Pen Portrait of

KEYNOTE SPEAKER

Nazrul Islam Managing Director Infrastructure Investment Facilitation Company

Mr. Nazrul Islam, Managing Director of Infrastructure Investment Facilitation Company (IIFC), is one of the leading PPP infrastructure expert in the world. Out of his 34 years of overall experience, he has 27 years of PPP experience in Asia, Pacific and Africa. He has worked in PPP assignments in more than 14 countries including Bangladesh, Kenya, Nigeria, Indonesia, New Zealand, Cook Islands, Rwanda, India, Pakistan, Sri Lanka, Philippines, Hong Kong, Malaysia, China and Solomon Islands.

Mr. Islam has been involved in PPP assignments worth over US$ 20 billion in capital investment. He has experience of 35 PPP transactions, 55 PPP projects development and 10 PPP related policy and guidelines formulation. He has been involved in over 100 PPP trainings and capacity building workshops.

He contributed valuable roles in the formulation of the captive power policy, remote area power supply systems (RAPSS) Policy, grid open access, coal policy, Private Sector Infrastructure Guidelines and Economic Zones Policy.

Before Bangladesh, he worked for nine years as an international consultant with the Electricity Corporation of New Zealand, the main Government utility in New Zealand at the time, as Group Manager, Project Development. In this position, he was responsible for developing a number of BOT and BOO power generation projects in the Philippines, Indonesia, India, China and other countries. He is conversant with all types of power generation technologies such as combined cycles, coal fired power stations, reciprocating engines, geothermal power stations, hydro, combined heat and power and renewable energy, He specialises in contracts, contractual frameworks, negotiations and financial modeling.

He is presently leading a team of IIFC experts in a banking sector PPP transaction for increasing Financial Inclusion in Nigeria, through one of its first PPP projects.

Institute of Cost and Management Accountants of Bangladesh (ICMAB)

Infrastructure Development in Bangladesh: Future Prospects and Challenges

Presented byNazrul Islam

Managing DirectorInfrastructure Investment Facilitation Company

27 April 2015

PART A: Infrastructure Development Needs

PART B: Selected PPP Projects Carried Out (studying the past)

PART C: Two Key Sectors: Power and Economic Zones

PART D: Challenges for Infrastructure Development for Integrating Public Finance and PPP Finance in the National Planning Process (learning by reflection)

3

PART A:INFRASTRUCTURE

DEVELOPMENT NEEDS

Plan envisages both public investment and private investment in infrastructure through public-private partnership (PPP) Government seeks to grow infrastructure investment from 2% of

GDP to 6% of GDP during the Sixth Five-Year Plan The Plan targets 75% of this investment to come from private

sector participation, making PPP the core of policy

40

1

2

3

4

5

6

7

Perc

ent o

f GD

P

Plan Year

Public and Private Investment in Infrastructure

Private Infrastructure Investment

Public Infrastructure Investment

Source: Sixth Five year Plan

5

0

5

10

15

20

25

30

35

40

45

50

Transport Electricity WSS Solid Waste Telecom Irrigation

Inve

stm

ent (

$ bi

llion

)

Low

High

Total Investment Requirement:- Low $74 billion- High $100 billion

Source: Reducing Poverty by Closing South Asia’s Infrastructure Gap, World Bank, Dec. 2013

1

2 3 (PIF)Competitive orFree market

41 (PSF)Monopoly

2 (PSF)Competitive, or

free market

PrivateSector

Financing

PublicSector

Financing (ADP)

Infrastructure

Non-Infrastructure

The Financing Circle

4 (P3F)PPP

Infrastructure can be carried out through two financing types

We should have sectoral Master Plans that plan for both PSF and P3F projects simultaneously

8

PART B:

Selected PPP Projects Carried Out

(given as examples of PPP projects in Bangladesh)

Number Sector Name of PPP Project Status

Project No. 1 Power NEPC Barge Mounted IPP Operationalsince June 1999

ProjectNo. 2 Power AES Haripur 360 MW CombinedCycle Power Plant

Operationalsince Dec 2001

Project No. 3 Telecom-munications PGCB Optical Fiber Cable Network Operational

since 2006

Project No. 4 Land ports Development of Land ports OperationalSince 2007

Project No. 5 Sea ports Patenga Container TerminalCourt casestopped project inNov. 2002

Project No. 6 Commun-ications

Dhaka Elevated Expressway PPPProject

Undergoingfinancial closure

Names of the PPP Projects Discussed

• BPDB speeded up procurement by avoiding pre-qualification

• A joint Ministry/BPDB committee carried out tenderevaluation.

• Unique Group of Bangladesh joined with a UK-basedcompany, New England Power Company (NEPC)

• NEPC submitted tenders for the barge-mounted plant andwon the order for the plant at Haripur.

• The Power Purchase Agreement and the ImplementationAgreement for the project were signed between BPDB andNEPC on 10th March 1998

• Commercial operation was started on 30 June, 1999.• The Plant can operate on dual fuel i.e. Gas & Furnace Oil• Total electricity generation capacity of the plant is 122 MW

NEPC Barge Mounted IPP, Haripur(1 of 2 Slides)

Financing was arranged by Wartsila, through OPIC, USA. The loan was about $87 million with a long (13 yrs)

repayment period. Total project cost was $124 million. It is a BOO type of project with a 15 years life span. Wartsila Oy, Finland, bought out Unique Group’s share and

subsequently also purchased the shares of New EnglandPower Company.

Later Wartsila Oy, in turn, sold most of its shares to twopower generation companies of USA.

El Paso, Houston purchased 50% of the shares andOgden, New Jersey purchased 45% of the shares.

Wartsila reduced its shares to 5% but retained their interestin supplying the engines for the power plant.

NEPC Barge Mounted IPP, Haripur(2 of 2 Slides)

Developer AES Haripur (Pvt) Ltd. Location Haripur, Narayanganj Project Cost US$ 176.5 million Power plant 1 gas turbine, 1 steam turbine & 1 boiler Net Capacity 360 MW Contracts signed PPA, IA, GSA, and LLA

signed on 17 September 1998 Commercial

Operations 1 Dec 2001 Term 22 yrs Fuel Natural Gas

Haripur 360 MW Combined Cycle Power Plant (1 of 2 Slides)

Plant Output Guaranteed output of 360 MW achieved and maintained over its 12 years of operation

Plant Availability Guaranteed availability of 90% achieved

Heat Rate Performed better than the Guaranteed Heat Rate of 7336 kJ/kWh

Power price Lowest power price amongst all BPDB power plants. Also the lowest power price in the world

Haripur 360 MW Combined Cycle Power Plant (2 of 2 Slides)

Phase I:In Phase I, the installation of Dhaka-Chittagong link, 245 km was completed.

Phase II:The network in the rest of the country is being installed as shown in the picture on the right. Installation of Chittagong-Cox’s Bazar link, 145 km, has already been completed. PGCB leased out one dark pair of OFC between Dhaka and Chittagong through open tender.

IIFC was engaged by PGCB in August 2004 to act as the transaction advisor.

Power Grid Co. of Bangladesh (PGCB) Optic FibreNetwork (1 of 2 Slides)

PGCB Lessee

Own Use

PSTN OperatorsCellular OperatorsISPsCorporate Users

Lease Agreement

Contractual Flow

Lessee’s Revenue from Own Customers

Lessee keeps Bandwidth for Own Use

PGCB Leases the OFC to Lessee

The Lessee Subleases the Bandwidth

Lessee’s Revenue from sublease

Payment Flow

Business Around Lessee

Power Grid Co. of Bangladesh (PGCB) Optic FibreNetwork (2 of 2 Slides)

Power Grid’s Optic Fiber Cable Network

Stevedoring Services of America (Bangladesh) Ltd (SSAB)submitted an unsolicited proposal for the construction andoperation of a container-handling terminal at Patenga inChittagong

The project was proposed for a BOO basis. The terminal was proposed to have a capacity of 300,000 TEUs

(twenty-foot container equivalent units). The proposed project would be through a US/Bangladesh joint

venture company named SSA Bangladesh Limited (SSAB). The investors proposed taking the full commercial and other

risk without any involvement of the government. The total estimated cost of the project was US$ 438 million. The original lease period demanded was very long (2x99 years). Finally negotiated to restrict this period to 30 years.

SSAB Patenga and Pangaon Container Terminals(1 of 2 Slides)

Dec. 1997 Submission of a proposal for construction of an integrated containerterminal project by SSAB to the Ministry of Shipping (MoS).

March/April1998

Approval by Cabinet Committee on Economic Affairs (CCEA) and issueof letter of approval

December1998

Land Lease and Operating Agreement signed for establishment ofContainer Terminal at Pangaon, by BIWTA

January 2000 MOS formed an inter-ministerial Negotiation Committee.

September2000

Court case filed in the High Court based on lack of transparencyand that the project would create problems in the navigability ofthe river.

December2000

Negotiations with SSAB undertaken, on the ImplementationAgreement, with over 85 lengthy sessions, during the whole year

October2001

The Govt. formed a six-member committee at the Secy. level.

May 2002 Negotiations held between the Six-Secretary Committee andSSAB on 12 major issues. All points revisited and agreed afterintense negotiations.

November2002

High Court decision stops project.

SSAB Patenga and Pangaon Container Terminals(2 of 2 Slides)

Bangladesh Bridge Authority (BBA) under Ministry ofCommunications is the Executing Agency for the DhakaElevated Expressway (DEE) PPP project.

The Dhaka Elevated Expressway (DEE), a projectrecommended in the Strategic Transport Plan (STP) forDhaka city, will initially be a 26 kilometer (approx.) long, fourlane dual carriageway, with 2 elevated links, 7interchanges, 35 ramps and with a design speed of 80kilometers per hour.

