By The Pulseline News Desk
Sri Lanka is moving to establish a formal legal framework for public-private partnerships (PPPs), with the Cabinet of Ministers approving the publication of a draft bill in the Government Gazette before it is presented to Parliament.
The proposed legislation is intended to address longstanding institutional and legal obstacles that have hindered the country’s ability to attract private capital into public infrastructure and other national investment projects.
Cabinet Spokesman and Minister Nalinda Jayatissa announced the decision at the weekly post-Cabinet media briefing, saying the legislation would establish a National Agency for Public-Private Partnerships and introduce a structured framework for developing and implementing PPP projects across the economy.
The Legal Draftsman has prepared the bill, and the Attorney General has granted legal clearance for the proposed legislation.
The decision marks an attempt by the Government to formalise a model of investment that successive administrations have pursued, but struggled to implement consistently amid concerns over transparency, procurement, institutional coordination and investor confidence.
“This Act is being introduced and formulated taking into account the opportunities and challenges we identified regarding public-private partnerships over the recent past,” Jayatissa has said.
He has said the legislation would establish a comprehensive statutory framework covering the identification, formulation, evaluation, approval, procurement, implementation, monitoring and conclusion of PPP projects.
National agency to coordinate projects
A central feature of the proposed legislation is the establishment of a National Agency for PPP to facilitate and coordinate projects involving the Government and private investors.
According to Jayatissa, the agency would provide advice and assistance, monitor implementation and support the execution of PPP projects across all sectors of the economy.
The proposed institutional arrangement is intended to reduce fragmentation among public authorities and provide investors with a more consistent process for engaging with the Government.
Under the framework, PPP projects would also be integrated into the public investment management system established under the Public Financial Management Act.
This is expected to strengthen fiscal discipline and ensure greater consistency in project appraisal, approval and monitoring.
The integration is particularly important because PPP arrangements can create long-term financial commitments for the State, including contractual payments, guarantees and contingent liabilities that may not be immediately reflected in conventional public expenditure.
A clear assessment of these obligations would help the Government evaluate whether a proposed partnership offers value for money and whether the associated risks are manageable within the country’s fiscal constraints.
Jayatissa has said the bill was intended to place PPPs on a more structured and formalised footing.
“This bill is being drafted to place public-private partnerships on a much more structured and formalized footing,” he has said.
Transparency and procurement safeguards
The proposed legislation also seeks to introduce a transparent and competitive procurement framework for selecting private-sector partners.
Jayatissa has said the selection process would be guided by procurement guidelines issued by the National Procurement Commission.
A competitive framework could help address concerns over how projects are awarded, how investors are selected and how the State determines the terms of individual partnerships.
These issues have been central to Sri Lanka’s difficulties in implementing major public-private investment projects, particularly where unsolicited proposals, negotiations with individual investors and the allocation of risks have raised questions about transparency and accountability.
A formalised process could provide greater clarity on project selection, feasibility assessments, competitive bidding, contractual obligations and the responsibilities of public institutions.
However, the effectiveness of these safeguards will ultimately depend on the final provisions of the bill, the independence and capacity of the proposed agency, and the consistency with which the rules are enforced.
The Government will also need to ensure that the new arrangements complement existing procurement and public financial management requirements rather than create additional layers of approval.
Lessons from past investment setbacks
Sri Lanka has periodically turned to PPPs as a means of financing infrastructure development without relying entirely on public funds or direct Government borrowing.
The model allows private investors to finance, construct, operate or maintain public infrastructure under agreed contractual arrangements, depending on the structure of each project.
Such partnerships can potentially mobilise capital, introduce specialised expertise and improve operational efficiency in sectors where the Government faces financial or technical constraints.
However, successive efforts to attract private investment have encountered difficulties arising from institutional fragmentation, lengthy approval procedures, policy uncertainty and disputes over project terms.
Changes in government and shifts in national development priorities have also affected investor confidence, with some major projects facing renegotiation, suspension or cancellation.
The absence of a unified framework governing the preparation, evaluation and procurement of PPP projects has further complicated the process of developing consistent investment proposals.
For international investors, these uncertainties can increase project preparation costs, complicate financial planning and make it more difficult to assess the risks associated with long-term commitments.
Bureaucratic delays and disagreements among public institutions can also extend the time between an initial investment proposal and the commencement of construction or operations.
The proposed bill seeks to address these constraints by establishing clearer procedures and institutional responsibilities.
Jayatissa has acknowledged that Sri Lanka had attempted PPP arrangements intermittently but had failed to implement them at the pace and efficiency required.
“Although we have attempted this intermittently in our history, we were never able to carry out Public-Private Partnerships at the speed and efficiency that we and the country required,” he has said.
He has attributed the difficulties to transparency concerns, friction between agencies, institutional coordination problems and other procedural bottlenecks.
The legislation, he has added, was intended to address the statutory and legal constraints underlying these problems.
Balancing investment with public accountability
The proposed framework comes as Sri Lanka continues to face the challenge of financing economic development while maintaining fiscal discipline following its recent economic crisis.
Mobilising private capital could help the country pursue infrastructure and other investment projects without requiring the State to meet the entire upfront cost.
However, PPPs do not eliminate public financial risks. Poorly structured agreements can expose the Government to expensive guarantees, inflexible payment obligations and costly disputes if projects fail to deliver the expected benefits.
The success of the proposed framework will therefore depend on whether projects undergo rigorous feasibility studies, realistic demand assessments and transparent evaluations of their long-term financial implications.
Equally important will be the allocation of construction, operational, financing and demand risks between the public and private partners.
Investors generally seek predictable regulations, enforceable contracts and clarity on how disputes will be resolved. At the same time, the Government must ensure that private-sector participation serves the public interest and does not result in excessive costs for taxpayers or users of essential services.
Public confidence will also be important, particularly for projects involving strategically important State assets or essential public services, where concerns over ownership, affordability and national interests can generate opposition.
A transparent process for evaluating proposals and disclosing relevant contractual information could help address such concerns while improving the credibility of the investment framework.
Leave a comment