Public-Private Partnership

300 sskm
Compared to privatization, PPPs allow the government to maintain a significant role while leveraging private sector expertise and capital, offering more advantages to the government without transferring full ownership to the private sector.  ILLUSTRATION: Image used for illustrative purpose/FREEPIK
What is a Public-Private Partnership?
Public-Private Partnership is a contractual agreement between a public agency and a private sector entity. With Public-Private Partnership, the public agency and the private sector entity share assets, skills, risks and rewards and set up one project. Public-private partnerships combine the public sector capital and private sector capital to improve public services or the management of public sector assets. Public-private partnerships contribute more advantages to the government than a privatization form due to the fact that PPPs emphasize the role of the government, whereas, in a privatization form, the whole business needs to be transferred to the private sector.
Why do developing countries need Public-Private Partnerships?
Developing countries usually have a budget deficit based upon a low tax base, weak tax administration, and poor business environment. With the budget deficit shown, adopting PPPs enables the government to afford to deliver good public services. PPPs are being widely used among governments when it comes to procurement processes when public funding is inadequate. PPPs are also a reliable form of investment from the perspective of private investors, as they guarantee the long-term delivery of public services.
The origin of Public-Private Partnership in world countries
The history of public-private partnerships dates back to the eighteenth and nineteenth centuries when countries focused on developing public infrastructure through joint financing and infrastructure operation. In Britain and the United States, around the eighteenth century, over 2,500 companies were chartered and incorporated to develop private turnpikes. In France, around the seventeenth century, the government used concessions to finance its infrastructure development. This means its private enterprises and banks are granted the ability to design, construct, finance, and operate infrastructures such as railways, roads, electricity, and tramways. In the later decades, PPPs have been commonly used by most countries as they prove to be easy to procure, construct, and finance.
Common types of PPPs
Basic PPP contract types vary in terms of levels of responsibility and risk to be taken by the private operator so that different countries adopt a particular PPP contract type that meets the local requirements on a country-to-country basis. According to the Asian Development Bank (ADB), PPPs are commonly used in most countries as follows-
Service Contract
Management Contract
Lease Contract
Concession
Build- Operate- Transfer (BOT)
Joint Venture
(1) Service Contract: This is a model in which the government partners with a private entity to perform one or more services for a 1 to 3-year limited period. In this model, the government funds capital investment, and a private partner performs the service at the agreed cost, which is in line with the performance standards set by the public sector. The public authority takes operation and management responsibility and commercial risk, whereas the risk taken by the private entity is minimal.
(2) Management Contract: In a management contract, daily operation and management responsibility are assumed by the private entity with its own working capital, whereas the public authority finances capital investment with asset ownership. The contract generally lasts for 2 to 5 years.
(3) Lease Contract: In a lease contract, the initial establishment of the system is financed by the public authority and contracted to a private company for operation and maintenance. The contract usually lasts for 10 to 15 years. The private sector has to take responsibility for service provision and financial risk for operation.
(4) Concession: In the concession model, the private sector needs to provide all capital investment (assets), and these assets belong to both the public authority and a private company. In this model, the public authority needs to take the role of regulating the price and quality of service while the private partner takes full responsibility for funding, management, operation and maintenance.
(5) Build Operate Transfer (BOT): There may be various forms of BOT-type contracts such as Build-Operate Transfer, Build-Own-Operate, Design-Bid-Build, Design-Build and Design-Build-Finance-Operate.
(6) Joint Venture: A Joint Venture is a model in which the infrastructure is co-owned and operated by the public sector and private partner. In this model, both the public sector and private partner are shareholders, so both parties have to invest in the project and share risks.
How did PPPs evolve in Myanmar?