The purpose of the Expressway is to: improve road connectivity to link the northern part of

Dhaka city with the central, south and south easternparts, linking important commercial and businesscenters of the city.

increase traffic capacity and reduce travel times forpeople living in and around Dhaka City.

Dhaka Elevated Expressway PPP Project (1 of 2 Slides)

Route of DEE (as in early 2012)Shahjalal International Airport – Kuril –Banani – Mahakhali – Tejgaon –Moghbazar – Kamlapur – Gopalbag –Dhaka Chittagong Highway (near Kutubkhali)

7 Interchanges

11 Toll Plazas (5 above ground)

To be extended later to link Joydevpur and Narayanganj

Dhaka Elevated Expressway PPP Project (2 of 2 Slides)

Toll Fees for Cars

End to End Tk 125

Any Intermediate Point Tk 100

Guaranteed Traffic 13,500 transactions per day

Traffic Transaction Ceiling 80,000 vehicles per day measured in terms of transaction

Revenue Sharing 25% GoB – 75% Concessionaire (for exceeding Traffic Transaction Ceiling)

Estimated Project Cost Tk 8703 Crore

Concession Fee (Royalty) Tk. 272.5 Crore

Viability Gap Funding Tk. 2350 Crore

21

PART C: Two Key Sectors

• Power Sector• Economic Zones

Opened to private sector investment in 1996 through the Private Sector Power Generation Policy, 1996, that led to the development of Independent Power Producers (IPPs) Since the policy was adopted, private sector now owns and

operates 58 power stations and the public sector 50 Installed capacity of private generators is about 40% of the

total generating capacity of 10,000 MW In terms of electricity production, 50% of the electricity

production (in kWh) is from private sources Private sector has already invested about $2.7 billion

(excluding captive power generation)

22

Power Sector Features: Public and Private Investment in Generation

23

0

500

1000

1500

2000

2500

2010 2011 2012 2013 2014 2015

MW

YEAR Public Sector (MW)Private Sector MW

Public Sector 4704 MW (41%)Private Sector 6753 (59%)Private Investment US$ 5.6b)58 power plants

24

Public Sector Investment Under Bangladesh Export Processing Zones

Authority (BEPZA) Chittagong EPZ Dhaka EPZ Comilla EPZ Ishwardi EPZ Karnaphuli EPZ Mongla EPZ Adamjee EPZ Uttara

Under Bangladesh Small & Cottage Industries Corporation (BSCIC) Over 79 industrial estates

25

Private Sector Investment Under Private EPZ Act (purely private with PIF) Korean EPZ Rangunia EPZ

Under Bangladesh Economic Zones Authority (BEZA) Mongla EZ Sherpur (Maulvibazar) EZ Mirshorai EZ Anowara EZ

PWC estimated in 2009 that EZs of 500 Acs are needed every year for garments/textile alone

26

Private Sector Investment Under Bangladesh Hi-Tech Park Authority

(BHTPA) (with PPP, except Jessore) Kaliakoir Hi-Tech Park Jessore ICT Village Rajshahi ICT Village Sylhet Electronics City Mohakhali Hi-Tech Park Plus 3 more sites at Divisional level Plus ICT villages at District level

PPPs in Economic Zones or Industrial Parks are still Evolving

Units

On-Site DevelopmentOperation &Management

Lease

Lease Payments

SME Sectoral Associations/PPP Operator

Government

Land Acquisition & Development,

Regulation

Royalty

Regulation Financing Development Operation

Government Agency NA

Private Operator NA

Concession Agreement

Padma Bridge Project

6 km long Bridge on Padma River, at Mawa-Janjira, 35 km from Dhaka City Land Acquisition (in hectares)

• Approach road/railway 176 • Service areas 90.73 • Toll Plaza 28.9 • Resettlement sites (4) 68.7 • River training works 508.7 • Main Bridge (Char land) 190.0

Total 1144 ha (or 2,825 acres)

Social Impact• Affected Households 13,500 • Affected Persons 76,200

28

29

PPPSME

INDUSTRIALPARK

PROJECT(Over 650 factories created)

Can give direct Employment to 20,000 persons

Needs Land150 acs

Public Infrastructure ProjectPadmaBridgeProject

(affected persons 76,000)

Possesses Land more than 2800

acres

Needs to give Employment to 13,500 households

30

PART D:Challenges for

Infrastructure DevelopmentIntegrating and Planning for

Public Sector Finance (PSF) with PPP Finance (P3F)

PROJECT INITIATION & DEVELOPMENT RISKS Projects need to be sufficiently defined upfront Standard project development process to be systematically followedAll important linked projects to be identifiedRisk allocation to be standardised beforehand for each sector uncertainty in costs uncertainty in viability uncertainty in regulatory regime.

EXECUTING AGENCY SKILLS AS UP-FRONT DEVELOPER

Project identification process to be standardised

Regulatory focus rather than commercial focus

Low-in-house skills for PPP project development

Frequent change in project personnel

Paradigm shift from public sector focus

Slow engagement of consultants

A champion is usually needed to drive a PPP Project forward, especially the first flagship project in a sector

Major Obstacles to Rapid Project Development

Slow Decision Making• Lack of knowledge on BOT, BOO etc• Fear of “selling the country” to private investors• Fear of “Initiating” a project or an idea• Concern for finger pointing• Comfort in “status quo” Lack of Consultant Skills

• Consultants of public sector projects inappropriate

• Overseas consultants inability to think smaller than developed countries (the overdesign, Roll Roycing or gold plating risk)

Pre-Award Phase

TA Budget needed for each project

Developing projects needs multiple skills in the executing agency• Technical• Commercial• Legal and contractual• Negotiations

Public sector projects are significantly different from private sector projects• Needs to consider the concerns of private sector• Over tightening and over-safety turns away investors• Negotiation skills are highly needed

Capacity of Government officials need to be urgently built in these areas

10

5

Public Sector Project

PPPProject

Technical Skills

Commercial, AccountingFinancial, Legal and

Management & Negotiations

Kno

wle

dge

1•

2• 4•

3•

Capacity Building Needed …………………

Management & Accounting roles are expected to rise sharply

Effective PPP Focal Points needed in sectors other than Power PPP Focal Points should have:

• Good PPP Project Development Skills• Ability to act as a champion for a project/idea• Sufficient funds that are easily accessible• Authority to execute the PPP project, on behalf of the

sector, as the Project Director, with PDs for each linked Public Sector Projects

• A drive to standardise documents (i.e. Model Contract Documents)

Power Cell is an example of a Sector Specific PPP Nodal Point in Bangladesh

Sector Specific PPP Focal Points

36India plans public infrastructure and private

infrastructure separately, for each sector

Each Infrastructure sector to have target through KPIs for PPP in relation to overall budget, Experienced PDs to be appointed Executing Agencies to seek sufficient funds to

meet the agreed KPIs: TA to carry out PPP projects Investment to carry out all Linked Projects

Percentage of Privately Financed Infrastructure (Tk) Total Infrastructure (Tk) Monitoring Parameter

Year 1 Year 2 Year 3 Year 4 Year 5

Proportion of privately funded infrastructure to total expenditure in infrastructure (annual ADP)

0%

5%

10%

15%

20%

Set Sectoral KPIs for PPP Projects

38

Recommendations

Utilise the experience of the past PPP projects to set the course for the future PPP projects

Utilise PPP expertise on a cross-sectoral basis Focus on PPP capacity building, with simulation exercises; give

special training to the Project Directors Include change management into PPP training Integrate PSF infrastructure with P3F infrastructure, where

possible Carry out sectoral plans irrespective of public or private financing,

and then identify the PPPs with its linked projects. Give sectoral KPIs for PPP

Thank You

1

The Institute of Cost and Management Accountants of Bangladesh (ICMAB)

CPD ON

Infrastructure Development in Bangladesh: Future Prospects and Challenges

BRIEF CASE STUDIES OF PPP PROJECTS IN BANGLADESH IN DIFFERENT SECTORS

Infrastructure Investment Facilitation Company

27 April 2015

NOTE

These case studies are being presented for dissemination of the country’s PPP experience in different sectors to the general audience. Only six case studies are presented here (IIFC was directly involved in most of these projects). However, the total number of PPP in the country exceeds 70 (given in attachment). It is seen that some sectors are more advanced than others (e.g. power and telecommunications). The country may be benefited from the learning experience of the government officials in the more advanced sectors. The policy makers may think about how to transfer the knowledge base on PPPs from one sector to the other.

2

CASE STUDIES OF PPP PROJECTS IN BANGLADESH

IN DIFFERENT SECTORS

Number Sector Name of PPP Project

Status

Case Study No. 1

Power NEPC Barge Mounted IPP

Operational since June 1999

Case Study No. 2

Power AES Haripur 360 MW Combined Cycle Power Plant

Operational since Dec 2001

Case Study No. 3

Telecom-munications

PGCB Optical Fiber Cable Network

Operational since 2006

Case Study No. 4

Land ports Development of Land ports

Operational Since 2007

Case Study No. 5

Sea ports Patenga Container Terminal

Court case stopped project in Nov. 2002

Case Study No. 6

Commun-ications

Dhaka Elevated Expressway PPP Project

Undergoing financial closure

3

C A SE ST UDY NO. 1: NE PC B A R G E M OUNT E D I PP

Background In 1997, Government decided to address an acute power shortage through Independent Power Plant (IPP) projects. The Government decided to invite installation of 4 barge-mounted plants with a capacity of about 110 MW each. This decision was taken on grounds of speedier installation, recognizing that barge-mounted plants are costlier than land-based plants. To save time BPDB dispensed with the need for pre-qualification. A single-envelope tendering system was followed. A joint Ministry/BPDB committee carried out tender evaluation. The recommendations were forwarded to the Ministry of Power Energy and Mineral Resources and cleared by both the Secretary and the Hon. Minister. The Ministry then sent their recommendations to the Cabinet Committee on Government Purchase for approval. Contracts were to be signed with four parties, but in one case, the party concerned could not submit the performance guarantee in time and that IPP project was postponed and later abandoned. The NEPC consortium was the lowest bidder in all three barge-mounted IPPs, but GoB decided to award the contract for each plant to different parties. This case study describes one of these IPPs, for a plant to be located in Haripur, just outside Dhaka. The Power Purchase Agreement and the Implementation Agreement for the project were signed between BPDB and NEPC on 10th

of March 1998 and commercial operation was started on 30 June, 1999. There was no Fuel/ Gas Supply Agreement in this project.

