1

PPPs for Infrastructure Financing in the
MENA-Region

• Different PPP Designs in the MENA Region
• Establishing an Effective Legal Contractual
  Framework
• Frequently Asked Questions on PPPs
• The EIC Response
• Frank Kehlenbach
• BIAC Representative / Director of European
  International Contractors

2
1
About EIC - Experience

• European international contractors take a leading
  role in developing the worlds TRANSPORT
  infrastructure, such as toll roads, railroads,
  ports and airports, but some diversification
  into other sectors.
• European contractors have developed over the past
  decades expertise not only to build
  infrastructure facilities, but also to design,
  operate and finance these structures in
  industrialised as well as in emerging
  developing countries.

3
1
About EIC - Goals

• Bigger Market
• International Financing Institutions must reserve
  sufficient funding for infrastructure investments
  in developing countries
• Promotion of Public-Private Partnerships
• Better Market
• Quality-Based International Competition (due to
  project life-cycle costing)

• Fair Market
• Balanced Contract Conditions
• Effective Dispute Settlement
• International Arbitration
• Ethical Market
• Corruption-free environment
• Environmentally sound and sustainable projects

4
PPP Developing Markets Overview World Regions
2
Investment in Infrastructure with Private
Participation in Developing Countries (1990 -
2005) by Region
WORLD TOTAL 970 billion US
Asian Crisis
Source World Bank PPI Database
5
PPP Developing Markets Overview Infrastructure
Sectors
2
SECTORAL TOTAL 970 billion US
Source World Bank PPI Database
6
PPP Developing Markets Overview Focus MENA
Region (excluding Extractive Industries)
2

• In the MENA Region, the dominance of the telecom
  and the energy sectors is even more obvious than
  on average (94).
• Around 72 of investments accumulated in only 3
  countries, i.e. Morocco (38), Egypt (17.5) and
  Algeria (16.5).
• Projects in the transport sector comprised
  airports (588 million), seaports (1.300 million)
  and railroads (182 million).

MENA TOTAL 43.5 billion US
Source World Bank PPI Database
7
PPP Developing Markets Overview Lessons Learned
on PPP Structuring
2

• World Bank statistics suggest that telecom
  projects (ca. 50) are easier to set up in lower
  income countries, due to comparably lower
  up-front investment costs.
• Many projects in the energy sector (ca. 33),
  since there is the possibility of agreeing on
  long-term off-take agreements a either with a
  government entity or an independent power
  producer. This model has triggered criticism from
  many angles.
• Some transport projects (15) may be
  commercially viable if they are structured
  around insulated assets frequented by industrial
  clients, e.g. airports, seaports, freight rail.
• Other transport projects with socio-economic
  benefits, such as toll roads, bridges and tunnels
  and passenger rail, as well as water sewerage
  projects apparently are less often structured as
  a PPP, since they relied in the past on (non
  cost-covering tariff) payments by private
  customers and thus were not commercially viable.

8
EIC White Book on BOT/PPP Basic Features
3

• Published in April 2003
• Based on the broad experience of EIC member
  companies as concessionaires in preparing forPPP
  projects in the transport sector
• Advise to Governments, Contr. Acting Authorities
  and International (Financial) Organisations in
  structuring PPP projects
• Comprises 21 recommendations for the technical
  and financial implementation of PPP projects

9
EIC White Book on BOT/PPP 21 Recommendations
3

• 3 TENDER PROCESS
• Use Pre-qualification of bidders
• Ensure Transparency Confidentiality throughout
  process
• Present clear award criteria
• Reimburse Bidding Costs
• Unsolicited Bids ??? (outside EU )
• 4 RISK MITIGATION
• Provide for optimal risk identification
  allocation
• Invite financial risk mitigation through IFIs,
  ECAs, etc.

• 1 GENERAL PRECONDITIONS
• Ensure true Government Support
• Create a PPP Task Force
• Enhance Country Legal Framework(Accounting,
  Taxes, Procurement)
• 2 PROJECT PREPARATION
• Put in place sound procurement strategy
• Present comprehensive, reliable project
  documentation
• Provide for a steady and secure payment mechanism
• Agree on affordable level of tariffs

10
EIC on FAQs on PPP Political Arguments on PPP
3

• Value for Money ? Life cycle approach
• Off-balance Financing ? Not always
• Government Flexibility ? Public duties
• Government Control ? Retained
• Public Sector Comparator ? Reliable?
• Complexity Costs ? Can be limited
• Re-negotiations in PPP ? 20-30 years
• (Increase of) Tariffs ? Right Blend
• State Subsidies ? non-viable PPPs
• Role of SMEs ? - Important
• Role of architects consultants ? - dito
• Labour rights ? state responsibility
• Sustainability of PPPs ? Definitely

11
Conclusion
4

• Challenges for PPPs
• Public sector skills
• Legal and regulatory sector-specific framework
• Steady revenue flows
• Transaction costs, right blend of public and
  private funds (Role of IFIs /EU)
• Political Economic risks

• Benefits of PPPs
• Project life-cycle approach
• Project completion on time on budget
• Project operation according to pre-defined
  standards
• Risk transfer to the private sector (e.g.
  interface risk)
• Additional private funds

12
Conclusion
4

• WORLD Bank PPP Working Paper (2003)
• Whatever policies countries choose, governments
  cannot avoid the inescapable realities that
  infrastructure services have to be paid for,
  whether provision is public or private.
• Most of the concerns about the sustainability of
  private infrastructure really
• reflect the difficulties governments have in
  sustaining cost-recovering tariffs and
  commercial principles in these sectors...
• The real issue is not public infrastructure
  versus private infrastructure. Put this way, it
  is more simple the argument is about less
  infrastructure versus more.

13
EIC Contact

• Address EIC Secretariat Kurfuerstenstrasse
  129, D - 10785 Berlin, Germany
• Phone [phone]
• Fax [phone]
• E-mail eicontractors_at_compuserve.com
• Internet www.eicontractors.de