PUBLIC PRIVATE PARTNERSHIP FRAMEWORK FOR E-SERVICE DELIVERY September

PUBLIC PRIVATE PARTNERSHIP FRAMEWORK FOR E-SERVICE DELIVERY September November 06, 2010

Background • New Policy and Strategy for Public-Private Partnership (PPP) was approved by the Cabinet and the gazette was published on August 02, 2010 and replaced BPSIG • The Guidelines for large, medium and small projects have also been approved

Approach • Definition: providing public goods and services using private investment • Office of the PPP: A strong and independent lead agency for PPP under PMO, CEO directly reporting to the PM • Streamlined and simplified process – Formulation, appraisal, approval • Empowered line Ministries/implementing agencies • Flexibility: Generic Policy and Strategy has been proposed and guidelines may be updated time to time based on the needs and experience of implementation • CCEA can specify guidelines

Policy and Strategy • Sectoral coverage (SIC codes) – BOTH infrastructure and service delivery • Investment size – Small (BDT <500 mil. ), Med (BDT 500 -2500 mil. ), Large (BDT >2500 mil. ) • Financial participation by government – 1. TA; 2. VGF; 3. Infrastructure Financing • Linked components – Implemented by government – Financed by public and/or private funds • Incentives to Private Investor – Fiscal and Special incentives, particularly for pro-poor projects

Institutional Framework Entity Chair To. R PPPAC Prime Minister • Guide Office of PPP, line Ministries to expedite • Break down bottlenecks • Review progress at national level CCEA Finance Minister • Approve guidelines, procedures, model docs • Review contingent liability for Large projects • Approve incentives • Approve ‘In Principle’ for Med and Large; Approve Large • Approve org. structure of PPP Cell • Recommend PPP-related laws Office of CEO PPP • Prepare model docs and guidelines for approval • Promote PPP projects to investors • To select a panel of experts and transaction projects • Support line Ministries/impl. Agencies in formulation, prefeasibility, technical and contractual parameters • Build capacity of line Ministries/impl. Agencies on PPP • Monitor PPP projects • Prepare and manage budget of PPP Cell

Institutional Framework (cont. ) Entity To. R Line Ministry/ impl. agency • Initiate, develop, pre-qualify, tender and award PPP projects • Oversee implementation based on concession agreements • Recommend incentives • Proactively involve Office of PPP for own capacity building Finance Division • Issue procedures and guidelines for financial participation by the government • Approve funds for TA for proposed and VGF for selected projects based on concession agreements • Channelize funds for infrastructure financing Planning Commission • Fast-track Linked Components (part of ADP) • Review ADP to prevent duplication

Process by Size of Projects Project Identification / Unsolicited Proposal S: Line Ministry/PPP Cell/ Private Investory M: L Line Ministry/PP Cell/Private Party M L: Line Ministry/PPP Cell/Private party Inprinciple Approval Feasibility Study Line Minister 2 -4 weeks Request for Qualificati on Line Minister 4 -8 weeks Line Ministry/IA 4 -8 weeks CCEA 2 -4 weeks Transaction Consultant 8 -20 weeks Transaction Consultant 6 -12 weeks Line Ministry/ IA Line 4 -8 weeks Ministry/ IA 4 -8 weeks RFP, Final Approval Negotiatio n, Contract Award Line Ministry/IA 4 -8 weeks CCEA 8 -12 weeks Line Ministry/IA 4 -8 weeks Finance Minister Line Ministry/IA 6 -10 weeks 4 -8 weeks Monitoring and Evaluation PPP Cell OPPP

Process by Size of Projects OPPP

OPPP

PPP and e-Service Delivery • The government has taken a two-pronged strategy for building public-private partnership: – one is to attract investment for projects, where building new infrastructure and expanding existing infrastructure is the major component; the – second is to attract innovation and sustainability of public service delivery to the citizens.

PPP and e-Service Delivery • Service Delivery was focused – Objective 2. a. : Spell out principles of partnership with private sector for undertaking various projects related to infrastructure as well as public service delivery; • Dominant role of private party is recognized – Concept of PPP 3. d: In the PPP projects, the private sector is the active party who undertakes activities, depending on the model, starting from the stage of conception and up to the stage of operation and maintenance

Applicability of PPP • Any project that generates public goods and services may be considered under the public-private partnership, if at least one of the following circumstances exist for the project : 1. 2. 3. 4. 5. The implementation of the project is difficult with the financial resources or expertise of the government alone; Private investment would increase the quality or level of service or reduce the time to implement compared to what the government could accomplish on its own; There is an opportunity for competition, where possible, among prospective private investors, which may reduce the cost of providing a public service; Private investment in public service provides an opportunity for innovation; and There are no regulatory or legislative restrictions in taking private investment in the delivery of public service.