4

Private Sector Consortium Many companies were involved at various times in the bid consortium. Unique Group of Bangladesh joined with a UK-based company, New England Power Company (NEPC), who agreed to participate in the project. The project has since been known by the name NEPC. Later the company name was changed to NEPC Consortium Power Ltd. NEPC submitted tenders for the barge-mounted plant and won the order for the plant to be located at Haripur. Wartsila Oy, Finland, the diesel engine manufacturing company, later became interested in the project and bought out Unique Group’s share and subsequently also purchased the shares of New England Power Company.

Later Wartsila Oy, in turn, sold most of its shares to two power generation companies of USA. El Paso, Houston purchased 50% of the shares and Ogden, New Jersey purchased 45% of the shares. Wartsila reduced its shares to 5% but retained their interest in supplying the engines for the power plant. Ogden changed its name to Coventa represented by a Bangladeshi company named Coventa Bangladesh Operating Ltd. The three parties distributed the work among themselves. All the equipment in the deal remains the property of NEPC and can be re-exported by the company at the expiry of the contract or sold to GoB at a price then to be agreed. The economic plant life was estimated at 20 years. Financing was arranged by Wartsila, through OPIC, USA. The loan was about $87 million with 13 years repayment period. Total project cost was $124 million. It was a BOO type of project with a 15 years life span. The project can be extended by another 2-3 years through negotiations. Project Implementation Construction of the power plant started in September 1998. The diesel/ gas engines came from Wartsila, Finland and the barge came from China. The plant consists of eight diesel engines of 16 MW each. The plant can operate on dual fuel i.e. gas and furnace oil, giving a total net capacity of 122 MW when operated on furnace oil and yields 115 MW if operated on a blend of 95% natural gas and 5% furnace oil (Heavy Fuel Oil). The company has a capacity dispatch contract of 110 MW with BPDB. The barge-mounted plant was delivered in Bangladesh in March 1999. The incoming pipeline, the filtration unit and the gas compressors are all on land. The power generation was at 15 kV and a transformer on the barge upgrades the power to 132 kV. A metering unit was on the bargeand connected to the Power Development Board’s 132 kV line, which is only 200 metres from the barge. Commercial operation based upon Heavy Fuel Oil started in mid-1999.

Project Revenues Bulk power is sold through a two-part tariff. The first part of the tariff depends on the plant factor and is variable depending upon how much power is sold. This price reduces with the

5

quantity of sale measured in MWh. The second tariff component is the fuel tariff. It is a fixed sum irrespective of the quantity of gas. Contractually BPDB has to purchase a minimum 50% of the electricity that can be generated based on the monthly capacity of the plant. After the start up of the plant the lowest capacity sold has been 28.5% and the highest 82% with an average of 55% for the year 2001. Because of high variable costs, the plant is currently being used only as a supplier of peak demand. 99% of the revenues generated by the IPP are converted to foreign exchange for payment to the sponsors. Problems Faced

1) Normally Titas has a direct contract with IPPs but for the NEPC plant, BPDB is the supplier of gas. (in turn BPDB buys the gas from Titas). There were problems with regard to the quality and pressure of the gas supply into the plant; these had not been adequately addressed in the original agreement. Therefore, NEPC could not be compensated.

2) The NEPC considers that the country understanding of project financing was inadequate.

They cited as an example that there was a 0.6 acre piece of khas land required for operations, and on which the authorities granted a 20-year lease consent. As part of the security package, the lender (OPIC, USA) needs to ensure that the lease continues even if there was a default by NEPC. In such a case, the lease could automatically pass on to the next buyer of the company. The project administration has already spent 2 years in solving what should be a minor problem and has been running between Ministry of Land, Deputy Commissioner (District Administrator) office, BPDB and others in order to resolve the issue. The lender has already disallowed the full dividend to be paid to the shareholders for one year due to this problem.

Current status

NEPC power plant has been in operation since 30 June, 1999 and supplying power to the national grid. Under Private Sector Power Generation Policy, this was one of the successful PPP initiatives in the power sector.

6

C A SE ST UDY NO. 2: A E S H A R I PUR 360 M W C OM B I NE D C Y C L E POW E R ST A T I ON

Project Details The Government of Bangladesh (GOB) had selected the power plant from the list of least cost power generation option recommended by Power System Master Plan (PSMP) 1995. The power plant was planned to be developed as an IPP, a base load plant on a build-own-operate (BOO) basis sited at Haripur, Naraynganj. In this context, prior to approval of energy policy, GOB signed Memorandum of Understanding (MOU) with 12 sponsors who submitted unsolicited offers for this project. After the scrutiny, following six sponsors were considered creditable:

1. AES Transpower Limited, USA 2. Occidental Energy Venture Corporation, USA 3. BanAmco Energy Limited, USA 4. Midlands Power International, UK 5. Tenaga Nasional Berhad, Malaysia 6. Vender Horst, Singapore

As per private power generation policy 1996, Power Cell under Power Division, Ministry of Power, Energy and Mineral Resources was mandated to develop IPP projects. Accordingly, Power Cell issued Request for Proposal (RFP) to all six credible sponsors on 1 April 1997. Four of them submitted tenders on 29 June 19971

1 Mr. Nazrul Islam, ED & CEO of IIFC, supported the project as Resident Adviser appointed by the World Bank, while he was in New Zealand

. The levellised tariff of different bidders ranged from 2.73 to 3.89 US cents/kWh. After evaluation of bids and approval of GOB, Letter of Intent

7

(LOI) was issued to AES Transpower Limited- the technically responsive and first ranked bidder. AES is reputed for developing and operation of power generation projects worldwide. The tariff offered by AES was 2.73 US Cents/kWh which was one of the lowest tariffs in the world

After negotiation with AES, the first ranked bidder, security package was signed in September 1998. The agreements (security package) included Power Purchase Agreement (PPA) with BPDB, Implementation Agreement (IA) with GoB, Gas Supply Agreement (GSA) with Titas Gas Distribution and Transmission Company and Land Lease Agreement (LLA) with BPDB, the owner land required for the power plant. The project is of Build Own and Operate (BOO) type with 22 years operating period and has a provision for extension. The power purchase agreement is a wholesale concession agreement with BPDB being the only customer. All the agreements of this project are under English law excepting land lease agreement, which is under Bangladesh law.

. In bid evaluation, the plant factor has been considered 85% and the annual generated electricity at 85% plant factor is 2,680 GWh. The net Heat Rate on HHV is 7336 kj/kWh at full load.

The Project enjoys a 15 year corporate tax exemption and 3 year income tax exemption for the expatriate employees of the project company, and other fiscal incentives as allowed by the GOB for private sector power investments.

Plant Configuration The broad technical consideration of the plant is locked in to envisage the operation and management of the plant. The plant has one Gas Turbine (GT) and one Steam Turbine (ST) combination of combined cycle plant of 360 MW. The plant capacities are as follows:

Combined Cycle Operation - 360 MW

Simple Cycle Operation - 238.5 MW

The incoming gas required for the plant as input is being received at 10 bars and compressed with gas compressors to 18 bars at the turbine intake. There is a large switchyard. The electricity output is transferred to the national grid through national transmission lines. Titas Gas Transmission & Distribution Co. Ltd is the gas supplier. The Engineering, Procurement and Construction (EPC) contractors were Hyundai Engineering & Construction Co. Ltd and Hyundai Heavy Industries Co. Ltd.

Security/ Bond At the time of bid submission there was a provision of depositing proposal guarantee of US$ 3 million. Performance Guarantee of US$ 20 million was deposited by the winning bidder AES at time of financial closing, which was returned back on Commercial Operation date in exchange of operation guarantee equivalent to two month capacity payment.

GoB has given a payment guarantee on behalf of BPDB and a performance guarantee on the gas supply through Titas Gas Distribution and Transmission Company.

8

Important Project Dates and Milestones The project bidding process had started after AES Meghnaghat power plant project but moved faster and achieved commercial operation date (COD) one year before the Meghnaghat project. The key milestone dates of the projects are given below:

Dates Milestones 01 April 97 Request for Proposal (RFP) issue 30 April 97 Pre-bid Conference 29 June 97 Proposals Received 21 Jan 98 Letter of Intent (LOI) Issue 17 Sept 98 Project agreements (IA, PPA, GSA and LLA) signed 01 Dec 01 Commercial Operation.

Current status This is the pioneer and one of the most successful PPP power projects in Bangladesh, with one of the world’s lowest power price. Presently the plant is running smoothly and supplying power to the national Grid.

