Public Private Partnership and Investment Act, 2019

1. What is the Public Private Partnership and Investment Act 2019?

The Public Private Partnership and Investment Act 2019 (PPPIA) is a legislative framework enacted by the Government of Nepal to facilitate, regulate, and promote public-private partnerships (PPPs) and foreign direct investment (FDI) in the country.

This Act aims to attract private sector investment in infrastructure development and public service delivery by providing a clear legal foundation and streamlined procedures for PPP projects.

The PPPIA outlines the roles and responsibilities of the government and private sector entities, establishes a transparent process for project selection, approval, and implementation, and provides mechanisms for dispute resolution.

Additionally, the Act sets forth provisions to ensure that PPP projects are aligned with national development priorities, are financially viable, and deliver value for money.

It establishes the Public Private Partnership and Investment Committee (PPPIC), a dedicated body responsible for overseeing PPP projects and facilitating investment processes.

2. How does the act define public-private partnerships?

The Public Private Partnership and Investment Act 2019 defines public-private partnerships (PPPs) as collaborative agreements between the government and private sector entities for the development, financing, construction, operation, and maintenance of public infrastructure and services.

According to the Act, a PPP arrangement involves the sharing of risks, resources, and responsibilities between the public and private partners, with the objective of leveraging private sector expertise, efficiency, and capital to deliver public projects. The Act specifies that PPPs can take various forms, including Build-Operate-Transfer (BOT), Build-Own-Operate (BOO), Build-Transfer-Operate (BTO), and other hybrid models.

These partnerships are designed to achieve specific outcomes, such as improved service delivery, enhanced infrastructure quality, and economic development. The PPPIA mandates that PPP projects must align with national development goals, be technically and financially viable, and provide value for money.

Furthermore, the Act requires that PPP agreements include clear terms and conditions regarding project scope, timelines, risk allocation, performance standards, and dispute resolution mechanisms. By defining PPPs in this manner, the PPPIA aims to establish a structured and transparent approach to implementing public infrastructure projects in Nepal.

3. What sectors are open to PPP investments?

The Public Private Partnership and Investment Act 2019 identifies several key sectors open to public-private partnership (PPP) investments in Nepal. These sectors include, but are not limited to, transportation (such as roads, highways, railways, airports, and ports), energy (including hydropower, solar, wind, and other renewable energy sources), water supply and sanitation, healthcare, education, tourism, agriculture, urban development, and information technology.

The Act encourages private sector participation in these areas to address infrastructure deficits, enhance service delivery, and promote sustainable economic growth. The Government of Nepal prioritizes projects that align with national development plans and have significant socio-economic impact.

Additionally, the Act provides a framework for identifying and prioritizing PPP projects through feasibility studies, market assessments, and stakeholder consultations.

By opening these sectors to PPP investments, the PPPIA aims to attract both domestic and foreign investment, harness private sector innovation and efficiency, and ensure the successful implementation and management of critical infrastructure and public services. This approach is intended to foster a collaborative environment where both public and private entities can contribute to the country’s development objectives.

Also Read: Aviation Policy, 2006

4. What incentives are provided for PPP projects?

The Public Private Partnership and Investment Act 2019 offers various incentives to attract and facilitate private sector participation in PPP projects in Nepal. These incentives include fiscal and non-fiscal benefits designed to enhance the financial viability and attractiveness of such projects.

Fiscal incentives may include tax exemptions or reductions on income, customs duties, and value-added tax (VAT) for specified periods. Additionally, the Act provides for the availability of government guarantees to mitigate project risks, such as revenue guarantees, exchange rate guarantees, and guarantees against changes in law.

Non-fiscal incentives include streamlined project approval processes, access to land and infrastructure, and support in obtaining necessary permits and licenses. The Act also allows for the establishment of special economic zones (SEZs) and industrial parks with additional benefits for PPP projects located within these zones.

Furthermore, the PPPIA ensures that PPP projects can access international financing and insurance services. By providing these incentives, the Act aims to reduce the barriers to private investment, lower the cost of capital, and enhance the overall attractiveness and feasibility of PPP projects, thereby promoting infrastructure development and public service improvement in Nepal.

The Public Private Partnership and Investment Act 2019 ensures project transparency through several key provisions aimed at promoting accountability, openness, and public trust in PPP projects. The Act mandates the establishment of a transparent process for project identification, selection, and approval, which includes rigorous feasibility studies, stakeholder consultations, and competitive bidding procedures.

