Statement Delivered by UN RC/HC/RR on the occasion of the National Symposium on Public Private Partnership

Oct 22, 2008


UN RC/HC & UNDP Resident Representative at the inaugural session of the Public & Private Partnerships Symposium 22nd October 2008, at Hotel Soaltee Plaza, Kathmandu

Firstly, let me also welcome you all to this important two-day Symposium. I am sure this will be a valuable platform to discuss the importance of Public & Private Partnerships in National Development. And the practicalities of how to make more of these kinds of partnerships a reality.

UNDP has for some years by now, understood the vital role of the private sector in development. When we look at the extraordinary rise of incomes in China over the last decade, we see the role of FDI in injecting capital and entrepreneurial know-how to lift 300 million over the poverty line. When we look at some of the smartest innovations in our development practice – micro-financing models, the use of mobile phones for savings and banking, even carbon trading – behind each we find great innovators who have understood how to harness the market in the interests of sustainable development. We look at the challenges ahead of achieving the MDGs by 2015 and we know many of these goals will remain hopelessly out of reach without the full engagement of the private sector.

We believe the Government of Nepal has internalized these same lessons. We note the Government’s rapid steps to engage the private sector in the days immediately after theelections. We see in the budget the emphasis on private sector development and industrial policy. We note the Government’s explicit attempts to balance clear social goals – expanding free health and education access, higher social security payments etc… - with the need to create jobs and unleash growth. We note ‘leaping frogs’ are to replace ‘slithering snakes’ in the Minister’s budget speech!

It must be equally obvious to everyone in this room, that the Government’s ambitions to triple income levels within 10 years, to generate 10,000MW of power within 10 years, to establish a quick trajectory of double digit economic growth, will remain a dream without generating private investment and unleashing entrepreneurship in Nepal. To achieve this, a whole new approach to harnessing private capital and managerial expertise is needed. Public Private Partnerships are a tool that holds great potential to turn these kinds of plans into facts on the ground.

Yet it would be unwise to under-play the size of the challenge ahead. Success in this ambitious agenda hinges on some fundamentals being addressed, for the business environment in Nepal to improve and entrepreneurship to take off. Importantly, none of these fundamentals are about financial resources as such, but rather about policy, leadership and political will. If PPPs are akin to a ‘compact’ between the private and public sector, then addressing these fundamentals are arguably the Government’s side of the bargain. What are they? Let me mention six:

Fundamentals one, two and three, are peace, peace and more peace! No one will invest serious capital in long-term productive uses in an unstable political environment. And peace not just at the political level but out on the streets and in the factories as well - the kind of peace delivered by responsible police men and women doing their daily job of enforcing the law consistently and without prejudice. The peace delivered by professional judges arbitrating commercial disputes. The peace delivered by responsible managers and trade unions that work together for a growing enterprise where the fruits of hard work can be shared by all.

Fundamental # 4 - predictability. Clear rules of the game for companies. Simplification of business registration processes. Clear Tax codes. Follow-through by the government on its policy announcements, and enforcement of the law. Above all, clear and consistent roles and responsibilities – between different government agencies, between the centre and the district. Talk of youth groups becoming vigilantes for VAT compliance is the kind of idea that will send any
serious investor running in the opposite direction. Law enforcement should remain the domain of law enforcement agencies, and youth should stick to being youth.

Fundamental # 5 - a level playing field. Serious investors want to know that they are operating under the same constraints and with access to the same opportunities, as their competitors. They need to know that there is no option for buying privileged access, treatment, or information in the New Nepal. Ratification of the UN Convention against Corruption, for example, would be a good message to send to the market place that the Government is serious about attracting a new kind of investor.

And finally, fundamental # 6 - space. The space to operate and ‘make business’ and not be crowded out by the public sector. While the Government budget does make a firm commitment to private sector development, the signals contained in this policy statement are mixed. Talk of reviving State Owned Enterprises that have failed market tests, establishment of public distribution centres/shops - these initiatives will need to be carefully managed to ensure the Government isn’t contradicting its own policy ambitions.

Very importantly, Public Private Partnerships are not the same as ‘privatization’. The public sector retains oversight, often its own investment in the activity and can still maintain a hand on the rudder in terms of its social goals as it enters into PPP’s. At the same time, PPP’s are also not about Corporate Social Responsibility as such. PPP’s only work where the companies involved can generate returns for their share-holders. Unapologetically. Privatization and CSR have a very important place in our dialogue on private sector policy, but they should not be inadvertently conflated with Public
Private Partnerships.

We are convinced Public-Private Partnerships have real potential in this country. UNDP Nepal has over the last five years made some modest progress in this field with our partner, the Ministry of Local Development and FNCCIS. Our efforts have included facilitating formulation of PPP policies and guidelines and initiating small scale projects under the PPP model, mainly in water, sanitation, solid waste management, transport management and renewable energy. Our experience is of course at your disposal and you will hear more from our experts during the coming two days. Again, thank you for your participation and good luck with these critical discussions.