9

C A SE ST UDY NO. 3: PG C B OPT I C A L F I B E R C A B L E NE T W OR K

Background The Government of Bangladesh formed the Power Grid Company of Bangladesh Ltd. (PGCB) in 1996 as a functional unit under the Power Sector Reform Program and entrusted with the responsibility for operation, maintenance and expansion of high voltage power transmission network of Bangladesh. PGCB had constructed an Optical Fiber Back-bone network Cable on its high voltage transmission lines for its own communication system which includes voice communication, Data transmission, Protection of the transmission lines, Supervisory Control and Data Acquisition (SCADA) etc. PGCB adopted the philosophy of using optical fiber on its high voltage transmission lines throughout the whole country. Until then 448 km optical fiber had already been installed around Dhaka and Dhaka-Chittagong route as Optical Ground Wire (OPGW). Project Identification In an effort to overcome the low bandwidth problem the country faces, PGCB decided to expand it’s communication system and started installation of optical fiber over its high voltage transmission lines throughout the whole country. The company had been able to use a small portion (10%) of the optical fiber network capacity and the remaining portion was remain unutilized after it’s various requirements are met. The company intended to lease out the rest (90%) capacity through open tender to interested party/parties engaged in Telecommunication, Internet Service and other ICT businesses in the country. This was intended to utilize the latent capacity of the optical fiber installed by PGCB to make Bangladesh a part of the Global Village. Figure 2.1 shows the OFC network between Dhaka and Chittagong. Key Benefits of the Project

• Less installation and maintenance cost • Transmission connectivity between Dhaka-Chittagong link • Increased bandwidth capacity • Higher network security and reliability

As part of the endeavor PGCB, engaged Infrastructure Investment Facilitation Company (IIFC) on 11 August 2004 to assist in leasing the OPGW for telecommunication purposes for better utilization of this national asset.

10

Figure 2.1 Dhaka – Chittagong Optical Fiber Network

Rampura/ DHK

Comilla

58 Km12 Km22 Km

6 pair 6 pair 6 pairFeni

70 Km 4 pair 4 pair

Pylon 213

76 Km 78 Km

6 Km

MeghnaghatHaripurHathazari/ Chittagong

Rampura/ DHK

Comilla

58 Km12 Km22 Km

6 pair 6 pair 6 pairFeni

70 Km 4 pair 4 pair

Pylon 213

76 Km 78 Km

6 Km

MeghnaghatHaripurHathazari/ Chittagong

Process of Leasing PGCB’s OFC Network The process of leasing involved invitation of Expression of Interest, motivating investors, floating tender and evaluation of tenders. This type of optical network leasing was relatively new in Bangladesh and there were a number of points that required input from telecom stakeholders, especially the potential tenderers, a project promotion meeting was held on 12 January, 2005. The objective was to attract at least three interested parties to participate in the EOI. Invitation for tender was published in local dailies on 31 October, 2005 with a deadline of submission of tenders on 29 December, 2005. The deadline was later extended to 30 January, 2006. A pre-tender meeting was held on 29 December, 2005 to answer any queries and address the concerns of any potential bidder. Tender documents were purchased by six companies/consortiums and four tenders were finally submitted. After evaluation of the tenders Grameen Phone Limited was selected as the Lessee and a Letter of Intent (LOI) was issued on 4 May, 2006 to the company. A flow diagram showing the overall process flow is demonstrated in the section five of the PPP Process flow report. The following figure demonstrates the business model of the project depicting commercial relations ship among the lessor, lessee and sub-lessee.

PGCB Station

Overhead Cable Termination

OPGW Termination Points:

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Figure: Business Model of the OFC Project

PGCB

Lessee

Lease Rental to PGCB

Lease Agreement

PGCB Leases the OFC to Lessee

Lessor Lessee Lessee’s Sub-lessee

OWN USE

Keeps

Bandw

idth for ow

n use

Less

ee’s

R

even

ue fr

om

own

cust

omer

s

Revenue from Sublease

The Lessee subleases the bandwidths

PSTN Operators

Cellular Operators

ISPs

Corporate Bodies

Others

F igur e 2.3 L essee’ s B usiness M odel

Contractual Flow

Payment Flow

Expression of Interest

The Expression of Interest had three purposes:

• Find the potential lessees who are interested for the OFC cable • Invite realistic plans for the development of the telecom network services by which

PGCB can earn maximum revenue from leasing the asset • Receive inputs of interested parties on project configurations.

EOI requested from the interested parties required:

• Information of the interested parties, • A Preliminary Technical Plan containing the plan of the interested party containing a

broad outline on utilization of the network and • A Preliminary Business Plan containing a broad strategy for business development. The

intention of the EOI was not to ask for detailed plan or proposal with respect to the Technical and Business Plans, but to have an understanding of the desired project configuration.

Stakeholder Consultation PGCB and IIFC jointly carried out consultation with the investors for promoting and defining the framework of the lease. A consultation meeting was held on 12 January 2005 at IDB Bhaban, conference hall inviting investors and relevant stakeholders. Around 50 participants participated in the consultation where the project concepts were presented and discussed. A consultation

12

paper was issued to define the technical and commercial framework of the project. Considering the responses in the consultation paper, tender documents were prepared. EOI was submitted by the following companies:

• Grameen Phone • TMIB • PBTL • Sheba • Telebarta • Dhaka Telephone • National Telecom

Tendering Process The tender was intended for leasing out one pair of PGCB’s Dhaka-Chittagong Optic Fiber Cable (OFC) network along the 230 kV power transmission line on “as is where is” basis for 15 years term. The Lessee was required to install the equipments for common use by multiple pairs (“Common Use Equipments” or CUEs) and transfer ownership of the CUEs to PGCB and pay Lease Rentals. The first ranking Tenderer based on the selection criteria was expected to be invited to finalize and sign the Lease Agreement based on the draft Lease Agreement issued with IFT and the proposal submitted by the winning Tenderer. The Lease Agreement required the winning Tenderer to obtain a license from BTRC, for doing business with Lease Assets, before the end of a pre-specified period, for the Lease Agreement to become effective. Otherwise, the second ranking Tenderer was to be invited to take award of the Lease, and same conditions with regard to licensing, as applied to the first ranking Tenderer. Tendering parameters The Tendering was done through three sets of parameters as described below:

Licensing Qualification Parameters It is the requirement of Bangladesh Telecommunication Regulatory Commission (BTRC) that any provision of telecom facility, except for own use, shall need to have a license from the Commission as per Bangladesh Telecommunication Act 2001. Both PGCB and the Lessee obtained a license from BTRC by applying to the Commission before the Lease was awarded. For the Lessee to obtain a License, the tendering process was kept open and provisions had been made as a condition of award of the lease that the successful Tenderer (the first ranking Tenderer), needs to obtain the required license from BTRC before the end of a pre-specified period. The Tenderers were evaluated on their ability to obtain a BTRC license. After meeting Licensing Qualification Parameters, Tenderers were evaluated based on technical responsiveness and financial proposal as described below.

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Technical Parameters The technical parameters, on which technical responsiveness test were done, are as follows: Network Utilization Plan - how the tenderer plans to utilize the network, consistency of equipments and state-of-the-art technology, comprehensiveness of the plan, innovativeness and new solutions. Business Development Plan - the tenderers business development strategy, how the tenderer plans to attract customers and create demand for bandwidth and tenderers assessment of future level of business. The plan also included a realistic financial projection i.e. proforma income statements and investments to be made, for at least five years with a clear description of assumptions including those on tariff and pricing. Overall plan contained:

• Strategy of business development • Market analysis and forecasts of growth of traffic and revenue • Planned expansion on a year-by-year basis.

Financial Parameters

Payments to PGCB

PGCB was to be paid the lease payments as upfront payment, guaranteed annual rental and variable lease rental (i) Upfront Payment

Upfront Payment was to be paid, as a one-time payment, at the time of signing of Lease Agreement. The amount of Upfront Payment was determined by the following formula.

Upfront Payment =

10% of the summation of present values of each Year’s Guaranteed Annual Rentals (GARs), quoted by the Tenderer, derived by multiplying present value factors with the GARs of respective years.

The Lessee paid an amount of Tk. 85,58,000 (Taka eighty five lakh and fifty eight thousand only) to the Lessor at the time of signing of the Agreement as a one-time payment. (ii) Guaranteed Annual Rental Guaranteed Annual Rentals or GARs are the Lease Rentals quoted was to be paid by the Lessee irrespective of level of business. It would be paid in four equal installments each Year. Each installment was fixed and which was equal to one-fourth portion of respective Year’s GAR.

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(iii) Guaranteed Annual Rental The Lessee was expected to pay a VLR to PGCB, after each quarter of the year determined by the following formula:

VLR =

4 0.25 * Σ [D * N * R]

where Σ = Summation over all routes between any two Fiber Drop Poin ts over all Sub-lessees and GP’s

own use D = Distance between two Fiber Drop Points (expressed in km), N= Number of E1 (for own use and for Sub-lease) connecting the same two Fiber Drop Points as

corresponding to D, at the end of the quarter R = Equivalent E1 Rate expressed in Taka per E1-km per year

GP is paying VLR to PGCB calculated by the formula provided above, provided that the VLR is not less than a Minimum Average VLR of Tk 2.5 crore per year (i.e. Tk.12.5 crore over first five years). If the actual average VLR is lower than the Minimum Average VLR, the Lessee would make-up the shortfall at the end of first five years or at the time of termination, whichever comes earlier. Performance Guarantee The Lessee was expected to submit a Performance Guarantee valid for five years from the date of signing of the Lease Agreement for an amount of Taka 1,00,00,000 (one crore). Tendering A notice was published inviting tender in Bangladesh National Newspapers. The first publication was on 31 October 2005 (in Bangladesh Observer). The following companies purchased the Tender document:

1 Concord Pragatee Consortium Ltd. 2 Warid Telecom BD. Ltd. 3 Sheba Telecom. (Pvt) Ltd. 4 T.M. International (BD) Ltd. 5 Grameen Phone Ltd. 6 National Telecom Ltd.

