Public-private partnerships (PPPs) should be a mechanism to boost the private sector’s role in the national economy. On the macroeconomic level, PPPs increase the value added to the gross domestic product (GDP). However, there should be a mechanism to rein in the higher cost of public services because of undue profits for private investors.
The Moustafa Madbouli-led cabinet aims to raise the private sector’s contribution to investment to 65 per cent within three years. To that end, the government rolled out a number of projects for PPPs. The projects include the second phase of school construction – a total of 57 schools and a dry port in the 10th of Ramadan City.
The World Bank defines a PPP as a form of financing public investment, and sometimes the direct provision of public services, in which finance is provided by private investors (in return for interest), and private firms are involved in the management of the construction or operation of the publicly-owned facility.
PPPs can be an efficient instrument to boost a variety of sectors such as energy, transport, wastewater, telecommunications, power, healthcare, water and education.
Furthermore, the government’s goal is to achieve inclusive private sector-led growth to increase investments and create jobs.
Background
Law No. 67/ 2010 marked the beginning of legislative efforts to regulate the participation of the private sector in infrastructure projects. However, between 1990 and 2007, a number of PPPs were success stories in infrastructure, communications, transportation, water and sanitation, and energy.
Egypt introduced a law in November 2021 allowing the private sector to take part in the nation’s infrastructure projects, services, and public facilities. In December 2021, President Abdel Fattah El Sisi ratified Law No. 153/2021, which amended a number of provisions of Law No. 67/2010.
The amendments are designed to speed up procedures for contracting PPP projects and to develop new mechanisms for increasing investments in the infrastructure, utilities, and public services sectors. The ultimate objective is to stimulate the participation of the private sector in financing infrastructure projects to ease the burden on the state budget.
The law has introduced new ways to set up PPPs such as direct contracting, contracting in advance at the initiative of the private sector, and limited tenders and auctions.
Structural reforms
PPPs can be described as an ideal option for risk-sharing finance. This unique feature makes PPPs the best financing mechanism for both the state and the private sector.
Moreover, PPPs are essential to empower the country’s private sector as part of promoting market-orientated economic policies for all-inclusive growth. The empowerment of the private sector is part of Egypt’s overall structural reforms.
The government has outlined a six-pillar plan for structural reform based on a bigger role of the private sector, human capital, and governance. Structural reforms are urgently needed to counter the economic repercussions of the Russia-Ukraine conflict and the Covid-19 pandemic.
The government is committed to applying structural reforms in a bid to support more inclusive private sector-led growth.
