Private investors can fill Rs3tr development gap

Budget provides barely a quarter of financing for roads, hospitals, water & power projects

LAHORE:

With the federal development budget covering barely a quarter of what the country needs, the government is looking to private investors to build the roads, hospitals, water schemes and power projects that public money alone cannot pay for. A bill now before the National Assembly Standing Committee proposes to make that easier by merging two bodies into one.

According to the Privatisation Commission (PC), this year's federal development budget is Rs1.126 trillion, against a stated need of Rs4.1 trillion. The Privatisation Commission (Amendment) Bill, 2026 will fold the Public Private Partnership Authority (P3A) into the PC, creating the Privatisation and Public Private Partnership Commission. The PC said the law would repeal the P3A Act, 2017, and place privatisation and public-private partnership (PPP) deals under a single board and a single approval framework.

Economists said the gap between needs and funds is the real reason behind the merger. PPPs let private firms finance, build and run a project, with the state generally supporting only the viability gap. That arrangement, they said, could stretch the limited public money much further, provided the contracts were sound.

For investors, the change is mostly about simplicity. Until now, the PC said, two federal bodies did related work, so investors dealt with two boards, two approval processes and two sets of advisers. The PC described the new set-up as a "one window, one law and one accountable board". Business stakeholders said the time spent moving between offices had been a hidden cost for investors, and a simpler track would help local companies take part, not just large foreign ones.

The bill aims to speed up delivery in other ways too. The PC said every project would get a fixed deadline and a dedicated team, and that ready funds for project preparation, viability funding and facilitation would remove the most common causes of delay. Four funds are proposed: privatisation, public contribution, viability gap and PPP project development. All will be non-lapsable, so the unspent money will be carried over. Analysts said the stop-start pattern of annual funding pushes up project costs, and carry-forward could ease it.

For ordinary users, experts pointed to service quality. According to the PC, private partners will have to meet performance standards written into their contracts, which make upkeep and service quality legal obligations. Analysts said maintenance was where public projects most often failed, and binding standards would be among the most useful parts of the law. New projects, they added, would create construction and operating jobs.

The question for taxpayers is what the state promises in return. The PC said a Risk Management Unit in the Finance Division would review every financial promise made by the state about a PPP before approval. Pakistan's PPP contingent liabilities already exceed Rs472 billion, according to the PC, which said the check mattered for that reason. The bill also says the state will not be liable for risks if a contract does not assign to it. Economists said the unit's value would depend on whether it could refuse a deal and whether its reviews were made public. The PC also said one board, one secretariat and one set of advisers would lower running costs and save consultancy fees.

The new commission would have 11 to 15 board members on three-year terms, of whom eight to 12 would be independent, including at least one PPP expert and at least two women. It will run a federal PPP pipeline, with transaction execution committees and PPP nodes in ministries. Disputes will go to mediation, arbitration or the Privatisation Appellate Tribunal. PPP agreements will become public documents, which experts said would help answer the long-held belief that such deals were made behind closed doors.

The PC has also tried to answer fears about the merger. It said ongoing projects would not stall and P3A staff would be retained for six months and then reassigned or released under their contract terms. It said not every deal under the merged body would be a sale of public assets, as a PPP brought in private investment and skills through a contract and did not sell the asset itself. Business representatives said investors with signed contracts would want to see the handover work smoothly before they felt fully reassured.