The deadline for submission was 30 January 2006 (extended from 29 December 2005). Out of the six parties, the following four companies submitted tenders:

1 Concord Pragatee Consortium Ltd. 2 T.M. International (BD) Ltd. 3 Grameen Phone Ltd. 4 National Telecom Ltd.

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Project Risks

PGCB’s Risks

O&M Risks

One of the major risks would the regular Operation and Maintenance of OPGW, which is strictly under the control of PGCB and very sensitive in nature. It was installed inside the high transmission overhead line, where O&M work is very difficult to carry out Only remote tests can be conducted at the PGCB Stations, to detect the fault in some point of OPGW between the Stations.

Commercial Risks

One of the concerns is the amount of Variable Lease Rental. The lessee was permitted to sub-lease a pre-specified portion to others. However, as it is not yet clear the rates at which the lessee would be allowed to sub-lease the bandwidth. So there remains the risk, that if sub-lease rates imposed by the regulator later, are significantly low in comparison to Lease Rental quoted by lessee.

Lessee’s Risks O&M Risks

Lessee has to bear the risks of interruption in the segments of the Optical Fiber Network, which are exclusively under its control, the lessee has to bear the loss to its sub lessee due to interruptions in the PGCB controlled segments

Business Risks

Sub-leasing of bandwidth was mandatory upon the lessee If the lessee does not find enough customers for bandwidth, it has to bear the loss, as Lease Rentals have already been fixed and to be paid irrespective of the business obtained.

Technical Risks It is likely that during tendering, the tenderer could not properly assess the physical condition of the OPGW, as the scope of testing was limited. However, at later stage, if any fault detected, where testing was not done, in that case PGCB would keep itself harmless because such fault was not declared during tender and it would be a consequential loss of the lessee.

Current Status The agreement was signed between PGCB and GrameenPhone on 31 July 2006. Currently the project (OFC cable between Dhaka and Chittagong through PPP) is in operation.

Note: IIFC also assisted a 2nd leg of OFC cable between Chittagong and Cox’s Bazaar through PPP that is presently under operation. Currently, PGCB is planning to lease out their countrywide OFC network.

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C A SE ST UDY NO. 4: DE V E L OPM E NT OF L A ND POR T S

Background The Government of Bangladesh decided to operate the existing Benapole Land Port directly in public sector and the remaining twelve land ports would be developed and operated through private sector on a build-operate-transfer (BOT) basis for a period of 25 years from the Commercial Operations Date. For the first time Government termed thirteen Land Customs (LC) stations as “Land Ports”. Twelve land Ports were declared by gazette notification on 12 January 2002 and Bibirbazar was notified on 18 November 2002. Mainly three government agencies were involved in the LC stations:

a. Bangladesh Customs under the National Board of Revenue b. Bangladesh Sthala Bandar Kartripaksha (BSBK) c. Bangladesh Rifles (BDR)

BSBK was mandated to provide cargo handling and storage facilities in the land ports to facilitate collection of customs revenues, on the imports from India and Myanmar. The revenues are collected by the Bangladesh Customs. BDR cheeks unauthorized access of contraband goods and illegal trade through the land ports and adjacent border areas.

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Projects Identification The Ministry of Shipping and the BSBK decided to develop twelve land ports on a build-operate-transfer (the “BOT”) arrangement for a period of 25 years from the Commercial Operation Date. BSBK aims to provide better and efficient storage and handling facility for import and export cargos, through the engagement of the private operator. By adopting BOT mode of contract, there will be saving of scarce government funds that may be used for other infrastructure development projects. Bangladesh Land Port Authority (BLPA) was created in 2001 to act as regulator for all the land ports. After being approved by the ministry, the Private Infrastructure Committee (PICOM) enlisted the projects on 20 April 2005.

Feasibility Studies

BSBK signed a Development Services Agreement (DSA) with IIFC on 18 November 2003 to assist in inviting private sector for development of land ports at ten LC stations on BOT basis and later for Teknaf land port. Under the DSA, IIFC conducted feasibility studies of the ports and prepared tender documents. Tender document consists of Invitation for Tenders, Concession Agreement and Land Lease Agreement. In addition to that, IIFC held investment promotion meetings, short listed potential investors and participated in pre-bid conference, negotiation of project agreements and direct agreement. During feasibility the following activities were undertaken

• Preparation of cargo projection • Design philosophy. • Design of a tentative ‘Layout Plan’. • Preparation of a tentative ‘Cost Estimate’ for the port development • Preparation of a ‘Financial Model’ on the basis of the estimated cost.

Issue Request for Tender It was planned to appoint the private port operators on BOT basis for all the land ports on phase wise. In the 1st phase, five port operators have been appointed to run five land ports and a 2-stage tendering method have been followed for the operator selection. Teknaf was tendered out separately. The awarded six land ports are given below:

1. Sonamasjid 2. Hilli 3. Birol 4. Bibirbazar 5. Banglabandha 6. Teknaf

The pre-qualification was done through public advertising and the potential investors were short listed. Subsequently, for the 1st phase, BSBK issued tender document to pre-qualified short listed bidders on 18 May, 2004. In the tendering process BSBK adopted a single-envelope system to select investors. .Based on the highest variable royalty offered to BSBK, the responsive tenderers have been ranked in descending order. The deadline for submission of tenders was on 14 July 2004. Finally, the above operators have been selected after the evaluation of the submitted tenders and Concession Agreements have been signed with the selected operators.

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Issue Letter of Intent (LOI) Under the BOT mode, BSBK acquired the land and leased it to the investors. The investors were selected through a transparent bidding process, following the Bangladesh Private Sector Infrastructure Guidelines (PSIG) and approved by PICOM. Six companies were awarded the Projects to operate on BOT basis for a period of 25 years. The sponsors established special companies to fulfill the obligations and duties under the agreements. In return, the investors have the right to charge the port users for the services provided for cargo storage and handling. After expiry of the term, the investors will transfer the land ports to BSBK including all fixed and movable assets. Risk Allocation The volume of cargo movement through the land port depends upon the countries relationship with India and Myanmar in the case of Teknaf. The land port has also risks related to changes of the fiscal and export policy of the government. The tariffs are regulated by BSBK which bears a risk of tariff changes at the discretion of BSBK. Risk of declining demand in the local market, may hamper imports through the land port. Natural calamities, internal political disruptions and wars are the major political force majeures, beyond control of the port operator. The following table shows the risks involved in the project.

Risks to the Private Operator

Political Risk

If heavy duties are imposed on Indian and Nepalese imports, the throughput in the land port is likely to suffer.

Fiscal Policy

The throughput is also highly dependent upon the duty and at source tax imposed on imports.

Export-Import policy

Export and import policy of the country has an impact on import. Especially, import of foods is frequently affected with change of the policy.

Tariff Regulation The land port operator will be subject to tariff regulation by Bangladesh Sthala Bandar Kartripaksha (BSBK). Benapole Land Port is running under BSBK. Therefore, it is likely that it will not set any tariff that hamper the throughput at Benapole.

Demand Risk

There is a possibility that Bangladesh achieve self sufficiency in food and demand for import of food may not be sufficiently cover the fixed costs of running the port.

Force Majeure Risk

These risks arise from natural calamities, political disruptions and wars.

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Problems Faced In the bid, the investor for Sonamasjid and Hilli quoted a very high amount of royalty, which was 49% of the gross revenue, earned from the port. The difference between the quoted royalties with the other contenders was significantly high and unrealistic. In the financial model carried out in the feasibility study, the maximum royalty assumed was roughly around 2% of the gross revenue. It is assumed that the bid was an offer by the investor where the project viability and other financial obligations like recovery of the investment and repayment was not properly considered. The lead financer in Sonamasjid and Hilli did not properly model the cash flows with the 49% offer. A significant portion of loan in the project was disbursed without monitoring the construction progress. The physical works were not completed to the required quality, leading to a poor name for PPPs. In the other projects, Birol and Bibir Bazaar had difficulty with its associated or linked projects. These were rail line relocation and road access respectively. Bangla bandha faced difficulties in receiving the appropriate amount of goods from Nepal through India. The Teknaf Land Port is operating well.

