Discerning Public-Private Partnership

Over the past years, there has been a focus on upgrading Egypt’s infrastructure in order to attract investments, while the large size of the population has given rise to a need for human development projects. Since the lack of financing and modern know-how can constitute an obstacle in the face of the government to introduce such projects, the Public-Private Partnership (PPP) can be an optimum solution.

The PPP concept dates back to the 1960s when the United States implemented such solution for urban renewal projects. At present, more than 85 countries have resorted to PPP to accomplish infrastructure. PPP projects are categorized into nine types: 1- BOO (Build, Own, Operate), where the contractor constructs, owns for a specific duration, operates, and maintains a facility. 2- BOOT (Build, Own, Operate, Transfer), where the contractor carries out the same missions but the facility’s ownership goes to the government after a specified operating duration. 3- BOT (Build, Operate, Transfer), where the contractor never owns the facility. 4- BBO (Buy, Build, Operate) where the government sells the facility to a contractor who improves and operates it for profit. 5- BTO (Build, Transfer, Operate), where the government acquires the ownership of the facility once it is built by the contractor who later assumes operations. 6- BLT (Build, Lease, Transfer), where the contractor builds a facility and leases it for a while from the government before the latter gets it back. 7- ROT (Rehabilitate, Own, Transfer), where the contractor renovates an existing facility, owns it for specific time, and later transfers it to the government. 8- Operations, Maintenance, and Management (OMM) agreement where the contractor operates, maintains and manages an existing facility owned by the government. 9- Concession, where the contractor just constructs the facility and collects the expenses by directly charging the user and/or receiving a grant from the government. The operating duration is usually 10 to 30 years.

Professor of Economics, Investment and International Finance Rashad Abdo, Chairman of the Egyptian Forum for Economic Studies, tells Business Today Egypt that PPP can be applied in all sectors. “For instance, if we want to build 300 schools that cost $300 million, we can invite tenders on the local and global scales for the private sector to construct and equip the buildings, and get financing from funding institutions. 

The loan and interests can be paid back over 30 years, which would be $10 million a year. Pension funds would be interested as they would get a fixed annual income. The World Bank can conduct the studies needed for PPP projects, designating the specifications and amount needed. The studies can be conducted by the World Bank and submitted to funding institutions. This can be a way to develop hospitals, education, and transportation,” Abdo explains.

 

Source: Egypttoday