projects

23. ANY QUESTIONS????

24. Thank You!!!!!!