Zain Fawzi,

Senior Project Officer,

Public Sector Management &
Governance Unit,
ADB Pakistan Resident Mission
Tuesday, Dec 05, 2023

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Sessions
• Session 1 – Understanding of PPPs – Key Concepts

• Session 2 – Overview of Sindh PPP Program

• Session 3 – ADB’s support for PPPs in Pakistan & Lessons Learned

• Session 4 – Case Studies

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 PPPs
Development /
Management of
Long Term Contract
Public Asset /
Service

Risk Transfer /
Private Finance Performance Based
Sharing

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Definition Of Public Private Partnership
(APMG PPP Certification Program Guide)

“A long term contract between a public party and a private party for the development (or significant
upgrade or renovation) and management of a public asset (including potentially the management of a
related public service), in which the private party bears significant risk and management responsibility
throughout the life of the contract, provides a significant proportion of the finance at its own risk, and
remuneration is significantly linked to the performance and/or the demand or use of the asset or
service so as to align the interests of both parties.”

Definition Of Public-Private Partnership

(The Sindh PPP Act, 2010 As Amended From Time To Time)

“Public Private Partnership means a partnership carried out under a Public-Private Partnership
Agreement between the public sector represented by an Agency and a private party for the provision of
an infrastructure facility, management functions and/or service with a clear allocation of risks between
the two parties.”

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Types of Infrastructure Delivery Models

Transfer significant operational risk to

the private sector for the lease term

Revenue Share demand risk tranfer

user pay

2
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Difference Between Traditional / Conventional Procurement & PPP

Funding

• Government Budget v/s Private finance

No or
Or minimum
minimum upfront
payment
upfront

Cost to government
payment

Debt + OM

Operations and maint cost

Duration

• In traditional procurement the relationship

between the private partner and the
procurement agency ends when the
construction phase is over.
• In PPP relationship continues even after the
construction of the project into the
operational phase.
3
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Difference Between Traditional / Conventional Procurement & PPP

Risk Allocation

• Risk fully borne by the Government versus

optimal risk allocation between the
Government and Concessionaire

Cost over-runs

• In traditional procurement this financial risk is

allocated to the public sector
• In a PPP the private partner is in charge of
construction and operation related risks

4
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Projects are Risky ???

5
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Risk Allocation in PPPs Retained
(managed by government)
planning & permits

Regulatory changes

Demand (Annuity)

Design

Construction

Productivity

Transferred
RISKS Obsolescence & hidden faults
(managed by private sector)

Operations

Financing

` Demand (BOT)

Force Majeure

Shared
Inflation
(managed by both parties)

Demand (MRG) 5
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 PPP: ADEQUATE DISTRIBUTION OF RISK
Public Sector Contribution Private Sector Contribution
• Guarantees • Finance
• Subsidies Optimal Risk • Efficiency
• Co-investment Allocation leads to • Technical expertise
• Tax incentives sustainable and • O&M regime
• Land Acquisition successful projects

Too much allocated risk to public Too much allocated risk to

sector leads to no Value for private party leads to project
Money & inefficiency failure

6
Public Sector Riskpermission.
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate Transfer Private Party
 VALUE FOR MONEY
What is Value for Money
“Value for Money (VFM) in PPP projects is gained through the engagement of private sector efficiency,
effectiveness, and economy and through the appropriate allocation of risks in the project.

The purpose of a VFM Analysis

To indicate if a project would be more efficiently implemented under a PPP scheme or under some other
procurement method, from the perspective of the procuring authority and considering the broader
interests of society.

Types of VFM Analysis

1) Quantitative Analysis
2) Qualitative Analysis

VFM analysis should be done over the whole project lifecycle.

7
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission. Source: ADB Value for Money in Public–Private Partnerships Publication
 Types of PPP Contracts
Essentially, there are three different types of PPP Contracts

User Pay Government Pay Service / Management contracts

Duration : 20 – 30 Years
8
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Benefits Of Public-Private Partnerships
Attract private capital
PPP projects can be used to finance projects that would not have been possible due to public budget constraints

Efficiency gains
Improves the quality of project delivery by private sector efficiency

Long term solutions

Good quality and adequate maintenance can be assured since the private partners are responsible for operations for a longer
term

Reduced life cycle costs

In traditional procurement the private partner will be inclined to keep the initial costs lower but in PPP since the private
partners will be responsible for the project in the long term as well, and thus won’t mind spending more.

Transfer risk to the private sector

In PPP risks are shared among the public authority and private partners

Accountability through multiple consultants

Independent Engineer/Expert and Independent Auditor

Innovation and diversity in the provision of public services

9
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Limitations Of Public-Private Partnerships
Complex/High transaction costs: The project must be big enough to justify large procurement costs

Private sector capacity: The private sector might not have the capacity to absorb the risks associated
with the project

Political and social sensitivity: Private sector maybe more inclined to promote sustainability of the
project by increasing revenue through ‘user pay model’ whereas the government sector is more
concerned with social welfare

Issues Relating To Public-Private Partnerships

• Limited PPP market & environment (Consultants, Financiers, Investors, Insurers)
• Unfair allocation of risk in early years of market development
• Long gestation period of PPPs
• PPP projects require strong government support
• Need to influence investors’ investment decisions

