Egypt currently has 23 public-private partnership (PPP) projects open for tendering to the private sector, with eight already approved, officials said this week.
Next year, the market will be saturated with PPPs, said Rania Galal Zayed, advisor to the minister of finance and director of the PPP Central Unit, during a panel discussion titled “Infrastructure Investment” at the Euromoney conference in Cairo this week.
The private sector — which is more capable than the government — has a vital role to play in building up the country’s dilapidated infrastructure, as well as increasing the quality of public services.
Egypt’s government is facing a serious lopsidedness in its balance of payments, she claimed, especially following the global economic crisis, and in this context, the private sector can help alleviate disequilibrium. PPPs would drive growth and create jobs, Zayed said.
Minister of Trade Rachid Mohamed Rachid noted in a separate discussion that for Egypt to regain growth lost due to the economic crisis and go a step further by expanding it to 10 percent, further PPP projects were necessary in infrastructure as well as health, education and agriculture.
Panelists — including individuals from the International Finance Corporation (IFC), the legal sector, as well as an international utility firm — were more than enthusiastic over the prospects of future PPP projects in Egypt, yet some voiced concerns over deep-seeded obstacles.
Paddy Padmanathan, president and CEO of ACWA Power International, although diplomatic in pointing out challenges that need to be met, was able to underscore the “entrenched institutional structure” at the higher levels of government present in Egypt, which maintain “suspicion” and manifests latent protectionism, in spite of having made significant progress in acknowledging the positive role the private sector can play in this domain.
He added that the Egypt’s institutions and actors are “set in their ways,” and thus, “hard to penetrate.”
Padmanathan added that ensuring that local capacity is involved in the PPP process is critical to its success, as it brings in needed knowledge about the local environment, which would be onerous to cultivate with foreign staff and partners.
The issue of the slow involvement of local banks into the PPP process was identified as a further challenge by a panelist attendee.
Richard Banks, director of Euromoney conferences for the Middle East region, chuckled that it would come as no surprise that bankers would eschew taking the bold step addressing this concern during the panel discussion.
Nevertheless, Padmanathan defended the position of local banks, stating that though flush with liquidity, they would prefer to wait and see how the PPP environment in Egypt will mature. Once success has been demonstrated, he indicated that local banks would begin to become more active.
A second attendee noted that the local culture with regard to investing needs to change, as it is currently bunkered down in a short-term rather than a longer-term focus, which is the basis for capital intensive PPP projects.
Only 10 percent of local investors make up the mix of private sector investors, and that this would in turn lead to a situation whereby foreign firms would overwhelmingly benefit, which would prevent the local economy from truly benefitting from PPP projects.