Informed sources said that the objective of the technical assistance is to assist the ADB and the government in preparing and finalising the design of the PPI SDP and help in establishing the institutions and some pilot transactions facilitating seamless transition from the design to implementation of the SDP.
The TA will support developing policy, regulatory and institutional reforms for the PPISDP. The ensuing SDP programme loan will finance the cost of reforms, including a portion of the infrastructure fund.
The assistance will help the government through a task force in developing policies for PPI, design and establish the Infrastructure Project Development Facility (IPDF) under the Finance Ministry, as a company run by professionals of high calibre, design and establish the Infrastructure Project Finance Facility (IPFF), managing the IF and develop assistance approach for line agencies at the federal, provincial and local levels in preparing and managing PPI.
It will also develop assistance approach for FIs in building infrastructure units, and assist in developing the market for domestic long-term capital, including the sub-sovereign level.
Infrastructure sector in Pakistan comprises power, telecommunication, roads, ports, railways, air transport, water supply, waste management, information technology, cyber parks, and industrial estates.
Currently, the existing infrastructure is inadequate to cater to the needs of economic development as well as the demand arising out of population growth, the sources added.
The public sector remained the main provider of basic infrastructure. However, large fiscal deficit has limited the government's capacity to meet growing infrastructure requirements.
To augment limited public resources for infrastructure, private sector participation must be encouraged by creating the enabling environment for increased private sector involvement, the sources added.
NEED FOR PUBLIC-PRIVATE PARTNERSHIP IN INFRASTRUCTURE DEVELOPMENT Pakistan's infrastructure is grossly inadequate as compared to the world standards and has been identified as one of the critical reasons constraining rapid economic growth.
The ADB last year in its policy dialogue with the government stressed upon the need to develop infrastructure at a fast pace in order to achieve GDP growth rates in excess of 8 percent.
The government has embarked upon massive plans for infrastructure development. In its national budget in June 2004, the government announced $3 billion per annum of new investments in development projects and infrastructure for the next five years.
However, it is estimated that the government will only be able to fund $1.5 billion per annum, or 50 percent of these needed infrastructure investments. The rest must come from the private sector through direct investments or public-private partnership (PPP) structures.
Countries, such as Pakistan, that for a long time have financed infrastructure projects directly from the fiscal budget allocations often lack necessary institutional and regulatory capacity to facilitate private sector participation in infrastructure provision.
OTHER REASONS WHY PRIVATE INFRASTRUCTURE PROJECTS HAVE NOT MATERIALISED INCLUDE:
(i) Reforms have not progressed as fast as anticipated;
(ii) present governance structures are not suited to broad private sector participation infrastructure envisaged in a liberalised environment;
(iii) the public-private interface needs substantial strengthening - shortage within the government of skills and institutional mechanisms needed for effective interaction with the private sector; and
(iv) it remains difficult to disaggregate and allocate risks in the domestic capital market. Not all the solutions can be pursued at the national level - some may involve provincial or even municipal policy and institutional reforms.
For reasons mentioned earlier, infrastructure financing will have to rely more on private resources. The opportunities for developing and financing public-private partnerships in Pakistan are considerable.
There is proven demand for new projects in the water, wastewater, solid waste, and transportation sectors. The economy is growing, local and international investors are interested in PPPs in Pakistan, and the government commitment to decentralisation and market solutions to infrastructure is strengthening.
Most importantly, there is substantial interest among the local institutions and investors to participate in these types of transactions that any PPP legal, institutional, and regulatory framework might yield.
This combination of attributes, along with other country specific and regional trends, makes the PPP opportunities in Pakistan considerable and realistic.