10
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Sindh PPP
• PPP Unit Sindh was established in 2008 with technical assistance of Asian Development Bank

• With promulgation of Sindh PPP Act 2010, a robust PPP Framework was put into place which focused on
Institutional, Legal and Regulatory aspects

Legal Framework Funds Established Institutional Setup Other Supportive Factors

▪ Project • Consistent political support
▪ PPP Act & Policy Development ▪ PPP Policy Board
Facility (PDF) • Hiring of qualified and subject professionals from private
▪ Separate Chapter sector
for PPPs in Sindh ▪ Viability Gap
▪ PPP Unit • Adequate funding for PPP projects
Procurement Funding (VGF)
Rules
• Ensured private participation and fair business practices
▪ PDF Guidelines ▪ PPP Support Facility
• PPP agreements are model documents which cover
various risks - Political Force Majeure, Change in Law,
▪ VGF Guidelines ▪ PPP Nodes Termination Payments, Event of Defaults, Project Land -
free of all encumbrances

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Organizational Framework

Organizational Framework GOS

Planning & Finance Dept. PPP PSF

Line Dept.
Development (EA & IA) Node VGF

PPP PPP Unit PPP

Node W&S
Node
SFMH
(PDF)
Education PPP
Dept. Node

Transport PPP
Dept. Node
EA = Executing Agency PMU = Project Management Unit
IA = Implementation Agency EPPP = Enhancing Public Private Partnership
GoS = Government of Sindh W&S = Works and Services
PPP = Public Private Partnership VGF = Viability Gap Fund
SFMH = Sindh Fund Management House PDF = Project Development Fund
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Institutional Framework

PPP Policy Board

Institutional Framework

Line Dept. PPP Unit PSF

PPP Node
Line Dept.
PPP = Public Private Partnership
PSF = PPP Public Support Facility
Project GoS = Government of Sindh
PIU = Project Implementation Unit
Implementation
Unit

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 PPP Evolution
PPP Nodes Established
Other Line Agencies involved in PPP Projects

Works & Services

Water & Sewage Board Agriculture Livestock & Fisheries

Transport

Health
Information Technology Social Welfare PDMA

Education

Energy Sindh Board of Investment Culture & Tourism Irrigation

Local Government

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Projects Completed & Operational - Infrastructure, Education, & Health

Hyderabad Mirpurkhas Sir Aga Khan Jhirk Mulla Karachi Thatta Education Management
Dual Carriageway – USD 37.78 Mn Katiyar Bridge – USD 25 Mn Dual Carriageway – USD 45.72 Mn Organization RFP 1-6 with
139 schools & 72,378 students
– USD 44.56 Mn

Contracting Out of 160 Health

Regional Blood Centres Security & Safety NICH Teachers Training Institute
Facilities through performance
USD 60.86 Mn USD 2.16 Mn Hussainabad – USD 3.06 Mn
based agreements – USD 55 Mn

Source: PPP Unit Sindh

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Accomplishments
• Economist Magazine’s Intelligence Unit’s Report “Infrascope 2018” ranks
Public Private Partnership Program Sindh as, Sixth Best Performer in Asia
• The rating only considers countries, however, two Provincial PPP Units
including Sindh, were ranked higher than most countries due to exceptional
performance

NABISAR TO VAJIHAR PROJECT

WINNER
IFN Deals of the Year 2021
PAKISTAN: ENERTECH’S PKR 25.5 BILLION SUKUK

WINNER
Most Innovative deal of the Year 2021
PAKISTAN: ENERTECH’S PKR 25.5 BILLION SUKUK

RUNNER UP
Shortlisted for Overall Deal of the Year 2021
PROJECT & INFRASTRUCTURE FINANCE

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 PPP Project Pipeline
► Karachi Hub Water Canal Project
► Waste Water Treatment Plant at TP-1
► Waste Water Treatment Plant at TP-4 Water
► 5 MGD Desalination Project
► 65 MGD Water Supply Project
► Marble City Project
► NED Technology Park Industries
► Special Economic Zone for Industries
► Non-Formal Education Project
► Education Management Outsourcing (EMO)RFP 8 Education
► Teachers Training Institutes
► LDA Scheme 42 Project
► Rani Bagh Project Urban
► KMC Beach Front Project
► Thar Tourism Project
► and many more…. Culture

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 ADB’s support for PPPs in Pakistan & Lessons Learned
• PPP Unit Sindh was established in 2008 with technical assistance of Asian Development Bank.
• Enhancing Public-Private Partnerships in Punjab Project
• Supporting Public Private Partnership Investments in Sindh Province
• Promoting Sustainable Public-Private Partnerships Program Sub Program I &II

Lesson Learned & Few Key Considerations

• Introducing PPP legislation can be an important, but not by itself sufficient, prerequisite for successful PPPs.
• Sustained political and bureaucratic commitment is essential
• PPPs work best when the procurement process is transparent and competitive
• Procuring agencies should not lose sight of long-term affordability, both to government and to users, when
considering PPP programmes.
• Successful PPPs involve meaningful, yet realistic, risk transfer. Luring private partner to assume a risk, it
cannot mitigate, shall fire back.
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Thank You

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.