The Asian Development Bank (ADB) and the Government of Pakistan agreed to chart new ways to pursue more robust and inclusive ADB investments in the country by scaling up public-private partnerships (PPPs) to tap private sector resources and meet Pakistan’s rising infrastructure needs.
The 3-day consultation workshop, titled “ADB Country Programming and Public-Private Partnerships in Pakistan,” which started on 14 May at Bhurban near Islamabad, will be attended by over 100 delegates including senior government officials, economists, planners from federal and four provincial governments, and ADB staff. Participants will discuss development opportunities and pipeline of projects as part of ADB’s Country Operation Business Plan, 2019–2021, for Pakistan.
ADB Country Director for Pakistan Ms. Xiaohong Yang and ADB Office of Public-Private Partnerships Director Mr. Takeo Koike opened the workshop by reiterating ADB’s continued commitment to support Pakistan in achieving its key development goals outlined in the ADB-Pakistan country partnership strategy.
Ms. Yang called for closer coordination and consultation between ADB and partners to ensure smarter investment programs to better respond to Pakistan’s evolving priorities, particularly in the education and health sectors, as well as in energy, transport, agriculture, and institutional reforms.
Department for International Development (DFID) of the United Kingdom Head of Economic Growth Group Ms. Patricia Seex expressed her appreciation for ADB and the government’s efforts in facilitating an enabling environment and effective regulatory framework to promote PPPs at the national and provincial levels to increase Pakistan’s economic growth—needed to create jobs and help Pakistan achieve middle-income status.
Chairman of the Planning and Development Board for Punjab Mr. Mohammad Jahanzeb Khan and Head of PPP Cell and Member of the Planning and Development Board of Punjab Mr. Agha Waqar Javed reaffirmed the government’s commitment to work closely with ADB in delivering high-quality development projects and programs.
They also provided updates on reforms to improve regulatory and policy frameworks conducted by the government intended to encourage greater private sector participation in public sector development programs with the federal and provincial governments.
Pakistan’s public investment in infrastructure has historically fallen short of the estimated annual investment need of 7.6 percent of the country’s gross domestic product, or about USD 20 billion per year.
The current surge in infrastructure spending reaching more than 67 percent of the total development budget in the public sector requires effective fiscal consolidation measures and strategies to reduce the deficit and increase efficiencies, including mitigating potential fiscal risks posed by PPPs.
The outstanding infrastructure financing from local commercial banks in 2016 was only about USD 4 billion, with 65 percent of the local bank’s lending going into energy projects.
“Project financing in Pakistan is only offered by a few commercial banks, with little or no role of capital markets or other financial institutions,” said Ms. Yang. “This leads to lack of sufficient financial depth and backing in the country’s domestic credit markets to accommodate the long-gestation of infrastructure projects. In the meantime, we are in short supply of a well prepared and bankable PPP pipeline.”
Ms. Yang added, “In this regard, I commend the Sindh and Punjab provincial governments’ efforts to develop their investment frameworks to provide an enabling environment for the private sector to invest in infrastructure. The private sector has responded positively, but more needs to be done to create an effective fiscal risk vetting and management regime for greater private sector partnership in the public sector.”
ADB is already providing a total of USD 200 million in loans for projects supporting PPPs in Punjab and Sindh. The investments will augment and assist the provincial government’s efforts to increase the commercial viability of projects, as well as mobilize more private sector participation in PPPs.
The loans will also help develop PPPs across sectors and improve the government’s ability to review, develop, and implement sustainable and fiscally responsible PPP projects. ADB’s efforts are supported by DFID, through a USD 24 million grant and a USD 4 million technical assistance, both administered by ADB.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members-48 from the region. In 2017, ADB operations totaled USD 32.2 billion, including USD 11.9 billion in co-financing.