'I am Back'

 Thilan talks about his new role as the head of the National Agency for PPPs

The Cabinet last week, granted approval to appoint former BOI Chairman and business professional Thilan Wijesinghe as the head of ‘National Agency for Public Private Partnership’ (PPP) established to fast-track Sri Lanka’s economic development agenda.

“Today, the biggest problem PPP investors are having is the absence of a single Government counterpart agency to talk to. We need to clear the backlog of PPP projects and score some quick wins,” said Wijesinghe speaking exclusively to the Daily News.

Following are excerpts of the interview:

Q:You have come out of hibernation; where have you been hiding?

I have only been hibernating from active Public Service since I resigned as Chairman and Director General of the BOI in 2001 after holding the position for 5 ½ years. I have, however, been very active in the private sector in the last 16 years, having been CEO/Group Managing Director of several reputed companies, the last two being Forbes and Walker Group and Overseas Realty PLC. Starting 2011, I made a decision to pursue entrepreneurial interests for wanting to spend more time with my family who was living in the US at the time where my two young sons were studying. I decided that I will pursue my passion for investment banking and real estate by choosing partners and clients of my liking, working at my own pace. Secondly, I decided that I will take minority shareholding positions in entrepreneurial ventures by backing good management teams who will run the companies day-to-day, while I will play the role of an active non-executive Chairman or Director.

Q: The government seems to be having a lot of confidence in you and appointed you to chair this agency. Will the new agency have more teeth than the previous unit under the Ministry of Finance?

The Cabinet of Ministers has decided that a unit within the Finance Ministry has limited authority and decided that a new National Agency for Public Private Partnerships (NAPP) will be formed with adequate legal, financial and administrative authority to work in consultation with relevant line ministries. At the moment, this is a policy decision and time will be required to work out the right balance between authority and facilitation.

Q: Would the new agency for PPPs be involved with privatisation?

No. Securing strategic partners for commercially operating State-owned enterprises requires a different approach and would not be part of the mandate of the NAPPP. PPPs fundamentally relate to the creation of new business models (using dead or under-performing assets of the Government that are not generating an economic return) or creation of new assets via new investments by local and foreign investors.

Q: How much power would the agency have to close deals and make them viable projects for the country?

The approach is not to exert 'power.' I do not believe in power emanating from a job title or a set of rules and regulations. What is more important is performance that is based on knowledge and experience and collaboration to earn the respect and cooperation of the line Ministries to ensure that the best possible PPP deal is struck.

A key aspect of PPPs is the fair and equitable allocation of risk between the Government and the private investor. It is in this area and the complex financial and legal structuring that line Ministries have to be guided on. Large PPPs are governed by complex legal agreements that run into 100s of pages. The SAGT Port BOT agreement, which I helped structure in 1998, has over 1,000 pages!

Q: It is obvious that constraints put down by the IMF with regard to borrowings is why the government is going for the PPP formula. But there is an element of government participation. If the government does not have the finances to invest, what would they offer as collateral?

PPPs should not be thought of simply as dictates of the IMF or World Bank. PPPs, if done correctly are good for the country and need to be permanently etched in public policy.

For example, PPPs have made the Port and telecom sectors more competitive with far greater service improvements and taxes generated to the State than if these sectors remained as Government-owned monopolies.

The main collateral the Government can offer for successful PPPs is a sound legal and policy environment and some of its dead physical assets to be offered to the private sector at a fair price to generate new capital formation and economic activity.

Q: We understand that there will be people from the private sector on the Board. How will this help in creating a level playing field?

No decision has been made on the number or extent of any private sector members on the Board. When I created the PPP unit within the BOI (called the Bureau of Infrastructure Investments or BII), the majority of the BOI Board were top Ministry Secretaries. It is my view that relevant Ministry Secretaries should form the backbone of the Board of the NAPPP

Q: This unit is set to be independent but under the Ministry of Finance and Media. Will it have scrutiny from the independent procurement committees?

The NAPPP should always be subject to scrutiny. There will potentially be several layers of scrutiny and oversight. Firstly, the Board, then the line Ministry of the PPP project concerned, then the relevant Cabinet Committee(s) and the Cabinet itself. Finance and Media is the common thread–Finance will come into play in looking at financial and economic risk sharing and Media plays a very important role in communicating to stakeholders and the general public the nature and benefits from a particular PPP transaction.

Q: One of the main reasons you have been chosen for this position is probably because you have been the BOI Chairman and the pioneer in PPP projects. But times and rules have changed. What challenges do you see in attracting PPP investments to Sri Lanka?

What matters to me is that there is a policy environment and political establishment that recognizes the economic benefits of PPPs.

The next most important consideration is the criteria based on which Government investments versus PPPs will be chosen for an identified project.

There must be rigorous policy analysis and debate on the most optimum source of funding.

What has changed is that the BII that I set up, which had achieved so much from 1996 to 2001 when we implemented around $800 million in PPP transactions at a time of war, became a nonentity soon after my resignation. This was mainly a failure in hiring the right people.

Q: There were some questions about you when you left the BOI. Is there anything you need to clear on this matter?

One of the reasons I resigned was to clear my name through Court of a false allegation. This I did successfully. When the final judgment was delivered exonerating me of any wrongdoing, it was based only on the evidence of the first two prosecution witnesses who the Judge found to have given unsatisfactory evidence, and the written submission by the defence. The AG’s Department did not make any closing submissions, oral or written.

This effectively established that the charges were malicious and should not have been referred to Court in the first place. In any case, what was important to me was the Court of public opinion–despite a cloud hanging over my head, I had CEO job offers two weeks after I left the BOI and I went on to head public listed companies well before the judgment was delivered in my favour.

Q: Large projects such as garbage, roads and power generation can be done as PPP projects. Do you see these as priority or are there other areas you’ll be looking into?

I have not yet officially studied the PPP project pipeline. However, I expect the PPP net to be cast wide beyond utilities to capture projects in tourism, affordable housing, healthcare, technology etc. During my tenure as Chairman, the BOI and BII implemented PPP-type projects in housing (e.g. Millennium City, Athurugiriya and Nivasie Pura, Ekala, which to date remain the largest ever private family housing projects completed), Hospitals (Apollo/Lanka Hospitals, Asiri Surgical, Nine Wells etc.) and information technology (Millennium IT, Malabe).

Q: Is the Sri Lankan law in place to have PPP agreements? Or do you have to create new laws from scratch?

We already have many PPPs in operation with complex legal agreements such as SGAT and CICT terminals, Colombo Port City along with smaller projects in mini hydro and power generation.

The combined investment in existing and ongoing PPP projects roughly exceed US$ 3 billion. So why do we need new laws? If at all a law is required, it should be to institutionalise the PPP solicitation and execution process. Complex financial and legal structuring and negotiation skills have to be centralized in a PPP agency with persons head-hunted for their competency paying market salary rates, while the policy, technical and engineering aspects remaining within the domain of relevant Government ministries.

Today the biggest problem PPP investors are having is the lack of a single Government counterpart agency to talk to.

Q: What is your vision in PPPs for the next two years?

As Lou Gerstner, the CEO who turned around a struggling IBM in the 1990s said when he took up office: “the last thing IBM needs is a vision.” Similarly, what we need now is to clear the backlog of PPP projects and score some quick wins. The 'vision' will then naturally follow.