From 1962 to 1988, Myanmar practised the “Burmese Way to Socialism” under the leadership of the Burma Socialist Programme Party (BSPP) as a one-party system. In the economy, it practised a centrally planned economy. In 1988, after the Burmese Way to Socialism, in the aftermath of a tremendous uprising due to the inflation and demonetization of Myanmar kyats, the State Law and Order Restoration Council took office from 1988 through 1997. In 1997, the State Law and Order Restoration Council was reformed as the State Peace and Development Council from 1997 until 2011. In 1997, the State Peace and Development Council announced the transition into a market-oriented economy. With this transition, the government started to pave the way for Public-Private Partnerships and privatization. In 1997, PPPs started in Myanmar to fulfil the country’s infrastructure needs. However, the projects during those days were based upon unsolicited proposals (a proposal made by a private party to undertake a PPP project, submitted at the initiative of the private party rather than in response to a request from the relevant government agency) under the Build-Operate-Transfer form. In 2011, President U Thein Sein’s government took on the duties of the state, and some reforms were made significantly. In October 2011, 11 private banks were allowed to trade foreign currency. In November 2012, the new Foreign Investment Law (2012) was enacted, and special economic zones were established in Thilawa and Dhawei. In 2016 and 2017, Myanmar Investment Law (2016) and Myanmar Companies Law (2017) were enacted. In April 2015, to improve the reliability and stability of Myanmar’s power supply and to prevent the power shortage problem, the Myingyan Natural Gas Power Project was initiated. This is the first PPP project that was adopted through a solicited proposal (solicited bid received from private parties via a competitive tender process for PPP Projects under the purview of an Implementing Government Agency) between Singapore-based Sembcorp Utilities and the Ministry of Electricity and Energy. This project is located in Myingyan Township of Mandalay Region and was governed by a 22-year Build-Operate-Transfer (BOT) agreement and a Power Purchase Agreement (PPA).
When PPPs were widely used in Myanmar, the government started using the Swiss Challenge (a public procurement process designed to encourage private sector initiatives to engage in PPP Projects). Under the Swiss Challenge tender process, if a relevant government agency wishes to proceed with a project that was received as an unsolicited proposal, the agency is required to publish a bid and invite third parties to exceed it) to welcome private sector involvement in the tender processes recently. With regard to public-private partnership implementation, the Project Bank Notification was one of the greatest achievements. It was issued on 30 November 2018 by the Office of the President after the Private Partnership Centre was established through Notification No 24 /2021 of the Union Minister’s Office of the Ministry of Planning and Finance.
Public-Private Partnership in Myanmar
Myanmar’s government budget is shown as a deficit as the country has one of the lowest tax-to-GDP ratios. As Myanmar’s tax-to-GDP ratio is meagre, the government cannot afford to make sufficient investments in infrastructure. Although Myanmar is a recipient of  Official Development Assistance (ODA), a kind of aid given by developed countries to assist the development of developing countries, the funds from public capital and ODA are insufficient to meet the infrastructure gap. In Myanmar, PPPs have been practised in the form of build, operate, and transfer, mainly in the road and power sectors, and some projects have been done in hotels. Some forms of PPPs in Myanmar are categorized as Greenfield projects (any investment in a structure or an area where no previous facilities exist and without constraints imposed by prior works), Brownfield projects (any investment that uses previously constructed facilities that were once in use for other purposes), Production Sharing Contracts and Joint Venture Agreements between ministries/government organizations and private companies. In Project Bank Directive issued by the government, common types of PPPs which have been practised in Myanmar are categorized as Build-Own-Operate (BOO), Build-Operate-Transfer (BOT), Build-Transfer-Lease (BTL), Build-Transfer-Operate (BTO), Operation and Management (O & M) and other forms of PPPs.
Legal framework governing Public-Private Partnerships
In Myanmar, the Ministry of Planning and Finance, Myanmar Investment Commission and Directorate of Investment and Company Administration are government agencies that regulate PPP projects. The laws governing Public Private Partnerships before and after the issuance of Project Bank Notification are mentioned as follows: –
Myanmar Companies Law (2017)
Myanmar Investment Law (2016)
Permanent Residence of a Foreigner Rules (2014)
Myanmar Special Economic Zones Law (2014)
Securities and Exchange Law (2013)
Myanmar Citizens Investment Law (2013)
Central Bank Law (2013)
Foreign Investment Rules (2013)
Foreign Investment Law (2012)
Law Amending the Commercial Tax Law (2011)
Private Industrial Enterprises Law (1990)
Financial Institutions of Myanmar Law (1990)
State-Owned Economic Enterprises Law (1989)
Special Company Act (1950)
In Myanmar, apart from these laws, for the commonly used Build Operate Transfer project form, general tendering processes have been widely practised under Directive No 1/2017 (Tender Rules), which is widely used as a PPP manual in Myanmar. In addition to that, the State Administration Council issued tender notification No 1/2022. In PPP, if the private party is involved in international connection, the project is liable to Myanmar Investment Law (2016), and some restricted business activities are outlined in the notification 15/2017 of the Myanmar Investment Commission.
