{"id":544429,"date":"2022-03-02T04:12:01","date_gmt":"2022-03-02T04:12:01","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/hardhats\/govt-imf-develop-database-to-track-risk-fiscal-implications-of-ppp-projects\/"},"modified":"2022-03-02T04:12:01","modified_gmt":"2022-03-02T04:12:01","slug":"govt-imf-develop-database-to-track-risk-fiscal-implications-of-ppp-projects","status":"publish","type":"hardhat","link":"https:\/\/enterpriseam.com\/egypt\/hardhats\/govt-imf-develop-database-to-track-risk-fiscal-implications-of-ppp-projects\/","title":{"rendered":"Gov\u2019t + IMF develop database to track risk, fiscal implications of PPP projects"},"content":{"rendered":"

<\/a> The government now has a template for a database of Egypt\u2019s public-private<\/strong> partnership (PPP) projects<\/strong>, according to a technical assistance report (pdf)<\/a> from the International Monetary Fund, following visits from the global lender\u2019s Middle East Regional Technical Assistance Center (METAC). The IMF reviewed and discussed the database\u2019s design with the Finance Ministry\u2019s PPP unit.<\/p>\n

What\u2019s in the database?<\/strong> The database will include detailed data points on each of Egypt\u2019s PPP contracts, including project status, sector, dates of signature, value, and financing, alongside a consolidation table for reporting. This table, which \u201cwill include firm and contingent liabilities incurred by the government for PPP projects,\u201d is designed to increase transparency when reporting on PPP projects, the report says.<\/p>\n

Why do we care? <\/strong>Mobilizing private sector investment through PPPs could go a long way to helping Egypt close its infrastructure funding gap, which the World Bank has previously estimated<\/a>sits at around USD 230 bn. The vast majority of the gap is mainly in the transport sector, which the country now is focusing on under its efforts for a full overhaul. PPPs would ensure better quality standards and simplified and flexible tender processes through which government contracts with private businesses, unlike red-taped state-owned companies which are known to crowd out the private sector due to its legislative and institutional barriers.The model would also help address the perception that the state\u2019s growing involvement in the economy, especially through its mega-projects, is forcing out the private sector.<\/p>\n

Egypt is no stranger to public-private partnerships:<\/strong> The PPP model has proven successful and popular in some industries, including education<\/a>, infrastructure<\/a>, and healthcare<\/a>. Several big projects are already underway under this partnership model, including housing projects by the Mortgage Finance Fund<\/a>, the Cairo monorail<\/a>, as well as the Sixth of October and Tenth of Ramadan dry ports<\/a>.<\/p>\n

2021 saw <\/strong>more love<\/a><\/strong> by private sector education to large-scale private investment platforms<\/strong>, due to them being fundamentally stable investments allowing for long-term investments and delivery of high-impact, cost-effective, affordable, quality education, private sector partners in these joint ventures previously told us.<\/p>\n

The healthcare sector is also <\/strong>whetting investors' appetite<\/a><\/strong>, provided that PPPs could give the private sector access to outlying assets in exchange for a revenue-sharing agreement with the government. But despite investors\u2019 interest, a demand-supply gap could be a challenge due to fragmentation and uneven distribution of facilities \u2014 especially by geographic location in the country.<\/p>\n

A partnership between the MFF with the private sector is one of the examples <\/strong>putting the PPP amendments to the test. Both are planning to launch several housing projects early this year, the fund\u2019s head May Abdel Hamid said<\/a> in an interview in November.<\/p>\n

More transparency = better PPP bids:<\/strong> By using the database to report the details of Egypt\u2019s PPP projects, the Finance Ministry will be able to map out the fiscal implications of these projects and how they are managed. This documentation \u201cwill help to attract more high quality-bidders and potentially lower the risk premium and cost of financing for the government,\u201d the report says.<\/p>\n

The IMF also lent a helping hand on the PPP Act: <\/strong>The METAC mission discussed with FinMin \u201ckey revisions to the PPP law as well as gaps with good practices and clarifications to be drafted in the regulations.\u201d The law, which passed the House of Representatives<\/a> in November, will explicitly allow public entities to partner with private companies on transport, energy, communications, and healthcare projects, and introduce new mechanisms to simplify the process.<\/p>\n

What they said:<\/strong> The IMF said the bill brings \u201cimportant revisions to the PPP process,\u201d including changes to limit the term of PPP projects to a maximum of 30 years and the introduction of limited bidding, and unsolicited proposals among others amendments.<\/p>\n

Where does the law stand?<\/strong> The bill was ratified<\/a> by President Abdel Fattah El Sisi in December, and its executive regulations are set to be published in the coming months.<\/p>\n

Our homework:<\/strong> The IMF recommends the finance and planning ministries now review the public investment management (PIM) process to align on project assessment, prioritization, and selection. The IMF also suggests expanding the role of the PPP Supreme Committee to review and approve all PPP projects, as well as assessing the efficiency of the procurement method for potential PPP projects. METAC also presented the Finance Ministry\u2019s PPP unit with fiscal risks that Egypt may face from PPP projects, along with proposed actions to promote transparency.<\/p>\n

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