Public-Private Partnerships: a method to attract  investors

Ahmed Alkalawy
5 Min Read

Many governments are turning to the private sector to design, build, finance, and operate infrastructure facilities hitherto provided by the public sector. Public-Private Partnerships (PPPs) offer policy makers an opportunity to improve the delivery of services and the management of facilities.

The other benefit is that of mobilising private capital: the estimated demand for investment in public services shows that government and even donor resources fall far short of the amount required. For this reason, access to private capital can speed up the delivery of public infrastructure.

Governments are also turn to partnerships with the private sector as a means to improve the procurement of public services. The PPP process usually requires information about the true long-term cost of service delivery, which generates a more realistic debate on project selection. By improving the identification of a project’s long-term risks and the allocation of those risks between the public and private sectors, the PPP process enables a more efficient use of resources.

The contractual nature of Public-Private Partnerships acts as a powerful incentive to ensure that this long-term perspective is put into practice: the public sector can no longer procure infrastructure assets while failing to maintain them properly. At the same time, the private sector has incentives, as their capital is exposed to performance risk, to design and build these assets taking into account the costs of longer-term maintenance and renewal.

PPPs require governments to think and behave in new ways that require new skills. They can be a tool for reforming procurement and public service delivery and not merely a means of leveraging private sector resources. PPPs are more than a one-off financial transaction with the private sector. They need to be based on firm policy foundations and long-term political commitment.

Private sector partners look for these factors when deciding whether or not to bid for a project.

The other challenge for governments is the fact that resources are usually less readily available for the activities that lay the foundations for a successful PPP than for project-specific procurement activities. However, without the right policies, institutions, and processes, the transactions that follow often fail.

Although most forms of Public-Private Partnerships involve a contractual relationship between the public and private parties, the long-term nature of these contracts creates a strong long-term mutuality of interest. PPPs are not just a step in the procurement process, given their long-term nature, they differ from traditional procurement contracts, which often are associated with a short-term “claims culture.”

The PPP programmes in more mature operational contracts show that in many cases the parties can recognise this mutuality of interest without adversely affecting the mechanisms in the formal contract that determines performance.

PPP- In Egypt: President Al-Sisi’s Administration & Great Achievements:

Referring to Public-Private Partnerships Law No. 67 of 2010, which remained locked up in the box without activation, the Sisi administration at the time developed a number of strong legislative policies that did not activcate the Public-Private Partnerships system until Investment Law No: 72 / 2017. afterwards, the Sisi adminstration succeeded in liberating governmental bodies from obstacles and restriction in partnering with the private sector, for example under article 48 of law No 72/ administrative authorities that had assests were permitted to participate in the private sector by the PPP’s system and other types of the partnership. The Sisi administration also passed law No: 182/2018 for the organisation of contracts for public authorities while also giving the term ‘corruption’ a clear and legal definition for the country to abide by, but only to have law repealed in Law No: 89 /1998 for  Bidding & Tenders.

Recent legislative developments in Egypt have played a major role in attracting more investors and putting Egypt on the global map of long-term investments.

President Al-Sisi has done great achievements through major projects such as road, energy, and social housing. Many other areas of development like health, education, agriculture, and industrial prodution are considered a qualitative and historical leap to push Egypt among the ranks of the major countries and comes to fruition in the modernisation of infrastructure, public services, and utilities in record time.

Dr. Ahmed Alkalawy is a legal expert and the Managing Partner of Kalawy and Partners

Share This Article