Econostrum | Economic News in the Mediterranean

“Lebanon is ideally suited for PPP”

Written by Caroline Garcia, MARSEILLE on Monday, October 8th 2012 à 14:45 | Read 849 times

Ziad Hayek, Secretary General of the Higher Council for Privatization, Lebanon

“Lebanon is ideally suited for PPP”
Over the last 15 years, and as a result of limited budget resources, Lebanon has made no significant investments in infrastructure. As a result, the growth of its economy has been severely constrained.
In the power sector, for example, a generation deficit of 30% of total demand, coupled with the lack of smart digital meters, implies rolling blackouts that discourage investment in productive activities that rely on power supply.  Similarly, water is routinely wasted due to leaking distribution infrastructure.  
A planned network of 27 water retention dams has been delayed for decades. Road infrastructure planned in the 1960s is now unable to deal with the increasing number of vehicles, the acquisition of which has been made easy with the introduction of cheap car loans.  What mass public transportation existed pre-1975 has been destroyed in a 30-year period of internal and regional conflicts.  It has not been rebuilt.  Finally, the lack of adequate wastewater infrastructure has led to a growing environmental disaster that threatens the country’s beautiful valleys and beaches – major attractions for the tourism industry. The above is only a partial list of infrastructure requirements, but it highlights the acute need for urgent investment.

On the positive side, Lebanon does not need to worry about attracting FDI as badly as do some other countries.  Its banking sector is awash with deposits that currently exceed four times its GDP. Lebanese emigrants have consistently expressed interest in financing infrastructure projects in Lebanon. They possess large financial resources and many of them already own and/or run companies that are active in PPP projects in the Arab World, Eastern Europe, Africa and Asia. 
The country is therefore ideally suited for PPP.  What it lacks is a confidence-inspiring legislative framework, especially in light of the existent constitutional restrictions, which make it even more important to clearly define the PPP activity. 
PPP is not new to Lebanon, but it is fair to say that most PPP projects have faced serious difficulties either in the pre-project authorization phase, the tendering phase, or the post-construction phase. These problems have been mostly design-related and/or of a political nature. 
This is why it is important that the new legislation contemplated by the Council of Ministers and by Parliament does create a specialized Central PPP Unit.  The Unit would not only ensure proper expertise is deployed to design the PPP project and negotiate its contract, but would also ensure that all stakeholders (typically various ministries, municipalities, civil society, etc.) are properly consulted in these critical aspects of the PPP project.  In addition, an inter-ministerial PPP Unit that includes non-governmental technical, financial and legal advisors would be better placed to run a transparent and more professional tendering process.

This is what we, at the Higher Council for Privatization, are aiming to achieve.



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