Getting PPPs Right: The Road to Sustainable Infrastructure Investments
Sri Lanka’s 2024 Budget Speech outlined plans to accelerate Public Private Partnerships (PPPs) to secure the investment and expertise needed to sustain the provision of public infrastructure across the country going forward. It’s a welcome signal — but it raises an obvious question: does Sri Lanka’s current institutional and regulatory framework for PPPs actually have the capacity to deliver on these plans?
That question was the subject of a webinar hosted by the Advocata Institute, built around a policy brief jointly produced by Advocata and the Alliance for Sustainable Infrastructure (ASI). The session opened with a presentation of the brief’s findings, followed by a panel discussion featuring:
- Mr. Thilan Wijesinghe — Chairman & CEO, TWCorp (Pvt) Ltd (Former Chairman, NAPPP)
- Prof. Rohan Samarajiva — Chairman, LirneAsia
- Mr. Umair Ismail — Financial Restructuring Specialist, Ministry of Power and Energy (Former Lead Transaction Advisor, NAPPP)
- Moderator: Ms. Yasmin Raji — Deputy Manager, Research, Advocata Institute
Bringing together a former NAPPP chairman, a former NAPPP lead transaction advisor, and a leading regulatory economist gave the discussion a rare vantage point — voices who have sat inside the very institution the brief identifies as central to Sri Lanka’s PPP weaknesses, alongside an outside perspective on regulatory design more broadly.
Why PPPs, and Why Now
Sri Lanka’s debt crisis did not emerge from nowhere. Between 2006 and 2019, the country borrowed heavily to fund large-scale infrastructure projects — USD 12.1 billion in total, equivalent to 14% of GDP. Many of these projects have since been criticised as “white elephants”: expensive, poorly returning, and delivering minimal benefit to the population they were meant to serve, while causing environmental and social harm along the way.
The consequences of that borrowing have been severe. Sri Lanka lost access to international capital markets in 2020 following credit rating downgrades, and the situation worsened considerably after the country defaulted on its debt in 2022. Restoring a sovereign credit rating after a default is a slow process — ratings typically remain deep in speculative or “junk” territory even after successful restructuring, reflecting ongoing concerns about economic stability, governance, and long-term debt sustainability. As of the second quarter of 2024, Sri Lanka’s rating remained at a highly speculative grade. In practice, this means international borrowing to fund infrastructure remains prohibitively expensive, while a budget deficit and elevated local debt levels leave little room for domestic financing either.
Yet the country’s need for infrastructure has not gone away. This is the gap PPPs are meant to fill: a model in which government and private sector share the responsibilities, risks, resources, and expertise of building and running public infrastructure, in principle reducing the burden on public finances while bringing in private-sector efficiency and innovation.
Sri Lanka is not new to this model. Between 1990 and 2017, the country entered into 81 PPP projects that reached financial closure, with total investment exceeding $2,671 million. But that experience has been narrow: almost entirely concentrated in energy (77 projects, $1,737 million), with only a handful in ports (3 projects, $740 million) and ICT (1 project, $194 million). A tool that has worked well in a few sectors has simply not been extended to the broader infrastructure base the country now needs.
No Binding Legal Framework
There is currently no dedicated law governing PPPs in Sri Lanka. The main reference point is a set of Guidelines on Government Tender Procedure for private-sector infrastructure projects, last revised in 1998. These guidelines are not legally binding, and they say nothing about land rights, restrictions on foreign investor participation, environmental and social safeguards, dispute resolution, or termination and compensation — issues that instead have to be pieced together from a patchwork of separate legislation, including the State Lands Ordinance, the Land (Restrictions on Alienation) Act, the National Env
The brief’s central argument is that Sri Lanka’s underuironmental Act, and the Companies Act, among others. The guidelines are also silent on how state-owned enterprises should participate in PPP joint ventures, despite this being common practice.
The guidelines technically require a public call for bids, but the Cabinet can bypass this “in exceptional circumstances” — a loophole broad enough that most of Sri Lanka’s PPPs have actually come about through unsolicited proposals rather than competitive tender. Multiple amendments over the years have left no single, unified version available to public agencies, contributing to a widespread lack of clarity among government entities about what a PPP actually is — and, in turn, to projects being pursued as PPPs without the feasibility studies needed to establish whether that structure even suits them. A new PPP law is reportedly in development, though it has yet to materialise.
