Interview: Thilan Wijesinghe
What factors are most important when undertaking successful public-private partnerships (PPPs)?
THILAN WIJESINGHE: The most important aspect of undertaking successful PPPs is attracting the right skills and working collaboratively with public sector officials, who bring their own special skill set. Prior to embarking on PPP projects, evaluations must be carried out by the Ministry of Finance (MoF) – including the NAPPP, the Department of National Planning, the Department of National Budget and/or the Department of External Resources – to determine whether the project is suitable for inclusion in the Public Investment Programme and, if so to identify the most appropriate methods of funding.
There are instances where financial support from the government is required in order to make a PPP project sufficiently profitable and attractive to private partners. From a national budget perspective, these projects are then considered non-neutral, and the NAPPP is able to contribute by advising the MoF on funding options and the fiscal risks of a PPP project.
How can a PPP agency benefit the wider economy?
WIJESINGHE: There is ample evidence to suggest that when governments set up specialised PPP units, a greater number of PPP projects reach financial closure both more quickly and more efficiently. Therefore, setting up the NAPPP as a central processing agency for PPP projects within the MoF was long overdue. This is especially true considering that the NAPPP can provide financial and legal expertise to ministries both via its own staff and external specialists, given that there is funding available to the organisation. An additional factor that could increase the number of PPP projects is the implementation of updated PPP guidelines. Currently, these guidelines are under review by the National Procurement Commission of Sri Lanka. We have also identified other sectors that can benefit from PPP investment. These include minerals and hydrocarbons, expressways and transport infrastructure, digital infrastructure, affordable housing, agri-business, education and healthcare. The Hambantota PPP, which was recently concluded, significantly reduced the debt burden on the Sri Lanka Ports Authority and restored profitability.
There are lessons to be learned from this. The country’s debt burden could be eased through selling off non-strategic state assets, then subsequently using the proceeds to reduce debt. Furthermore, new PPP investments could be formed between private parties and state corporations, resulting in greater profits and a broadening of the tax base.
Why is the country an increasingly important destination for PPP investments?
WIJESINGHE: Sri Lanka has a 20-year history of securing over $6bn in PPP investments in ports, power, telecommunications, real estate, housing and health, all of which are operating successfully. In addition, Sri Lanka has not had a single failed PPP. This is due primarily to a legal environment that has been sound foundationally. Prior to the early 2000s the Bureau of Infrastructure Investment was established as a separate division of the Board of Investment to act as a catalyst for driving foreign direct investment (FDI) into the country. We recruited a team of around 15 professionals with financial and legal structuring skills, mainly from the private sector, into this unit.
From 1997 to 2000 the unit produced around 45% of Sri Lanka’s FDI, with closing transactions valued at over $800m. Notably, this was all during a time when Sri Lanka had a war risk premium. Furthermore, we have pioneered PPPs in the port and telecommunications sectors since the mid-to-late 1990s. Today, as a result of the combination of privatisation of state-owned assets and new investments via PPPs, Sri Lanka has the most competitive and efficient port and telecommunications infrastructure in South Asia.
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