Current status During construction phase of the project some disputes were raised between the Project Company and Bangladesh Sthala Bandar Kartripaksha (BSBK), which resulted significant delay in project implementation. Later, the disputes were resolved. The land port projects in operation:

Sonamasjid Hilli Teknaf

The land port projects under development:

Birol Bibirbazar Banglabandha

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C A SE ST UDY NO. 5: PA T E NG A A ND PA NG A ON POR T T E R M I NA L -SSA B

Project Background and Content Operation in Chittagong port was inefficient and inadequate to handle the required cargo. It can take a container even 30 days from coming in to moving out. Port development and improvement of its management system are fundamental and need to be addressed urgently. A master plan for Chittagong port development was prepared in 1995, wherein it was recommended to build a container port terminal at Patenga. However, GoB lack of funds prevented the progress. Stevedoring Services of America (Bangladesh) Ltd (SSAB) submitted an unsolicited proposal for the construction and operation of a container-handling terminal at Patenga in Chittagong, to be financed privately. The project was proposed for a BOO basis. GoB has retained the option of building a complementary Pangaon terminal in Dhaka. However, if GoB would not build the Pangaon terminal in time, SSAB would also build Pangaon and provide the integrated barge services to carry the containers between Patenga in Chittagong to Pangaon in Dhaka. The terminal was proposed to have a capacity of 300,000 TEUs (twenty-foot container equivalent units). The construction of Patenga terminal was intended to consist of construction of jetties, container freight station, administrative building and container yard etc. The equipment side would consist of cranes, forklifts, tractors and trailers. The marine service, if necessary, would consist of barges and other associated equipment. The proposed project would be through a US/Bangladesh joint venture company named SSA Bangladesh Limited (SSAB). The foreign investor was involved in Stevedoring Services of America (SSA) of Seattle, USA and the local counterpart was Orient Maritime Limited of Bangladesh. At that time, SSA was carrying out 150 port terminal operations worldwide including in India, Thailand, New Zealand, Chile, Panama, Egypt etc. Private sector investors in shipping are rather few. All have a number of projects. Attracting foreign investors in port and shipping was very competitive, as experienced by Bangladesh in the case of the Sadarghat Terminal project. This was a large private sector Investment in physical infrastructure. The investment was forthcoming as a foreign direct investment and no government guarantee was required. The investors proposed taking the full commercial and other risk without any involvement of the government. The following are some of the benefits indicated by SSAB:

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Project Financing and Revenues The total estimated cost of the project was US$ 438 million of which$250 million was expected to be spent in the first phase. SSAB might restrict itself to the first phase. The original lease period demanded was very long (2x99 years) and there was a strong move to restrict this period to 60 or 30 years. The project was expected to be co-financed by the Infrastructure Development Company Limited (IDCOL) of Bangladesh and the International Finance Corporation (IFC), an affiliated organisation of the World Bank, and was likely also to receive finance from the Overseas Private Investment Corporation (OPIC) of USA.

Related Policy and Legal Framework In the absence of any directly-related Shipping Policy or enactment, the project was anchored within a number of existing policies and Acts, in particular:

• The Industrial Policy, 1999 provides that the private sector may undertake infrastructure projects like Ports, Energy, Transport and Communication on a BOO/BOT basis and these sectors will receive high priority as Thrust Sectors.

• Approval/Licence to construct Jetty or Berth by the Private Sector was permitted in Section 18 of Chittagong Port Authority Ordinance, 1976.

Processing of Project and Concession Agreement A number of steps were taken toward getting this project under way: The Chairman of the Negotiation Committee and SSAB representative initialed an Implementation Agreement on 5th

March 2001;

In expectation of government clearance SSAB had already purchased the necessary associated land at Patenga. It had followed up various licences and permits. There were about 50 such instruments and this could take another six months; Port authority personnel had travelled to USA to see and understand private sector participation in ports. At that time US Trade Development Agency had taken a group of stakeholders i.e., union leaders and leaders of Chittagong Port Authority (CPA), with two senior officials, to expose them to the privatised ports in the USA; As a part of the promotion of the project, the sponsors have had also to inspire social groups in support of the project through social organisations, civic society and the Chittagong Development Forum; Environmental Impact Assessment study had been completed;

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IIFC as an independent and competent body, was engaged as transaction adviser to provide advice to the Ministry of Shipping. The project was subject to a challenge in the High Court. In November 2002 the court identified a number of issues. Some of these concerns related to procedural shortcomings and the lack of an appropriate competitive process.

Chronology of Events Date Events Dec. 1997 Submission of a proposal for construction of an integrated container

terminal project by SSA Bangladesh Limited (SSAB) to the Ministry of Shipping (MoS).

March/April 1998

Approval by Cabinet Committee on Economic Affairs (CCEA) and issue of letter of approval

June1998 The Committee instructed Government agencies / authorities to take steps

for acquisition / leasing out of land to SSAB. August 1998 SSAB submitted a Draft Implementation Agreement to the Ministry of

Shipping consisting of: - Operation and lease agreement with BIWTA

- Operation and lease agreement with the Chittagong Port Authority - Project Implementation Agreement with the Ministry of Shipping.

November 1998 The Prime Minister approved the proposal for acquiring 157.86 acres of

privately owned land at Patenga. December 1998 Land Lease and Operating Agreement signed for establishment of

Container Terminal at Pangaon, Dhaka by BIWTA January 2000 MOS formed an inter-ministerial Negotiation Committee. January 2000 Infrastructure Investment Facilitation Company (IIFC) engaged by MOS

as transaction adviser to provide assistance to the Negotiation Committee in terms of technical, financial and legal aspects of the Draft Implementation Agreement.

September 2000 Ex Chairman of Chittagong Port Authority filed a case in the High Court

against the project implementation based on lack of transparency and that the project would create problems in the navigability of the river.

December 2000 Negotiations with SSAB undertaken, with over 85 lengthy sessions during

the whole year July 2001 Project progress stopped due to caretaker government

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October 2001 The Cabinet formed a six-member committee at the Secretary level. May 2002 Negotiations held between the Six-Secretary Committee and SSAB on 12

issues. All points agreed after intense negotiations. Sept 2002 Several meetings between GOB and SSAB to finalise text of the 12-

points. November 2002 High Court decision stops project.

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C A SE ST UDY NO. 6: DH A K A E L E V A T E D E X PR E SSW A Y PPP

PR OJ E C T

Background The Bridges Division, Ministry of Communications, on behalf of the Government of the People’s Republic of Bangladesh, signed a Concession Agreement on 19 January 2011 with Italian-Thai Development Public Company Ltd to design, finance, construct, operate and maintain the Dhaka Elevated Expressway, the country's largest infrastructure project under public-private-partnership. Bangladesh Bridge Authority (BBA) is the executing agency for implementing the project. The expressway is scheduled to be completed within four years from signing of the concession agreement, while the Concessionaire is required to achieve financial closure within a six-month period. The Project Company shall construct, maintain and operate the expressway for a period of 25 years. The prime objective of the expressway is to relieve the capital's traffic congestion.

The Dhaka Elevated Expressway (DEE), a project recommended in the strategic transport plan (STP) for Dhaka city, will initially be a 26 kilometer (approx.) long, four lane dual carriageway, with two elevated links and seven interchanges and with a design speed of 80 kilometers per hour. The expressway will improve road connectivity to link the northern part of Dhaka city with the central, south and south eastern parts, linking important commercial and business centers of the city. In addition to providing much-needed increase in traffic capacity, traffic access, distribution and exits from the expressway and the elevated links are designed to relieve existing overloaded roads. The major portion of the route of DEE is designed along the rail alignment for the ease of construction, minimizing interruption to existing traffic and minimizing adverse social and environmental impacts due to the construction of the expressway. In the future, the Expressway may also be extended north to Joydebpur Chowrasta with a link to Mirpur; east beyond Kanchpur Bridge over the river Shitalakhya; and southeast to the road connecting the Padma Bridge.

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Feasibility Study BBA decided to carry out a feasibility study of the STP recommended Dhaka Elevated Expressway. Due to the urgency of the work to relieve congestion in Dhaka, BBA engaged the international consultant AECOM on a sole-source basis in February 2010 to prepare a feasibility study for the project and to recommend the most appropriate route alignment through the city. AECOM prepared a feasibility study and presented the study results at a workshop held on 17 June 2010 at the Bangabandhu International Conference Center. Based on the outcome of the workshop, five (5) alternative route alignments were identified by the consultants. The Cabinet headed by the Hon’ble Prime Minister at its meeting held on 23 August 2010 reviewed and approved option 5a as the route alignment for implementation (Fig. 1).

Considering the importance of the first PPP mega-structure project in Bangladesh, the consultant also recommended that a transaction advisor with PPP experience be appointed. Acting on their recommendation, the BBA appointed the Infrastructure Investment Facilitation Company (IIFC), a government-owned PPP consulting firm, on 15 September 2010 to carry out detailed financial viability analysis, preparation of tender documents, concession agreement and to provide assistance to the Expert Committee during bid evaluation and negotiation.

Bidding Process The process of bidding was initiated by the publication of Pre-qualification notice on 16 November 2009 and subsequently published in the leading national daily newspapers. An Investment Promotion Meeting to give wide publicity to the project and attract global investors was held on 12 January 2010 at Bangladesh Bridge Authority conference room in presence of the representatives of different investor companies.

The following nine (9) companies submitted their pre-qualification statements:

Name of the Firm(s)

1. Soma Enterprise Ltd. (India)

2. Sino-Global (USA)

3. AR Track Hawai Rocket Rahmat (Bangladesh)

Figure 1: Route Alignment of DEE

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Name of the Firm(s)

4. Italian-Thai Development Public Company Limited. (Italy-Thailand)

5. Sikder Real Estate-KCC JV Consortium (Korea-Bangladesh)

6. Gammon Infrastructure Projects Ltd.-Bouygus Travaux Publics SA Consortium (India-France)

7. BPHB-BCC JV (Malaysia-Bangladesh)

8. M/S Simplex Infrastructures Ltd.- M/S Seri Infrastructure Finance Ltd. (India)

9. China Railway International Ltd. (China) A Pre-qualification and Tender Evaluation Committee was formed for evaluation of the proposals submitted by the applicants. After evaluating the pre-qualification statements submitted by the potential investors, four (4) prospective bidders were selected and subsequently approved by the Cabinet Committee on Economic Affairs (CCEA). The four (4) pre-qualified bidders were:

1. Italian-Thai Development Public Company Ltd. (Thailand)

2. Sikder Real Estate – KCC JV (Bangladesh- Korea)

3. Gammon Infrastructure Projects Ltd. (India) – Bouygus Travaux Publics SA (France) Consortium

4. China Railway International Ltd. (China)

The Letter of Invitation for bids was issued to the four (4) selected pre-qualified bidders on 2 September 2010 by providing the Request for Proposal (RFP). Following the issuance of RFP, the version 1 of the Concession Agreement was issued to the bidders on 5 October 2010. The bidders were requested to submit their questions and comments on the bidding document, including the Concession Agreement, on or before 09 October 2010.

