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In this article, we will discuss with you overall information about the advantages, disadvantages, problems, and challenges of Public-Private Partnership in the context of Nepal.
Public-Private Partnership refers to the merging of assets and resources from private as well as public sector. Its main objective is to provide more efficient and low-cost service to the public.
Public-private partnership is a long lasting agreement within public and private institutions, for providing public service. It gives benefits to both the public and private sector.
The private partners in a PPP can include local or international business or investors having commercial or mechanical knowledge related to the project. In the same way, government entities such as ministries, municipalities etc. are public partners in PPP.
The public sector’s role in PPP is to provide environmental awareness, social involvement and a capacity to mobilize political support. Similarly, the Private sector helps to run the business effectively by using its proficiency in management, innovation, and commerce.
At the same time, PPP can discover new innovations and bring finance by combining resources and skills of the private and public sectors.
PPP can be useful in short term management programs as well as big projects that need skilful workers and more budget. From the effective implementation of PPP, both public and private sectors get benefits from the project.
For the first time, the UK successfully managed water projects under Public-private Partnership arrangement. Similarly, Korea and Brazil implemented PPP in the development of infrastructure. Gujrat also brought Gujrat Infrastructure Development Act, 1999 for PPP implementation.
Public-private partnership in Nepal
Public-private partnership is a very new approach for Nepal. Successful implementation of PPP is mainly found in energy sector programs and in urban development programs. Free market economy has been in Nepal since the 1990s.
At the same time, the Hydropower development policy and Electricity Act in 1992 also predicted the private sector participation in generation and circulation of the electricity.
Similarly, the government introduced the PPP policy in 2015. Its aim was to support project contractors and to facilitate the implementation of PPP projects.
PPP is being implemented in hydropower, road, airport, and in other various sectors. Major projects of Nepal under PPP are:
Hydropower Sector: Khimti Khola hydropower project and Chilime hydropower project
Road Sector: Kathmandu-Terai fast track road project (BOT model) and Kathmandu Kulekhani Hetauda tunnel highway (BOT model)
Airport Sector: Nijagdh international airport (BOT/BOOT model) and Gautam Buddha international airport
Urban Development: Urban transport and Solid waste management, Water supply, park management, and sanitation.
Public Private Partnership Activities in Kathmandu Metropolitan City: New bus terminal modernization, expansion and management, Overhead bridges, urban service centres (public toilets, newspapers, telephone call canters, etc.
PPP Related Policies in Nepal
Nepal brought following Act and Policies to strengthen public-private partnership:
- Public-Private Partnership Policy (2072)
- Public-Private Partnership and Investment Act (2019)
- Local Self Governance Act, 2055 and regulation (2056)
- Contract Act (2056)
- PPP discussions (PPP Policy Dialogue, Training, Workshops)
Problems in PPP (in the Context of Nepal)
- No clear cut PPP structure
- Unclear procurement process
- Political instability and internal conflict
- Lack of institutional structure and clear policy
- Lack of a favourable environment to attract the investment of foreign countries
- Because of the poor capital market, there is a problem in capital accumulation.
Challenges of PPP (in the Context of Nepal)
- To improve management and investment of PPP in the development of the infrastructure sector
- To strengthen pre-established public-private partnerships
- To develop new models of public-private partnership
- To evaluate existing PPP projects effectively through regular reviews
- To develop national guidelines for collaboration with the private sector
- To address issues of poor and marginalized groups.
Types of PPP Contracts Models
On the basis of projects types, investment level, desired outcome, and risk transfer level, there are several public-private partnership contract models. The major contract models that are being used in Nepal are BOOT, BOT, and O&M.
Other contract models are:
- Build-Transfer (BT)
- Build-Finance (BF)
- Build-Lease-Transfer (BLT)
- Design-Build-Operate-Transfer (DBOT)
- Design-Construct-Manage-Finance (DCMF)
- Design-Build-Finance-Maintain (DBFM)
- Design-Build-Finance-Maintain-Operate (DBFMO)
- Build-Own-Transfer (BOT)
- Build-Own-Operate-Transfer (BOOT)
- Build-Own-Operate (BOO)
- Build-Transfer-Operate (BTO)
- Lease-Operate-Transfer (LOT)
- Develop-Operate-Transfer (DOT)
- Operation & Maintenance Contract (O&M)
Advantages of Public-Private Partnership
- Enhanced Service Delivery
- Good quality services
- Cost-effective delivery
- Share risk and responsibilities
- Reduce the risk of the public sector
- Increase productivity
- Increase investment
- Better utilization of resources
- Unique expertise and capabilities.
Disadvantages of Public-Private Partnership
- Increase in production cost
- Complex legislation
- Lack of transparency and accountability.
- Danger of Violation of agreement.
- Lack of common responsibility.
- Question of ownership.
We hope this article helped you to understand about Public-Private Partnership.