CAIRO: Egypt’s first pilot public-private partnership project was announced in May when a joint venture of Egypt s Orascom Construction Industries (OCI) and Spain s Aqualia won a tender for a Cairo wastewater treatment project.
OCI and Aqualia were awarded late last month the contract to build and operate a wastewater facility in New Cairo, an agreement that was made official during a signing ceremony Monday evening at the Ministry of Housing.
The Egyptian-Spanish consortium will construct and operate the new wastewater facility for 20 years before transferring ownership to the Egyptian government. The project will serve the growing population of New Cairo, which is expected to grow from 500,000 to 3.8 million by 2029.
The new wastewater facility is the first public-private partnership project for infrastructure development in Egypt under the new Public-Private Partnership Unit at the Ministry of Finance.
The International Finance Corporation (IFC) was the lead transaction advisor to the Egyptian government during the bidding process.
“This transaction is the first pilot public-private partnership in Egypt and will help mobilize private sector finance and know-how for the government. Egypt is following an active public-private partnership program and we are encouraging private sector participation in other projects by providing an appropriate legal and regulatory framework and a balanced risk allocation between the public and private sectors, said Rania Zayed, head of the PPP Central Unit.
The concept of public-private partnerships originated in the United Kingdom in the late 1970s and gradually spread around the world as governments realized the benefits of private sector efficiency in the allocation of public services.
It is currently a growing trend in the MENA region, where governments are faced with diminishing budget capacities in the face of increased infrastructure needs.
The IFC has helped regional governments pioneer a number of PPP projects, including the expansion of Queen Alia Airport in Jordan, the rehabilitation and expansion of the Hajj terminal in Saudi Arabia, and other desalination, irrigation and transit projects throughout the region prior to helping mobilize the concept in Egypt.
“PPP offers governments an efficient solution to their infrastructure dilemma. In PPP projects, the government becomes a regulator watching over quality of private service and making sure it covers what it is supposed to be covered, as opposed to a service provider as it was in the past, explained Moazzam Mekan, the IFC’s manager for infrastructure advisory services.
The IFC’s involvement in Egypt’s first PPP project, which was jointly funded by the Development Collaboration Partnership and the United Kingdom’s department for international development, underscores their commitment to expanding PPP in the MENA region.
“Public-private partnerships help increase private sector investments in public infrastructure to meet the needs of a growing economy and to improve services. The IFC has a unique capacity to structure private participation in infrastructure projects that balances commercial viability with the public good, IFC Director for Middle East and North Africa Michael Essex said of the IFC’s involvement.
While PPP projects ultimately increase efficiency and are profitable for the private sector, they can be wrought with obstacles for the public and private parties involved.
The bidding process and contractual procedures associated with PPP projects can be tedious and costly, sometimes requiring legislative changes to accommodate new contracts. Egypt’s allocation laws are one area that will need to be revisited to allow for easier public-private collaboration in the future.
Ultimately, the wide implementation of PPP in Egypt will require more awareness of the benefits and responsibilities of PPP agreements, says Mekan, who noted that the IFC was taking the lead in this area through a series of knowledge-sharing conferences and seminars.
Despite obstacles, the first project is starting out on the right foot. According to Mekan, the success of the wastewater facility will pave the way for future public-private cooperation in the PPP Central Unit’s long-term plan for infrastructure expansion.
“The PPP Central Unit under the Ministry of Finance is taking the leadership and driving the infrastructure development goals. When starting a new program, is it usually best to do simpler projects to establish a track record and signal seriousness to investors, so a project like a wastewater facility is a good place to start, he said.