Sectoral Coverage • Any project fulfilling one or more of above-mentioned applicability criteria in any economic sector, according to the International Standard Industrial Classification (ISIC) of all Economic Activities, Revision 4, specified by the United Nations, is eligible for PPP. – 5. k: Telecommunication systems, networks and services including information and communication technology (ICT) (ISIC 60 -63) – 5. n: IT park (ISIC 81 -82) – 5. o: social infrastructure e. g. health, education, human resource development, research and development, and cultural facilities, (ISIC 85 -88) – 5. p: e-service delivery to citizens (ISIC 85) – 5. q. iii: Rural Internet projects (ISIC 61)

Eligibility Criteria • Any for-profit or not-for-profit entity legally registered in Bangladesh or abroad at the time of submission of proposals in response to Request for Qualification or unsolicited proposals is eligible for participation in PPP projects. • However, at the time of contract awarding, the foreign entity is required to be registered as a legal entity in Bangladesh

Investment Size and Ease of Processing • Small: ICT Projects fit mostly in this category – BDT <500 million – Approval Authority: Line Minister – No RFQ Stage – Maximum 7 months for approval Proactive role of a Ministry will be key

Financial participation of the Government • Technical Assistance – – Pre-feasibility and Feasibility study for projects Preparation of RFQ and REP documents for projects Preparation of concession contracts for projects PPP related capacity building in the line Ministries/implementing agencies and other relevant agencies – PPP related awareness building such as road show, exhibition etc

Financial participation of the Government • Viability Gap Financing – Viability Gap Financing (VGF) is meant for projects where financial viability is not ensured but their economic and social viability is high. – VGF could be in the form of capital grant or annuity payment or in both forms – VGF in the form of capital grant shall be disbursed only after the private sector company has subscribed and expended the equity contribution required for the project. Rural Internet, ICT Education, Public Access to ICT, Poverty Alleviation Projects

Fiscal Incentives • Reduced import tax on capital items under PPP projects • Tax exemption or reduced tax on profit from operating/managing for a specific time period • Others specified by LM/ IA

Special Incentives • Any specific project may get special unique incentives with the approval of the CCEA which shall be declared in the RFP documents. • Special incentives may be extended to PPP projects targeted for rural or/and underprivileged population • Special incentives may be given to nonresident Bangladeshis (NRBs) to invest in PPP projects.

Financial participation of the Government • Infrastructure Financing – The infrastructure financing is an arrangement for extending financing facilities for the PPP projects in the form of debt or equity through specialized financial institutions

Suitable Models for ICT • Swiss Challenge: Protecting IPR

Procurement Parameters of ICT Projects under PPP Revenue Generation Potential Services with full cost recovery Services with partial cost recovery ( in many cases, fixed cost recovery is not possible) Public good ( citizens' entitlement) Selection Criteria Highest Composite Index on KPI Lowest cost Highest revenue sharing Highest Composite Index on KPI Highest fixed cost investment by private sector Total lowest recurring cost

Business Models for PPP in ICT E-service domain Project financing mechanism Returns to the private partner Tax and Customs User charges as fees for service enhancement from citizens and businesses % Share of the fees, per transaction % share of additional revenues made possible by improved audit and collection programs e-Procurement User charges as fees for service enhancement from participating government agencies, subscription fees from prospective suppliers % share of the amount of bid (with an upper cap on the total amount) % share of the subscription amount Certification and Licensing User charges as fees for service enhancement from citizens and businesses (in addition to the usual fees charged for issuing certificates and licenses) % share of the service enhancement fees -- Social Benefits Related Viability gap funding User charges as fees for service enhancement from the government % share of the service enhancement fees, per distribution -- Health and Education Viability gap funding User charges as fees for service enhancement from the government % share of the service enhancement fees, per distribution -- Source: Evalueserve Research

Priority in PPP [WB, 2007] ICT Projects BCS BASIS Interested in PPP Priority Tax related ▲▲ ▲▲▲ Social Benefits related ▲▲ ▲▲▲ Property related ▲▲ ▲▲▲ Agriculture related ▲▲▲ Education based ▲▲▲ Health based ▲▲▲ Tourism related ▲▲ x -- Tax related ▲▲▲ Corporate Compliance related ▲▲▲ e-Procurement ▲▲▲ Auctions ▲▲ ▲▲ Treasury Automation ▲▲ ▲▲ G 2 C G 2 B

Thank You