No Central Authority in Charge
Sri Lanka also lacks a single body with clear authority over how PPP projects are selected, approved, procured, contracted, and quality-checked. Responsibility is fragmented across line ministries, the Cabinet, and the National Agency for Public Private Partnerships (NAPPP).
The NAPPP itself has had a troubled history. Established with World Bank support in 2017 as an independent PPP unit, it began important reform work in 2019 — only to be shut down in 2020 before that work could be finalised. It was re-established by Cabinet decision in 2022, with LKR 250 million allocated toward its relaunch, but stakeholders report it still lacks the expertise and institutional capacity to function as a genuine oversight body. In practice, it operates more as an advisory board, leaving line ministries to make consequential decisions — on procurement, contract negotiation, and risk management — without the technical capacity those decisions require. This has contributed to project selection being driven by political considerations rather than sound investment criteria.
Weak Institutional Capacity
Technical capacity gaps run deeper than the NAPPP alone. Staff are often drawn from existing public service roles, given only ad-hoc training, and expected to manage complex PPP responsibilities alongside their regular duties. This shows up in a common and costly misunderstanding: PPPs are sometimes treated within government as though they were “free gifts” from the private sector, when in reality they can carry substantial financial exposure for the state. A private partner is typically paid either through user fees or through government payments — contingent liabilities that must be planned and budgeted for. Without the technical capacity to anticipate these liabilities, or the upfront costs of enabling infrastructure like access roads or utilities, PPPs risk generating unbudgeted and unanticipated expenses down the line.
A Transparency Problem
Perhaps most damaging is the lack of visibility into how PPP decisions are made. There is currently no public mechanism to access feasibility studies, environmental and social impact assessments, evidence of competitive bidding, bid evaluations, final contract values, or project progress reports for PPPs. The Ministry of Finance does publish a quarterly report on mega-infrastructure projects — but it excludes PPPs specifically. The brief points to the government’s PPP with an Indian and Russian firm to manage Mattala International Airport — long regarded as one of Sri Lanka’s least successful infrastructure projects — as a case in point: there is no publicly available information confirming whether that deal followed a competitive and fair bidding process at all. This lack of transparency does more than raise governance concerns domestically; it signals to potential investors that procurement in Sri Lanka is not competitive, undermining the very confidence PPPs are meant to build — particularly damaging in the aftermath of a crisis rooted in the mismanagement of public funds.
What Needs to Change
The brief sets out a three-part reform agenda.
Legal and regulatory reform tops the list: fast-tracking the long-promised PPP law, and ensuring it mandates competitive bidding (with narrowly defined exceptions for unsolicited proposals), requires proper feasibility studies before a project proceeds, forces clear disclosure of contingent liabilities and upfront costs before contracts are signed, and gives the NAPPP genuine legal authority to act as the country’s central PPP body — with real consequences when procurement rules aren’t followed. The brief also calls for Sri Lanka’s Public Investment Program to be published online, giving investors a transparent, sector-by-sector view of the government’s infrastructure pipeline.
Capacity building comes next: legally empowering the NAPPP to recruit and retain qualified professionals — in project finance, engineering, banking, and law — at competitive market rates, backed by proper budgetary provision and access to multilateral development grants, alongside dedicated PPP units within line ministries themselves.
Improving the investment environment rounds out the recommendations, including measures like tariff exemptions on selected construction materials and stronger guarantees against expropriation. Notably, the brief suggests a two-stage sequencing: focusing near-term efforts on transferring existing government-owned assets — brownfield projects like Mattala Airport — into PPP arrangements, and reserving new (greenfield) infrastructure projects for once debt restructuring concludes and investor confidence has had a chance to recover.
The brief’s underlying message is one of cautious optimism: PPPs genuinely can offer Sri Lanka a sustainable path to rebuilding its infrastructure without repeating the debt-driven mistakes of the past two decades. But that potential depends entirely on fixing the legal, institutional, and transparency gaps that currently leave PPP decisions too discretionary, too politicised, and too opaque to attract the serious private investment the country needs.
