Public-private partnership projects aim to shore up Lebanon’s faltering economy
Beirut - Lebanon needs substantial overhauling of its infrastructure and basic services from water and electricity to roads and transportation that the government has neither the funds nor the expertise to conduct. The best answer to the country’s development requirements are projects carried out in partnership between the public and private sectors, so-called PPP projects.
Ziad Hayek, secretary-general of the government’s Higher Council for Privatisation and Partnership, is categorical, saying: “PPP is fantastic. It is exactly what we need, because we have to build our infrastructure and the government does not have money, while the private sector has money to spend on infrastructure.”
Lebanon engaged in PPP ventures when it was one of the world’s biggest reconstruction sites after its 1975-90 civil war but first attempts at PPP were non-starters.
“We had many PPP projects but none of them had worked because the government did not really understand what PPP projects are about and treated them like normal procurements by running tenders to select the lowest bidder,” Hayek said.
He explained that PPP projects entail negotiations and detailed agreements about risk sharing and mitigation of services.
“When we say public-private partnership, we mean partnership in risk so we have to sit and discuss who is taking what risk, how are we helping each other mitigate the risks, who is better placed to take a particular risk, how can we value these risks, etc. Then the price would be the result of that discussion,” he said.
The failed solid waste management tender that led to a garbage collection crisis and popular protests in 2015 is a best example of PPP projects that never saw the light, Hayek noted.
“The private sector was willing to take financing risk, operation risk, market risk, foreign exchange risk but it was not ready to take political risks,” he said. “When you tell the private sector you should find the area for the landfill, which is a political issue, it will not accept or ask for very high prices.”
Parliament ratified a PPP law in August after ten years of lobbying. Henceforth, all partnership projects that would be prepared by the government, public administrations and municipalities will be governed by this law.
Mohamed Choucair, chairman of the Chamber of Commerce, Industry and Agriculture in Beirut and Mount Lebanon, welcomed the law stating that “there is liquidity in the banks and a lot of investors who have the will to invest in the country’s infrastructure.”
Hayek underlined the importance of applying the law properly to reactivate investments and create jobs for professionals and blue-collar labour.
“Finally we have PPP legislation that establishes transparency and a PPP unit of professionals who understand what PPP is and can negotiate on behalf of the government.”
“We have suffered from chronic unemployment for decades because the government never had any jobs programme, forcing many young professionals to emigrate,” Hayek said. “PPP projects create jobs because they are large long-term projects that employ thousands of people, including engineers, managers, lawyers, programmers.”
Under the new PPP law, the Higher Council for Privatisation and Partnership would be the authorised party for approving, beginning and managing projects and it would act as the liaison between the private sector and government bodies.
“I am in a hurry to get PPP projects on track and running as soon as possible,” Hayek said. “The economic situation in Lebanon is so dire and I worry that we will not be able to start collecting the benefits of PPP before we have a collapse of our economy because our system is so centralised and the political situation in the country does not help.”
Rani Achkar, senior engineer at the Lebanese Centre for Energy Conservation (LCEC), which is affiliated with the Ministry of Water and Energy, pointed out that the government has launched several PPP projects for power production from wind and solar energy.
“Bidders have been selected and licences granted for the implementation of three PPP projects for producing wind energy with a total capacity of 200 megawatts. We are in the final phase of negotiations regarding the power purchase agreement,” Achkar said.
Tenders have been submitted for 12 PPP projects for the production of solar energy in different regions of Lebanon with a total capacity of 120-180 megawatts.
“We have received 42 offers, which we will have to evaluate in order to select 12 bidders. Such projects will definitely help reduce the chronic power shortage in the country by exporting more energy to the grid. At the same time, this will increase the security of supply, help diversify the sources of energy and reduce [carbon dioxide] emissions,” Achkar said.
All projects are expected to start commercial operation by 2020, he added.
Hayek said he is hopeful that, with the new law, the government will start doing PPP projects the “right way.”
“We have many Lebanese companies that are already working on PPP projects in Africa, the Middle East, Asia and America so why not have them do the same projects here in Lebanon?” he asked.