Public Private Partnership (PPP)

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Public Private Partnership (PPP)

  1. 1. PUBLIC-PRIVATE PARTNERSHIP (PPP/P3) - A CONTEMPORARY ISSUE IN ENGINEERING By: Jivan Nepali 066 BCT 517
  2. 2. BACKGROUND: PPP IN NEPAL  Poor infrastructure has been one of the hindrances in Nepal’s competitiveness (130 out of 142, GCI Report - 2011/2012)  With the existing economy it is not possible to fulfill the fund requirements to develop the required infrastructure in Nepal  Only the government’s investment and involvement in infrastructure and public services is not enough implying the need for a greater role of the private sector  Considering this fact, the Nepal government is convinced that PPP is the way out to solve public financing deficit – PPP Policy
  3. 3. CONCEPT OF PPP PPP is a business relationship between a private- sector company and a government agency for the purpose of completing a project that will serve the public. It involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project.
  4. 4. CONCEPT OF PPP CONTD… Such partnership includes the design, construction, financing, operation, and maintenance of public infrastructure and facilities or the operation of services to meet pubic needs Benefits include reduced cost, better quality of service, greater productivity, and better leverage of the limited government resources to fulfill high cost, high need projects
  5. 5. COMMON ELEMENTS DEFINING PPP IN NEPAL  A contractual agreement between a public entity and private entity  A substantial transfer of appropriate risk to the private party  Focus on service delivery to meet public service or infrastructure needs  Private parties have investments at risk, although private capital investment is not required in all PPPs  Value for money is demonstrated  Remuneration of the private party may be directly from user charges, by payments from public agencies in the case of availability based PPPs, through exploitation of other assets or rights, or through some combination of these.
  6. 6. RISK ISSUES IN PPP  Risk transfer is one of the major components through which PPP projects can generate better value-for-money.  In principle, risk in a PPP should be allocated to the party who is best able to mitigate and manage that risk. Risks related to PPPs:  PUBLIC RISKS  ECONOMIC & FINANCIAL RISKS  MARKET RISKS  CONSTRUCTION RISKS  OPERATIONS & MAINTAINANCE RISKS  ENVIRONMENTAL RISKS  EXCHANGE RATE & INTERESTS RISKS  ACCEPTABILITY OF USER FEES: e.g. Price Elasticity
  7. 7. PPP MODELS APPLICABLE IN NEPAL Revenue-based PPPs are PPPs where the private party receives revenues solely from the direct collection of user charges. Revenue- based PPPs are expected to be applied in sectors where direct and clear user charges can be applied and collected, such as transport and similar infrastructure and services.
  8. 8. PPP MODELS APPLICABLE IN NEPAL CONTD… Availability-based PPPs are PPPs where the private party receives revenues from payments from the public partner or other government body. Hybrid PPPs are PPPs where the private party receives revenues through some combination of user charges and availability payments, and/or may obtain revenues by exploiting other assets or right.Recently, Kathmandu – Kulekhani - Hetauda tunnel (58 km) received the permission from the government to develop the project under BOOT (Build-Own-Operate- Transfer), a form of PPP.
  9. 9. CONCLUSIONS In spite of the acceptance of the PPP concept within the country, and progress with PPP projects at the l ocal level, national level PPP projects and major PP P infrastructures projects are yet to emerge in Nepal The idea of a PPP in general is theoretically appealing but its practical implementation in developing countries is not that easy. Nepal needs to analyze the successes and failures of PPP in the world, and develop a model that best suits its economic and political situation
  10. 10. REFERENCES  Gajurel, Aashish. (July, 2013). “Promotion of public- private partnership” in URL : http://www.thehimalayantimes.com/fullNews.php?headlin e=Promotion+of+public- private+partnership++&NewsID=382881. International Media Network Nepal Pvt. Ltd, Kathmandu, Nepal.  Shrivastav, Hariom, Shakya P. L. (Nov, 2012). “Policy Framework for Public Private Partnership (PPP) Projects in Nepal”. Third Ministerial Meeting on PPP for Infrastructure Development, held in Tehran, Iran.
  11. 11. Thank You! Questions & Answers Session

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