Local governments have resorted to using the Public-Private Partnership (PPP) model to meet the gaps in financing and management in infrastructure development in Nepal. The governance mechanisms set for PPP determine the quality of partnership in infrastructure development between the public and private sectors. This position paper inquiries into the practices of operationalizing PPP by local governments in Nepal. The paper adopts an explorative research design. Most of the data were collected through qualitative methods such as mini-meetings with stakeholders, in-depth interviews with municipal officials and leaders of the association of private sectors and citizens who were affected by the selected PPP projects, and a Public-Private Dialogue (PPD).

This process revealed that there are opportunities for local governments to broaden the avenues of participation of private sectors in PPP projects by addressing their concerns in areas of project identification, project selection, and project prioritization. It is vital to gain trust from all sectors. There is an urgent need to broaden the avenues of participation for the private sector in PPP mechanism decision-making platforms. Likewise, concerns of affected populations and general citizens should be given institutional representation while deciding whether to list any projects as potential PPP projects. Adoption of the principle of transparency, open government, collaboration among parties, suitable feedback mechanisms, and building trust with affected populations are keys to ensuring the sustainability of any PPP project. Ensuring decisions of the municipality are taken based on citizen feedback will definitely reduce disputes and increase trust between the private sector and the municipality. The governance of the PPP process should be approached from a citizen-centric perspective; it should not only be treated from a mere legal and technical point of view. The position paper recommends what course of action local governments must take to ensure that the private sector is involved in PPP projects and make the governance of PPP projects effective.