As per the Policy and Strategy for Public Private Partnership (PPP) 2010, the bid document and the Concession Agreement were sent to the PPP Office. A pre-bid conference was held on 11 October 2010 at the BBA’s conference room. Invitation was sent to all the four (4) companies who had pre-qualified so that they can have clarification on their queries and about any confusion/ misinterpretation/ ambiguity on any matter related to the bid document. Representatives from all the four (4) companies attended the pre-bid conference.

Two companies, Italian-Thai Development Public Company Ltd. (Thailand) and Sikder Real Estate – KCC JV (Bangladesh- Korea), submitted tenders by the deadline of 23 November 2010.

The BBA formed a Tender Evaluation committee comprising seven (7) members to evaluate the tenders. Ital-Thai was hence adjudged as the winning bidder and Letter of Intent (LoI) was issued to the same. The concession agreement between BBA and Ital-Thai was signed on 19 January 2011 marking it as the first mega-structure PPP project to be awarded in the country.

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Key Features of Concession Agreement Some of the key features of the Concession Agreement of the DEE PPP project are as follows:

Toll Fees for Cars*

End to End Tk 125

Any Intermediate Point Tk 100

Guaranteed Traffic 13,500 transactions per day

Traffic Transaction Ceiling 80,000 vehicles per day measured in terms of transaction

Revenue Sharing 25% GoB – 75% Concessionaire (for exceeding Traffic Transaction Ceiling)

Estimated Project Cost Tk 8703.11 Crore

Concession Fee (Royalty) Tk. 272.5 Crore

Viability Gap Funding (VGF) Tk. 2258.81 Crore

*Toll Fee for Bus will be 2 times, for Trucks upto 6 wheels will be 4 times, for Trucks greater than 6 wheels will be 5 times of Car Current status The ground breaking of the Dhaka Elevated Expressway was held on 30 April 2011. According to the concession agreement, the concessionaire was expected to achieve financial closure and obtain all required approvals and consents within 19 July 2011.

However, there have been financial closure delays because of the size of the project. In addition, route and alignment difficulties arose, leading to realignment and renegotiations. When all the conditions precedent activities are fulfilled, the construction of the Dhaka Elevated Expressway will commence.

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PPP Projects Awarded/Completed in Bangladesh

29

PPP PROJECTS IN BANGLADESH (Awarded/ Completed) Dated: 11 February 2014

Sl No. Sector Name of PPP Project 1 Power 360 MW Combined Cycle station at Haripur 2 Power 450 MW Combined Cycle station at Meghnaghat 3 Communication Gulistan-Jatrabari Flyover 4 Power Haripur 115 MW EI Paso Barge Mounted Power Plant 5 Water Supply Central Effluent Treatment Plant at Comilla EPZ 6 Water Supply Central Effluent Treatment Plant at Chittagong EPZ 7 Power 90 MW Westmont Baghabari Power Barge 8 Communication Dhaka Elevated Expressway PPP Project 9 Water Supply Central Effluent Treatment Plant at Dhaka EPZ

10 Power 51 MW Power Plant at Sylhet BEDL 11 Telecommunication RanksTel Fixed Line Telephone 12 Power Summit Uttaranchal Power Company 44 MW Power plant 13 Water Supply Central Water Treatment Plant (CWTP) at Chittagong 14 Power Summit Purbanchal Power Company 66 MW 15 Port Land Port at Teknaf 16 Power 11 MW Doreen Power House and Technologies Limited at

Mahipal, Feni 17 Port Land Port at Birol 18 Power 22 MW Regent Power Limited 19 Tourism Foys Lake Resort 20 Power Maona 33 MW Power Plant of Summit Power Limited 21 Power 50 MW Baraka Patenga Power Plant at Patenga, Chittagong 22 Telecommunication Public Switched Telephone Network (PSTN) Fixed Line

Providers 23 Power 341 MW Summit Bibiyana II Power Plant at Auskandi,

Habiganj 24 Telecommunication License for Interconnection Exchange (ICX) Services 25 Power 11 MW Hobiganj, SIPP 26 Port Land Port at Banglabandha 27 Water Supply Central Water Treatment Plant at Comilla EPZ 28 Power Summit Power 33 MW Power Plant

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Sl No. Sector Name of PPP Project 29 Telecommunication License for International Internet Gateway Services 30 Power Khulna 110 MW Power plant of Khulna Power Company Ltd. 31 Power 341 MW Summit Bibiyana I Power Plant at Auskandi, Habiganj 32 Power 25 MW Shahjahanullah, CIPP 33 Telecommunication Power Grid Company's Optic Fiber Cable (Phase-I) (Dhk-Ctg) 34 Port Land Port at Bibirbazar 35 Power 55 MW DNPGL Power Plant at Singair, Manikganj 36 Telecommunication Power Grid Company's Optic Fiber Cable (Phase-II) (Ctg-Cox's

Bazaar) 37 Power 2.7 MW Power Plant of Prapty Power Generation 38 Power 11 MW Power Plant at Noorpur, Habigonj 39 Water Supply Central Water Treatment Plant at Adamjee EPZ 40 Power 110 MW Haripur NEPC, IPP 41 Telecommunication BanglaTrac International Communication Gateway 42 Telecommunication License for International Gateway Services 43 Power 51 MW Ashuganj Midland 44 Power 360 MW Meghnaghat p. Ltd. CCPP, IPP 45 Port Panama Hili Land Port 46 Power 34 MW Power Plant at Bhola VERL 47 Power Narsingdi 35 Power Plant of Summit Power Limited 48 ICT Expansion of NTTN (Telecommunication backbone) Project 49 Power Ashulia 45 Power Plant of Summit Power Limited 50 Power Malancha Holdings Ltd. 44 MW Power Plant at Chittagong EPZ 51 Power 34 MW Malancha Holdings Power Plant at Dhaka EPZ 52 Communication Jamuna Bridge - First management contract 53 Power 52 MW Gazipur RPCL, IPP 54 Power 210 MW RPCL Combined Cycle power Station, Mymensingh,

IPP 55 Telecommunication Bangladesh Railway Fiber Optic Leasing 56 Power 55 MW DSPGL Power Plant at Nababganj, Dhaka 57 Telecommunication DNS Satcomm Satellite Earth Station Project 58 Power 22 MW Barabkunda, SIPP 59 Power 115 MW CPCL Khulna (new), IPP 60 Power 52 MW Rajlanka, IPP 61 Port Inland Container Depot of KDS Logistics Limited 62 Power 146 MW Summit Power (Dhaka), SIPP

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Sl No. Sector Name of PPP Project 63 Power 11 MW Summit Power (Ullapara), SIPP 64 Port Panama Sonamasjid Land Port 65 Power Chandina 25 MW Power Plant of Summit Power Limited,

Comilla 66 Power 22 MW Power Plant at Tangail 67 Power 25 MW Summit Power (Comilla), SIPP 68 Port CEMCOR Inland Container Terminal/River Port, Narayanganj 69 Power 22 MW Power Plant at Feni 70 Telecommunication M & H Telecom Interconnection Exchange Project 71 Power 22 MW Power Plant at Narsingdi 72 Power Jangalia 33 MW Power Plant of Summit Power Limited,

Comilla 73 Power Rupganj 33 Power Plant of Summit Power Limited,

Narayanganj

No. of Completed Projects = 60 i.e in commercial operation No. of Awarded Projects = 13 i.e. under financing and/or construction, but not yet

operational Total Number of PPP Projects = 73

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History of PPP in Bangladesh

Nazrul Islam Managing Director

Infrastructure Investment Facilitation Company

1. Introduction

Bangladesh needs a large amount of investment, especially for infrastructure projects, but because of the limited availability of public resources to meet the growing need for infrastructure investment, the Government has embarked on the Public Private Partnership (PPP) program as a key initiative for realization of the vision 2021; the vision sees Bangladesh progress to a middle income country by the year 2021. In order to achieve this vision on a sustainable basis, the Government has adopted PPP as one of its cornerstone policy features.

2. PPP Phases

Like many other countries in Asia, Public-Private Partnership was initiated in Bangladesh during the mid-1990s. Bangladesh recognized the need to encourage private participation in infrastructure services in order to improve efficiency and reduce demand for scarce public resources. In this backdrop, particularly focusing on the power sector, a 4-day Project Finance Workshop was held in September 1996 at Rajendrapur, Dhaka

In 1997 the World Bank initiated a Technical Assistance Project "Private Sector Infrastructure Development Project (PSIDP)" as a vehicle for delivering assistance to GoB for proactively developing and marketing sound PPP sub-projects for private investment. The PSIDP had the provision to provide long term debt financing from IDA resources by establishing a long-term fund.

, sponsored by the Board of Investment and the World Bank. Through this workshop, the Public Private Partnership (PPP) program was born in Bangladesh. Following on from the workshop, the Private Sector Power Generation Policy of Bangladesh was adopted in October 1996 for supporting the development of independent power producers (IPP) in the country. The Power Cell, under the Ministry of Energy & Mineral Resources (MEMR) started rolling out the first PPPs in the country from 1997. These may be termed as the first generation PPPs in the country.

The PSIDP had two components - project financing and sub-project transaction advisory. Infrastructure Investment Facilitation Center (IIFC) was mandated to carry out sub-project transaction services. The Infrastructure Development Company

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Limited (IDCOL) had the provision for mobilizing funds for private infrastructure projects.

In an effort to enhance private infrastructure development, and to bring PPP to sectors other than power, the government issued the Private Sector Infrastructure Guidelines (PSIG) in October 2004. This formed the basis for the second generation PPPs in Bangladesh. Later, in the year 2006, Investment Promotion and Financing Facility (IPFF), a World Bank financed project under Bangladesh Bank (BB), was established, mainly for lending to infrastructure projects in the private sector.

