The Public Private Partnership (PPP) program in Pakistan has made substantial progress since 2007. Infrastructure Project Development Facility (IPDF), as the central PPP unit, has been spearheading different initiatives that have contributed to the strengthening of Pakistan's PPP program in the past couple of years. The following is a review and assessment of the key elements of the Seoul Declaration for the two year period 2008-2009 pertaining to Pakistan.
In terms of policy framework, Pakistan's Policy for Public Private Partnerships was first approved in November 2007. This policy was further reviewed and revised leading to the approval of the revised Public Private Partnership Policy by the Economic Coordination Committee (ECC) of the Cabinet in late 2009. The revised Policy delineates a more detailed framework for the development of PPPs in Pakistan, thus, providing a more solid footing to Pakistan's PPP program. Throughout the development of this policy framework, IPDF was in close contact with multilateral agencies such as the World Bank and the Asian Development Bank who provided their inputs and comments at various stages during the process.
A key milestone in the development of the PPP program has been the formulation of PPP policies for different sectors by the concerned line ministries and government agencies. This marks a turning point since the line ministries are now more receptive to the idea of structuring their projects on PPP basis. These initiatives have been taken by the National Highway Authority (NHA) and Private Power & Infrastructure Board (PPIB) among other ministries and line agencies. NHA's PPP policy was approved in May 2009 and governs the development of highways, motorways, tunnels and bridges on PPP basis. The Asian Development Bank has also been assisting the Ministry of Railways in developing a PPP policy framework for railways in Pakistan. This is expected to be completed shortly.
By 2008, IPDF had developed a set of holistic guidelines and standardized contractual provisions. These guidelines cover the entire spectrum of the transaction stages ranging from inception to the procurement and ultimate financial closure. These guidelines are being extensively used by various line ministries and government agencies for the structuring of their projects on PPP basis. A draft PPP law at the federal level has also been finalised. It is expected that once passed, this law would further strengthen the Public Private Partnership Program in Pakistan and would give investor an added confidence to participate in different projects. Moreover, a Task Force on Public Private Partnerships headed by the Finance Minister has also been formulated to give directions on the legal, regulatory and policy framework for PPPs in Pakistan.
One of the key impediments that Pakistan faces in the development of PPP program is the lack of access to long term financing. In Pakistan, the capital markets don't have the depth that would allow infrastructure projects to raise long term financing. Also, a lot of these projects are economically viable but don't generate the financial returns needed to attract private sector. In order to address these issues, IPDF has been working along with multilaterals such as the World Bank and state institutions such as the State Bank of Pakistan for the setting up of Viability Gap Fund (VGF), Project Development Fund (PDF) and Infrastructure Project Financing Facility (IPFF). Some of these institutions are expected to become operational in the near future allowing projects to raise long term financing as well as be financially viable to attract private sector participation.
The World Bank also assessed Pakistan's PPP program and made recommendations on how this program can be further strengthened. A similar exercise with regard to the Task Force on PPPs was undertaken by the Asian Development Bank.
In terms of capacity building, IPDF organized four workshops in collaboration with the World Bank in 2008-09. Workshops on Public Private Partnerships have also been organized by the Planning Commission of Pakistan. Various staff members from IPDF and other governmental departments have been sent to trainings organized by UNESCAP, Asia Pacific Economic Cooperation (APEC) as well as other multilaterals and donor agencies. IPDF is an active member of the regional network of PPP units and regularly participates in initiatives undertaken by regional cooperation agencies such as UNESCAP, APEC as well as multilateral agencies and donor agencies such as Asian Development Bank and World Bank.
In conclusion, Pakistan's Public Private Partnership has achieved significant milestones over the last few years. The journey ahead contains quite a few obstacles and challenges. However, with a robust policy framework as well as a strong commitment and resolve, these obstacles can be overcome. We expect the program to further strengthen in the coming years and become a case study for successful PPP programs in other emerging economies.