The Board of Investment (BOI) was the one institution that has successfully facilitated PPPs in the past, and Thilan Wijesinghe has been the youngest ever and longest serving Chairman of the BOI. In the following interview, he speaks of the key enablers which facilitated successful PPPs during his chairmanship.
Why was the Bureau of Infrastructure Investments (BII) set up?
The Bureau of Infrastructure Investments (BII) was set up soon after I became Chairman in 1996 as a separate department of the BOI to structure PPPs, primarily in infrastructure.
This was a consequence of the Government at the time deciding to attract private investment into infrastructure in order to allocate resources into areas where the private sector cannot obtain a suitable investment return (such as irrigation, rural health).
Also, PPPs were intended to generate competition and efficiency within State-owned monopolies at the time such as Telecom and Ports. The BII was set up under the BOI due to a prior experiment of setting a PPP unit under the Ministry of Finance being unsuccessful.
What role did it play in facilitating PPPs?
In 5 years from 1996 to 2001, I put together a team at the BII that successfully implemented PPPs valued at US$ 800 million at a time when the country was faced with a war risk premium. Projects implemented included the South Asia Gateway Terminal (SAGT), which was the first ever Build-Operate-Transfer (BOT) in the port sector in South Asia, and the largest private investment ever in Sri Lanka at the time at US$ 220 million.
In telecoms, FDI into Lanka Bell and Suntel was secured to create competition for Sri Lanka Telecom, which paved the way to its privatization.
The BII then structured and executed Sri Lanka’s first ever thermal private power generation plant (Asia Power) and first ever mini hydro. This has led to more than 75MW of mini hydro and 250MW of thermal power investments by 2001. Through a pioneering structure on alienating State land, the BOI and BII implemented Sri Lanka’s largest private housing schemes, Millennium City Athurugiriya and Nivasie Pura, Ekala, which collectively comprised over 3000 housing units.
The same State land alienation formula was applied to quadruple the number of private hospital beds, which resulted in the construction of Lanka (Apollo) Hospitals, Asiri Surgical, Ninewells and several more. Identifying Malabe as an IT zone was also planned during this time with the cooperation of the UDA. The BOI provided grant funding to commence operations of SLIIT in 1998, which today is the largest degree awarding University for ICT and Engineering in Sri Lanka, with 7500 students. We also initiated the land policy that resulted in Millennium Information Technology (now owned by the London Stock Exchange) investing in a large new development facility in Malabe.
How was the organization structured? Did this have a significant impact on the success of enabling PPPs?
Yes, the organization structure played an important role. Firstly, the BII had the benefit of a powerful and dynamic board of directors of the BOI, which was appointed by former President Chandrika Bandaranaike at my request.
It included the Secretary to the Treasury, two other senior Secretaries and a former Chairman of Aitken Spence. The board functioned as a strong policy making body and did not waste time with routine matters. Secondly, the BII obtained approval of the Cabinet of Ministers to pay market salaries to private sector professionals. There were no ‘connected persons’ parachuted to the BII. Key officers selected had skills in negotiation, financial structuring and investment banking that were required to bridge the gap in such skills in the public sector. They were hired on contract basis usually up to 2 years, and would face dismissal with one months’ notice if performance was poor. During my 5½-year tenure as Chairman, I dismissed or did not extend contracts of several senior officers who did not perform up to my expectations. So, a performance-based culture not only helped us to succeed in closing many investment deals, but also earned the respect and support of the public service in general.
How were resources sourced to create the BII?
Initially BOI allocated resources to set up the BII and a major portion of the funding was obtained via a US$ 2 million grant from USAID, which was also used to hire foreign technical experts to assist in complex negotiations on PPP transactions.
What were the key success factors for the establishing the BII? What was the political context surrounding this?
The key success factor was right people. In my view the caliber of the Board and key staff at the BOI, who also contributed to the implementation of PPPs, and the BII were the best ever the institution has had.
Success was also possible due to the strong support of the Minister in charge of the BOI, former President Chandrika Bandaranaike. Whenever we hit a bottleneck, the former President resolved them through a process of consultation with the Ministry concerned and the Cabinet. Further, effective communication contributed to success. The BOI/BII was able to support the Government with required information to win over broad stakeholder support for PPPs.
What were the challenges/obstacles the BII encountered during your Chairmanship?
There were several key challenges. The first was criticism by some officers of the BOI for recruiting young professionals to the BII at significantly higher salaries than prevailing in public service. I countered this by offering similar salary if someone resigned from public service and was willing to work on contract basis with prospect of dismissal for non performance. No one took the offer and no one criticized me thereafter.
The key aspect in countering criticism is performance.
I am of the opinion that any person from the private sector entering public service has 6 months to prove himself. If you do, you will earn their respect and they will work for you; and if not, you will not receive broader public sector support to execute PPPs.
The second challenge was from Ministers and senior officials of line ministries who opposed PPP investments at the outset. These were countered through hours of negotiations, arguments and presentations, where the young team at the BII, all in their 20s and 30s, held their own against the Establishment to justify the rationale for PPP projects.
Another key constraint faced was with the delays at the Attorney General’s (AG) Department in concluding complex and lengthy legal documentation required for PPPs. This was not due to a lack of skills at the AG’s Department, but the more capable solicitors were saddled with routine work that took time away from focusing on PPP agreements. The then AG and I reached a compromise to resolve this when 3-4 of the most capable solicitors of the Department were seconded to the BII on an almost fulltime basis. They did excellent work and several lawyers of this team are now heading up thriving private commercial law practices.
What in your opinion is the way forward for enabling successful PPPs in Sri Lanka?
Firstly, the government should recognize that PPPs will play a catalytic role in furthering FDI into Sri Lanka and that too much time has been wasted in setting up the capability within government to efficiently execute PPPs.
In my view the policy, institutional framework and the inter-ministerial relationships for implementing PPPs should be approved by the Cabinet of Ministers as soon as possible. The next task is to secure a line of funding from agencies such as USAID to pay for the right technical skills. PPPs are complicated and requires a highly skilled and well-paid core team of professionals and technical advisers on a case-by-case basis. Finally, several of the most capable officers of the AG’s Department should be dedicated to PPPs as such investments have far reaching and positive impacts on Sri Lanka’s economy.
(The opinions expressed in this article are the individual’s own and does not reflect the view of the Ceylon Chamber of Commerce. This column is part of the ‘PPP Knowledge Week’ initiative by the CCC in collaboration with the World Bank, which will be hosting a roundtable discussion on ‘Country Readiness for PPPs and Way Forward’ on the 2nd of December 2016)