All PPP project proposals must be evaluated based on clear criteria, including technical feasibility, financial viability, and alignment with national development priorities. The Act requires that all key project documents, including contracts, agreements, and progress reports, be publicly disclosed and accessible to stakeholders.

Additionally, the Act mandates regular monitoring and evaluation of PPP projects by the Public Private Partnership and Investment Committee (PPPIC) and other relevant authorities to ensure compliance with contractual obligations and performance standards. The PPPIA also includes provisions for independent audits and reviews of PPP projects to verify their integrity and effectiveness.

Furthermore, the Act establishes mechanisms for grievance redressal and dispute resolution to address any concerns or issues that may arise during project implementation. By incorporating these measures, the PPPIA aims to create a transparent, accountable, and reliable framework for PPP projects in Nepal.

The PPP Center, established under the Public Private Partnership and Investment Act 2019, oversees and coordinates public-private partnership projects in Nepal. It provides technical assistance, evaluates project proposals, and ensures compliance with legal and regulatory frameworks. The Center facilitates the selection and approval process, monitors project implementation, and addresses issues related to PPP projects. Additionally, it promotes best practices, conducts capacity-building programs, and serves as a liaison between the government and private sector investors to enhance the effectiveness and transparency of PPP initiatives.

7. How are PPP contracts awarded?

Under the Public Private Partnership and Investment Act 2019, PPP contracts are awarded through a competitive bidding process. The government announces project opportunities and invites proposals from qualified private sector entities. The selection criteria include technical feasibility, financial viability, and alignment with national development goals.

An evaluation committee reviews the bids, and the contract is awarded to the bidder offering the best value for money. The process ensures transparency, fairness, and equal opportunity for all participants, minimizing the risk of favoritism or corruption in the awarding of PPP contracts.

8. What are the requirements for PPP proposals?

The Public Private Partnership and Investment Act 2019 outlines specific requirements for PPP proposals. Proponents must submit detailed project plans, including technical specifications, financial models, risk assessments, and implementation timelines.

Proposals must demonstrate alignment with national development priorities, financial viability, and the ability to deliver value for money. Additionally, proponents must provide evidence of their technical expertise, financial capacity, and prior experience in similar projects. The proposals undergo thorough evaluation by the PPP Center and relevant authorities to ensure they meet all legal, regulatory, and technical standards before approval.

The Public Private Partnership and Investment Act 2019 addresses risk-sharing in PPPs by mandating that risks be equitably allocated between public and private partners. The Act specifies that risks, such as construction delays, cost overruns, and operational inefficiencies, should be borne by the party best able to manage them.

Contracts must clearly outline the risk-sharing arrangements, including mitigation measures and contingency plans. The government may provide guarantees or financial support for certain risks, such as revenue shortfalls or changes in law, to enhance project viability and attract private investment.

10. What are the procedures for project approval?

The Public Private Partnership and Investment Act 2019 establishes a structured procedure for project approval. Proponents must submit detailed proposals to the PPP Center, which conducts a preliminary review. Approved proposals undergo feasibility studies, stakeholder consultations, and financial assessments.

The PPP Center and relevant authorities evaluate the projects based on technical and financial criteria. The Public Private Partnership and Investment Committee (PPPIC) gives final approval. The process ensures that projects are technically sound, financially viable, and aligned with national development goals, ensuring transparency and accountability at every stage.

11. How does the act support foreign investment in PPPs?

The Public Private Partnership and Investment Act 2019 supports foreign investment in PPPs by providing a clear legal framework, ensuring protection of foreign investors’ rights, and offering various incentives. The Act allows for repatriation of profits, protection against expropriation, and access to international arbitration for dispute resolution.

Additionally, it offers fiscal incentives such as tax exemptions and reductions. The Act ensures a streamlined process for project approval and provides government guarantees to mitigate certain risks, thereby creating a conducive environment for foreign direct investment in Nepal’s infrastructure projects.

12. What are the penalties for non-compliance?

The Public Private Partnership and Investment Act 2019 imposes strict penalties for non-compliance with its provisions. Penalties may include fines, termination of contracts, and blacklisting of non-compliant entities from future PPP projects.

Additionally, the Act allows for legal action against parties that breach contract terms or fail to meet performance standards. These penalties aim to enforce accountability, ensure adherence to project agreements, and maintain the integrity and reliability of the PPP framework. Non-compliance with environmental, financial, or operational requirements may also attract specific sanctions as stipulated in the Act.

