By: Lamia Nabil
The Egyptian Ministry of Finance signed an agreement with the International Finance Cooperation (IFC), a member of World Bank, and the American University in Cairo (AUC) during the 2nd Annual PPP Investment Summit on Sunday.
The agreement aims to promote public private partnerships (PPP), and to help raise awareness of the benefits of private sector involvement in major infrastructure, power, health, transport networks, and water projects.
“These partnerships allow the government to tap into private sector expertise, which makes the delivery of basic services more efficient and helps build necessary infrastructure,” said Atter Hannoura, PPP Central Unit Director at the Ministry of Finance.
The new PPP Central Unit plans to hold joint conferences, workshops and other events with the IFC and the AUC in order to support prospective enterprises and promote awareness of the benefits PPP projects.
PPP Director of the IFC Laurence Carter said: “Working closely with academia and government in this area will promote Public Private Partnerships and develop the necessary knowledge base and skills of Egyptian citizens.”
During the session regarding PPP projects’ life cycles and financing options, Hannoura explained that the Egyptian Government currently has between eight to ten projects under study to be tendered during 2013. These include refuse recycling projects, developing the Suez Canal University Hospital, the Cairo Contact Centre Park in Maadi, and building a train line between Ain Shams and the 10th of Ramdan City to transport both people and goods.
There are other projects which are still under study to be tendered in 2014 and 2015, including two water desalination plants in Sharm Al-Sheikh, the River Bus from Helwan to Qanater, and, the Cairo-Suez and Cairo-Ismalia-Port Said highways, as well as the Ras Sedr to Sharm Al-Sheikh tunnel.
For the healthcare sector, two hospitals are planned in Qena and Zagazig, and for the power sector, a 1,300 MW power station in Qena and a 1,500 MW power station in Beni Suef are also planned.
“PPP projects relieve the Government from financing infrastructure projects as the financial burden is only on the private sector,” said Hannoura. “The Government will only start making payments after receiving the project from the private sector.”
“The government is committed to paying these amounts to the private sector in case of a financial crisis,” added Hannoura. “Normally all the payments are in local currency except for some projects which are in hard currency, such power stations and water plants.”
He continued: “The private sector must bear the exchange rate difference between the two currencies, as term sheets are one of the required documents to be handed to the Government during the tender process.”
The Ministry of Finance said that it deployed many mechanisms during the tender process to adapt risk division between the government and the private sector.
There are many workshops and courses for the administrative system employees to increase their awareness dealing with PPP projects and contracting with the private sector.
PPP contracts organise the relationship between the government and the private sector and guarantee their rights in case of dispute during three stages of conflict resolution. These include the oversight committee on performance which consists of a representative from the private sector and another from the government, and independent financial or technical experts agreed upon by the two parties. At the second stage the partnership committee includes the two parties’ heads; the final stage consists of binding arbitration.
Khaled El-Degwee , concessions director for OCI talked about the problems for the private sector in starting PPP projects. He said: “The private sector faces many political, as well as financing challenges including exchange rates issues and also legal issues.”
He also stressed that banks are reluctant to give financial aid to companies, “although the major problems that we have are hard currency exchange rates and social demands, as these problems are hard to solve”.
“The Government must also create mechanisms to help the private sector overcome these obstacles to reduce their subsides gap through the private sector, as huge projects that would cost billions of dollars and the private sector cannot afford them without Government assistance to pave the way,” he said. “The private sector needs to work in a sustainable environment.”
The new Cairo wastewater treatment plant which was implemented by OCI is the first PPP project in Egypt.