3. Present PPP Framework

Government laid emphasis on infrastructural development and is providing extensive support to buildup an agreeable framework in terms of institutional, legal as well as financial to make the PPP program successful in Bangladesh.

a) Legal Framework:

Government has promulgated Guideline for VGF for PPP projects, 2012 and Guideline for PPP Technical Assistance Financing (PPPTAF), 2012 and Scheme for PPPTAF, 2012. A PPP law is in the process of enactment, which is consistent with policy and guidelines prepared for PPP projects.

In August 2010, the Government of Bangladesh issued the Policy and Strategy for Public Private Partnership (PPP) starting the third generation PPPs to facilitate the development of core sector public infrastructure and services. The PPP program is part of the Government's Vision 2021 goal to ensure a more rapid, inclusive growth trajectory, and to better meet the need for enhanced, high quality public services in a fiscally sustainable manner.

b) Institutional Framework:

A PPP Unit under the Ministry of Finance (MOF) was established to foster an environment of fiscal responsibility and sustainability in PPP projects. The Unit has management responsibility for overseeing three key, catalytic funds, the PPP Technical Assistance Fund, Viability Gap Fund and Bangladesh Infrastructure Finance Fund.

Under the policy and strategy for PPP, the PPP Office was established to support sector line ministries to facilitate identification, development and tendering of PPP projects to international standards. For interested investors and lenders, the PPP Office provides a professional, transparent, centralized portal to high quality PPP Projects.

c)

PPP Technical Assistance Fund (PPPTAF) covers expenditure related to project development activities including (1) project identification (ii) pre-feasibility study (iii)detailed feasibility study (iv) procurement procedures (v) documentation and evaluation (vi) technical, financial, commercial and legal supports (vii) contractual and negotiations and other subsequent activities in relation to the project till signing the contract and financial closure.

Financial Framework:

The Viability Gap Financing (VGF) is meant for the projects where financial

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viability is not ensured but economic and social viability is high. VGF could be in the form of capital grant or annuity payment or in both forms. The main intention of VGF is to make the commercially nonviable infrastructure projects attractive to private investors through PPP arrangement and to undertake the project more effectively under the close supervision of the government.

In order to avail long term financing for PPP projects, IDCOL and IPFF were set up. Moreover, Bangladesh Infrastructure Finance Fund Limited (BIFFL) was established in 2011 as a special purpose vehicle to finance infrastructure projects.

4. PPPs Carried Out in Bangladesh

Over the last eighteen years, Bangladesh has been very active in implementing PPP projects. In the power sector, after the approval of the 1996 Private Sector Power Generation Policy, a large number of IPP projects have been taken up and completed in Bangladesh. Notable amongst them are the 360 MW Haripur and 450 MW Meghnaghat combined cycle power plants. At 2.7 cents per kWh levelised cost of electricity, the two projects have the lowest power price in the world, far cheaper than comparable costs achieved by the public sector. At the moment, with over 40 IPPs having been completed, the share of PPP in power generation is over 44% in Bangladesh.

In the telecom sector, private investments approach the $1½ billion mark, with world-class mobile companies such as GrameenPhone, Banglalink, Robi, Orascom, and AirTel. Fixed line phones have also been opened up and many operators such as RanksTel and Dhaka Phone etc are giving commercial service. The Power Grid Co. has leased out its Dhaka-Cox's Bazaar Optic Tiber Cable constructed on its high-voltage transmission lines. The Bangladesh Railway has done the same thing for the optic fiber along its railway lines, leasing it with a PPP. The result: a PPP between Bangladesh Railways and GrameenPhone has triggered the growth of the largest mobile operator in the country, making us one of the fastest growing country in the world on telecoms.

In the ports sector, six land ports have been constructed through PPP. These are at Teknaf, Sonamasjid. Banglabandha, Hill, Birol and Bibirbazar, all helping with improved trade with our neighbouring countries. These are the first BOT land ports in the world. The tendering process for private operators is currently underway for the New Mooring Container Terminal, a world-class terminal at the Port of Chittagong.

In the transportation sector, several toll-road projects are under way, notably the Gulistan Jatrabari Flyover and the $1.2 billion Dhaka Elevated Expressway.

Mere recently, the Government is encouraging PPPs in developing economic zones in the country. Four feasibility studies for using PPP in economic zones have been carried out at Comilla EPZ, Meghna Economic Zone and Narsingdhi Economic Zone and High-Tech Park. On an overall basis, Bangladesh has carried out over 70 PPP projects, primarily in the power, telecommunications and transportation sectors.

The table below illustrates the sequence of development of PPP in Bangladesh.

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Table 1: Historical Development of PPP in Bangladesh

Sl. No. Stage Year Sectors Cornerstone

Policy

Institutions Examples of Projects

Authority/ Advisory Lending

1. First Generation PPP

1996 Power

1996 Private Sector Power Generation Policy

Power Cell IIFC

IDCOL

• 360 MW Haripur Combined Cycle power project (CCPP)

• Megnaghat 450 MW CCPP • Three barge mounted power

projects • 10 to 11 MW REB power

projects • In all, over 40

fired and coal fired projects gas fired, oil

under the policy 2. Second

Generation PPP

2004 Multi- sector

Private Sector Infrastructure Guidelines, 2004

PICOM IPFF • Six land ports • PGCB Optic fiber (2 projects) • Gulshan - Jatrabari Flyover • Dhaka Elevated Expressway • New Mooring Container

Terminal 3. Third

Generation PPP

2010 Multi- sector

Policy and Strategy for Public Private Partnership (PPP), 2010

PPP Office PPP Unit

BIFFL PPPTAF

• Development of Dialysis centers through PPP (two projects)

• Development of two jetties at Mongla port through PPP

5. PPP Challenges and Recommendations Despite a number of measures taken by the government several challenges remain in implementing PPP in Bangladesh. The challenges are as follows:

a) Projects take time to develop and bid: The process of developing a project for bidding to the private sector is well-established globally. Based on the principle of project finance, development requires the coming together of multiple parties, multiple disciplines across the multiple sectors of the government to achieve the full formed project. No matter how much pressure is excreted to meet the time target for releasing a bid or closing financing, all details must be completed. Attempts to short-cut the development process invariably lead to suboptimal outcomes. These are manifested through total project costs higher than anticipated, increased need of government support (higher VGF), longer negotiation period, projects award to unsuitable sponsors, delays in completion, cost overrun etc.

b) Projects require a balance amongst Government, sponsors and lenders: Often projects are planned and requests for proposals issued without proper consultation with the key stakeholders. Government must take into account not only the needs of their sectors and their own budgets, but also the needs of the sponsors/equity investors and the lenders. PPP development processes need to achieve a three-way balance from the outset

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amongst the interests and requirements of the government, developers and lenders in order to increase the chance for a speedy and efficient closure of the project.

c) PPP must account for all project factors: There appears to be a bias amongst line ministries to focus on the technical aspects while ignoring or downplaying the commercial and financial aspects. This is quite natural, given that sector ministries will concentrate on the areas of expertise as they are used to dealing in the realm of public sector. Global PPP experience indicates that the issues related to commercial and financial aspects also be addressed upfront prior to releasing a request for proposal.

d) Engagement of Transaction Advisors: Initially, Government may wish to utilise outside consultants to prepare projects for bidding and then support through the conclusion of negotiations - particularly in commercial, financial and legal matters. Multidisciplinary transaction advisors are required throughout the development lifecycle. However, using consultants for transaction support is not sufficient on its own. The government must develop its own in-house transaction skills for developing PPP projects successfully.

e) Risks needs to be addressed and allocate to the best able party to manage: PPP project development needs to comprehensively address all project risks. If major risk issues remain unresolved, then these areas become unknown as sources of potential cost or problems during the bidding and negotiations. Ideally all major risks should have a plan for how they are addressed in project specifications and contracts.

f) Linked Projects to be identified upfront: Success and attractiveness of a PPP project largely depend on timely completion of the linked projects. The linked projects may the activities like land purchase/ acquisition, linked road, transmission line, supplying utility services to the PPP project etc. Linked projects need to be identified by professional consultants and Government needs to give priority to timely completion of the linked projects.

g) Project development require inputs from broad range of professionals: Infrastructure projects are often complex, requiring multidisciplinary inputs. In context of PPP, all matters associated with the development, construction, financing and operations of a PPP project must be addressed upfront. As such reliable inputs covering all aspects of the project need to covered and captured in context of project documentation- whether in bids or contracts.

h) Capacity building: The executing agencies need to be capable of handling PPP deals in respect of preparing contract document, negotiation, contract management and risk identification, and allocation and mitigation techniques.

i) Sector mobilization: Infrastructure sectors, excepting a few, are yet to be mobilized to operate PPP projects. So, as far as the operation and implementation are concerned, having a systematic training program need

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to be carried out through coordinated efforts of PPP Office, executing agencies and line ministries.

j) Change Management Need for the Paradigm Shift: Traditionally people are resistant to change. Public sector may be reluctant to accept PPP concepts, feeling that there is potential risk of increasing their work load and losing their domination in the industry. The public sector must move out of their traditional beliefs and be encouraged with partnership arrangement with the private sector in the development process. This requires the change management discipline as one of the important necessities in developing PPP projects.

6. Conclusions

A developing economy like Bangladesh must not depend only on the public sector for infrastructure investments. Public and private combined efforts will have the greatest effect in infrastructure development. The public sector predominant infrastructure areas like energy, transport, water and sanitation, education and health provide good areas for the private sponsors to apply their financial acumen and managerial skills, while sharing the risks associated in a project.