13. How does the act handle dispute resolution?

The Public Private Partnership and Investment Act 2019 handles dispute resolution through a structured approach that includes negotiation, mediation, and arbitration. The Act mandates that PPP contracts must include clear provisions for resolving disputes. Initially, parties must attempt to resolve disputes through mutual negotiation.

If unresolved, disputes may be referred to mediation by an independent mediator. Failing mediation, parties can opt for binding arbitration under international arbitration rules. This multi-tiered approach ensures that disputes are resolved efficiently and fairly, minimizing disruptions to project implementation and fostering investor confidence.

14. What are the environmental compliance requirements?

The Public Private Partnership and Investment Act 2019 mandates that all PPP projects must comply with national environmental laws and regulations. Proponents must conduct Environmental Impact Assessments (EIAs) and obtain necessary environmental clearances before project approval.

The Act requires ongoing monitoring and reporting of environmental performance throughout the project lifecycle. Projects must implement mitigation measures to minimize adverse environmental impacts and adhere to sustainable development practices.

Non-compliance with environmental requirements may result in penalties, suspension, or termination of the project, ensuring that environmental considerations are integral to PPP initiatives.

15. How does the act promote infrastructure development?

The Public Private Partnership and Investment Act 2019 promotes infrastructure development by establishing a legal and regulatory framework that facilitates private sector investment in public infrastructure projects. The Act encourages the development of critical infrastructure sectors such as transportation, energy, water supply, and urban development.

It provides incentives, such as tax benefits and government guarantees, to attract private investment. The Act ensures a transparent and competitive project selection process, enhancing project quality and efficiency. By fostering collaboration between public and private entities, the Act aims to bridge infrastructure gaps, boost economic growth, and improve public service delivery in Nepal.

16. What are the reporting requirements for PPP projects?

The Public Private Partnership and Investment Act 2019 mandates comprehensive reporting requirements for PPP projects. Project proponents must submit regular progress reports to the Public Private Partnership and Investment Committee (PPPIC). These reports must include financial statements, project milestones, performance metrics, and compliance with contractual obligations.

Additionally, proponents must provide annual audited financial statements and environmental impact reports. The Act requires transparency in financial management and operational performance, ensuring accountability and facilitating effective monitoring and evaluation of PPP projects by relevant authorities.

17. How does the act ensure project sustainability?

The Public Private Partnership and Investment Act 2019 ensures project sustainability by mandating compliance with environmental, social, and economic standards. Project proponents must conduct thorough Environmental Impact Assessments (EIAs) and implement sustainable practices throughout the project lifecycle.

The Act requires continuous monitoring and reporting of environmental and social impacts. It promotes the use of sustainable technologies and practices to minimize adverse effects. By aligning PPP projects with national sustainable development goals, the Act ensures that infrastructure development supports long-term environmental, social, and economic well-being.

18. What is the role of government agencies in PPPs?

Under the Public Private Partnership and Investment Act 2019, government agencies play a crucial role in PPPs. They identify and prioritize potential PPP projects, provide necessary approvals, and ensure compliance with legal and regulatory frameworks.

Government agencies, including the PPP Center and the Public Private Partnership and Investment Committee (PPPIC), facilitate project selection, evaluation, and monitoring. They offer technical assistance, coordinate between public and private stakeholders, and provide necessary support to enhance project viability. These agencies ensure that PPP projects align with national development goals and deliver public benefits effectively.

19. How are project finances managed?

The Public Private Partnership and Investment Act 2019 requires meticulous financial management for PPP projects. Project proponents must establish transparent and accountable financial systems. They must submit detailed financial plans, including cost estimates, funding sources, and revenue projections, during the proposal stage.

Regular financial reporting, including audited annual financial statements, is mandatory. The Act allows government oversight to ensure proper use of funds and adherence to financial agreements. Additionally, the Act provides for government guarantees and risk mitigation measures to ensure financial stability and attract private investment.

20. How does the act support innovation in PPPs?

The Public Private Partnership and Investment Act 2019 supports innovation in PPPs by encouraging the use of advanced technologies and innovative practices in project implementation. The Act promotes research and development, and the adoption of best practices in infrastructure development and service delivery. It provides incentives, such as tax benefits and streamlined approval processes, for projects incorporating innovative solutions. The Act also facilitates collaboration between public and private sectors to foster creativity and efficiency. By prioritizing innovation, the Act aims to enhance the quality, sustainability, and effectiveness of PPP projects in Nepal.