Public-Private Partnerships in the Form of Production-Sharing Contracts in Myanmar
Production-Sharing Contract is used in Myanmar’s Oil and Gas sector, and it is a contract signed between a government entity and private companies. In Myanmar, under the Production-Sharing Contract, Myanmar Oil and Gas Enterprise acts as a body for the state and invites oil companies as contractors to make financial and technical investments in oil and gas extraction. According to MOGE data, over 150 oil companies were registered as local partners with MOGE. According to the terms and conditions of the model production-sharing contract set up by MOGE, there are two periods listed: the exploration period (an initial term of up to three years) and the development and production period (commenced on notice of commercial discovery and continues for at least twenty years from the date of completion of the development phase) in the oil and gas operation.
State Administration Council highlighting the role of Public Private Partnership in Special Economic Zones
Three currently established Special Economic Zones are Thilawa SEZ, Dawei SEZ and Kyaukpyu SEZ, but this article wants to highlight two of these. The incumbent government, the State Administration Council, is attempting to develop Kyaukpyu Special Economic Zones (SEZs) in the form of PPPs for economic development. In the Kyaukpyu Special Economic Zone Project, the China International Trust and Investment Corporation Consortium contributed 70 per cent, and the Myanmar side contributed 30 per cent when implementing the Kyaukpyu Deep Seaport project. It is a four-phase project building ten jetties where the ships can berth. After this project, the livelihood of people in Rakhine State, particularly those in Kyaukpyu District, will improve.
Myanmar can directly transport goods to countries in Africa, South Asia, and Europe. In responding to the media, Union Minister U Aung Naing Oo and Mr Liang Chuanxin said that “the deep-sea port is a four-phase project containing ten jetties, and it can accommodate about seven million 20-foot containers per year once completed. The consortium of this project will be incorporated by both domestically owned private or public companies registered under the Myanmar Companies Law 2017.” What’s more beneficial about the project is that the State Administration Council has already planned to prioritize the investment of ethnic businesspeople in the consortium.
Thilawa Special Economic Zone is another successful example of the PPPs project in Myanmar, which the Myanmar government and the Japanese government have carried out. Myanmar Japan Thilawa Development Limited has acted as a developer. Myanmar Japan Thilawa Development Limited was formed in January 2014 as a joint venture between MMS Thilawa Development Company, Thilawa SEZ Management Committee, and Myanmar Thilawa SEZ Holdings Public Limited. In Thilawa SEZ, in Zone A, a Residential and Commercial Area was first established, covering offices, residences, restaurants, hotels, international schools and hospitals, and it has begun operation since September 2015, whereas in Zone B, three types of land are categorized as industrial land, logistical land, residential or commercial land.
To sum up, the State Administration Council is currently putting an emphasis on Public–Private Partnerships and Small and Medium Enterprises to boost the economy in the aftermath of the COVID-19 implications. The actions of the State Administration Council, such as developing Special Economic Zones, encouraging SMEs to produce value-added goods to penetrate the export market, and providing tax exemptions and incentives in the existing tax laws, prove that the State Administration Council is making an earnest effort to keep the existing economic infrastructure and projects working. The implementation of public-private partnerships can pave the way for infrastructure development in Myanmar, and the opportunities can be seen in this initiative.
References
Asian Development Bank’s PPP Handbook
The establishment of PPP centre
Project Bank Notification
Myanmar Companies Law (2017)
Myanmar Investment Law (2016)
Ministry of Information’s press release
Special Economic Zone Law  (2014)
Share this post
Hot News
Hot News
Scholarship to be provided for four Myanmar students in the Republic of Korea
Radiocarbon dating of Hanlin Pyu City at early 3000 BC may be even earlier with further study: Archaeologist says
More than 1400 Myanmar workers to be recruited from Japan
Flooded areas and others warned of heavy rain and strong winds
Licences issued for homestay lodgings in Kalaw, Shan State
Deputy Health Minister leads inspection on diarrhoea disease control in Thakayta, North Okkalapa townships
Deputy PM MoFA Union Minister arrives back in Myanmar after 2nd BIMSTEC Foreign Ministers’ Retreat
Agricultural inputs provided for monsoon paddy growers in Ayeyawady Regoin
Press conference emphasizes joint statement of 23 political parties
MIFER Union Minister arrives back after attending Second High-Level Conference of Forum on Global Action for Shared Development