Frequently Asked Questions about PPP

What is PPP?

It stands for public-private partnership. It is a funding model for a public infrastructure project such as a new telecommunications system, airport, power plant, electricity production and distribution, public transport, telecoms, waters and other. It is done cooperatively between the public and private sectors and is typically of a long-term nature.

What does it include?

It contains a broad scope of activity, difficult to define precisely. A lot of projects can be implemented through PPP’s such as schools, hospitals, train stations etc. Two forms of PPP agreements are gaining popularity: the BOT (Build-Operate-Transfer) and DBO (Design-Build-Operate)

What is the difference between a tender and a PPP?

The tender is whereby the public sector sets the variables and the contractor only executes according to the terms of the public sector. In the PPP the roles are more mixed, the private sector shares the entire process with the government including the commercial risks.

How good is it for the country?

Governments are known for their bureaucracy and lack of efficiency. Governments lack expertise and professionalism. Consequently, relying on the private sector is an ideal scenario for the governments to evolve its infrastructure. Governments are not being able to cope with the growth of population and cities urbanization and are not being able to service the latter.

The PPP model is the ideal model that would merge both expertise. It would enable the country to develop in a faster and efficient manner since the qualified private sector is involved in the process. It is an amazing opportunity because its implementation will create jobs and good and well-maintained infrastructure for the economy and consequently it will boost growth and the development of our financial market.

How will the execution process be done in Lebanon?

  • The higher council for Privatization and Partnership will be managed by the Prime Minister.
  • The projects will be proposed by the relevant ministries.
  • Interested companies will be invited to apply for prequalification. (Final bidders not less than 3 to ensure fair and transparent competition)
  • The contract duration could range between (10-35 years) depending on the magnitude of the investment being placed by the private sector with a clear focus on how revenues will be shared between the private and public sector.
  • Government will control the implementation of the project. Private will ensure financing, proper execution and operation of the facility/asset.

How is PPP taking shape in Lebanon and who are the interested investors?

Now that Trump is promoting PPP, BOT, DBO all over the US, the trend is picking up also in Lebanon. Banks are the most fit to invest in the country’s infrastructure as they have enough liquidity and financial engineering expertise. Also, many private companies are showing interest in such partnership especially that the government ability for leverage is limited and it is unable to allocate a budget for infrastructure.

Let’s hope that the Law gets implemented in the right way, as it will create thousands of jobs every year. However, the fear is that a small group of people will monopolize and control these infrastructure projects…

So even though outlook looks promising, never clap victory too soon in a country as contradictive as ours…

Reference: Lebanon Opportunities September 2017 issue.

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