ISMED Annual Conference Defining a Way Forward for Infrastructure Investment in the Middle East

and North Africa

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Andrew Fitzpatrick, Programme Coordinator, ISMED Support Programme

Paris, 4 December 2014

Session Three:

Making PPPs happen in the MENA region

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Agenda for the Session:

• Review of the PPP Handbook: Public Private Partnerships in the Middle East and North

Africa: A Handbook for Policy Makers. (Draft)

• Discussion of country-focused work: • Egypt: Promoting Nile River Transport • Jordan: Optimising the Incentives Framework for Renewable Power Infrastructure

(DRAFT) • Morocco: A Benchmark Study on Logistics Zones Development

• ISMED Working Group Task Force on Public-Private Partnerships

Session Three:

PPP Handbook: Objectives

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The PPP Handbook:

• Public Private Partnerships in the Middle East and North Africa: A Handbook for Policy

Makers. (Draft)

• Major ISMED output, region-wide relevancy.

• Intended to be practical and hands-on guide to assist policy makers in moving projects forward.

• Define and describe barriers and obstacles to successful PPP projects in the MENA region and provide policy recommendations to address them.

• Not only a policy and framework level, but also at a more transactional, contractual level.

• Focus on Jordan, Egypt, Tunisia and Morocco, Deauville Partnership countries, and on Transportation/Logistics and Renewable Energy.

Session Three:

PPP Handbook: Methodology

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What did we do to develop the Handbook:

• ISMED country projects have helped to inform the Handbook.

• Broad consultations with IFIs.

• OECD expertise and guidance.

• The Risk Matrix.

Session Three:

PPP Handbook: Methodology

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The Risk Matrix:

• Identified infrastructure projects in each of the four countries in the last decade that

involved private sector participation.

• The main risks and obstacles encountered were identified.

• Seventeen types of risks and barrier identified.

• Grouped into four categories: • Political risks • Financial risks • Legal and institutional risks, and • Operational risks

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Political 19%

Financial 19%

Operational 19%

Legal & Institutional 43%

Barriers to PPP investment by frequency of occurrence* (Egypt, Jordan, Morocco, Tunisia)

* Source: OECD (forthcoming), Public-Private Partnerships in the Middle East and North Africa. ISMED Support Programme.

Session Three:

PPP Handbook: Methodology, The Risk Matrix

Session Three:

PPP Handbook: Key Findings

Capacity and High-level Political Buy-in

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Capacity is Key:

• The capacity of governments and government officials is a recurring issue.

• Goes beyond the ability to execute and manage the PPP arrangement.

• All levels must understand what PPPs are, and what they are not.

• Consultations indicate that there has not been a successful PPP project in the region in the

absence of high-level political support.

Session Three:

PPP Handbook: Key Findings

Capacity and High-level Political Buy-in

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Building Capacity:

• This highlights the need for PPP central units.

• Need sufficient resources and be sufficiently empowered to make decisions.

• Satellite PPP units at the line ministry or agency.

• The line ministry or agency must be able to live with and manage the contract for up to 30

years.

Session Three:

PPP Handbook: Key Findings

The Importance of Legal Frameworks

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Legal Frameworks:

• The PPP legal regime is vital.

• Long and complex agreements, can be many years to recoup investment.

• Investors require transparency and predictability.

• Every project should be a component of an overall strategy.

• Intergovernmental coordination, a whole of government approach.

Session Three:

PPP Handbook: Key Findings

The Importance of Legal Frameworks

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Strengthening Legal Frameworks:

• A comprehensive PPP law addressing all aspects of PPP procurement

• Transparent and predictable bidding processes

• Enhance legal security, guarantees against expropriation • Dispute resolution provisions, both contractual and treaty based.

• Develop overall strategies that include all areas of government.

Session Three:

PPP Handbook: Key Findings

Project Selection and De-risking

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It’s all about preparation:

• Governments may not dedicate sufficient resources to project selection and preparation

• Location choices sometimes made on political basis

• Inappropriate risk allocations

Session Three:

PPP Handbook: Key Findings

Project Selection and De-risking

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Do the Homework:

• Feasibility should be determined before potential investors are involved.

• Location is key in transport concession-based projects • Take care of what you can.

• Know what risks the private sector can realistically face

Session Three:

PPP Handbook: Key Findings

Energy Subsidies

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Energy Subsidies can Inhibit Transport and Renewable Energy Projects:

• Energy subsidies prevalent in the region distort the economics of both transport and

renewable energy

Integrated Strategies • Again, this illustrates the importance of integrated whole of government approach

• Certain transport and renewable energy projects may not be feasible in the absence of

subsidy reform.

Session Three:

PPP Handbook: Next Steps

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Finalising and Implementing the Handbook:

• The Handbook is a draft, and we look forward to comments and feedback to help us

improve and finalise • IMF Centre Kuwait training and Tunisia training

Mr Andrew FITZPATRICK Global Relations Secretariat, OECD

Andrew.Fitzpatrick@oecd.org

www.oecd.org/investment/psd/ismed.htm

With the financial assistance of the European Commission

Key Contacts