Lessons Learned from Public-Private Partnerships in Infrastructure in the Arab World: Success Stories – Part II
In a growing number of successful public-private partnerships (PPPs) in the Arab world, factors that have contributed to good outcomes include: experienced international and local investors; infrastructure construction combined with service maintenance; and, in some cases, innovative financing coupled with a competitive and transparent procurement and bidding process. In general, PPP arrangements have been aligned with global practices and addressed critical local needs and infrastructure services gaps. Innovative public entities play an important role as do strong legal and regulatory provisions.
Highlights from PPPs in Egypt, Jordan, Morocco, and Saudi Arabia provide insights into how to structure a successful venture, as follows:
Egypt: Wastewater Plant: A consortium of Egypt’s Orascom Construction Industries and Spain’s Aqualia (Orasqualia) is involved in a build, operate, and transfer (BOT) of a large wastewater treatment plant in New Cairo, awarded in 2009 on the basis of lowest net present value of the overall sewage treatment charge through the concessions period. The government pays a sewage treatment charge, which includes a fixed portion to cover investor’s fixed and a variable portion to cover investor’s variable costs. New Urban Communities Authority (the offtaker) will pay electricity costs.
Egypt: Alexandria Hospitals: An international consortium led by Egyptian private equity firm Bareeq Capital, together with G4S, Siemens, and Detac, won the 20-year concession contract for two new hospitals—a 200-bed gynecology and obstetrics center and a 224-bed facility providing neurosurgery, urology, and nephrology services.
Jordan: Queen Alia International (QAIA) Airport is the first airport PPP in Jordan, signed in May 2007. The Government of Jordan awarded a 25-year concession for QAIA to rehabilitate existing facilities, construct a new 900,000 square foot terminal, and manage airport services. The winning consortium includes companies from Cyprus, France, Greece, Kuwait, Jordan, United Arab Emirates, and the United Kingdom. Its bid gave 54.6 percent of gross revenues to the government, the highest revenue-sharing percentage achieved for similar projects anywhere in the world. The project secured nearly US$1 billion in private investment.
Morocco: Guerdane Irrigation: A consortium led by Moroccan industrial conglomerate Omnium Nord-African (ONA) won a 30-year concession to construct a 300-kilometer water irrigation network and a distribution system. The transaction was structured as a 30-year concession to build, cofinance, and manage the irrigation network. Estimated at US$85 million, the Government of Morocco is providing US$50 million, half as a grant and half as a subsidized loan. The private partner provided the balance.
Saudi Arabia: Desalination Plant: A PPP to develop a new desalination plant to supply potable water to the King Abdulaziz International Airport was signed with the General Authority of Civil Aviation (GACA) and Sete Energy Saudia, under a 20-year take or pay water purchase agreement in a BOT arrangement. Sete Energy Saudia will finance, design, construct, operate, and maintain the new plant, decommission the old plant, and rehabilitate the site.
Saudi Arabia: Medina Airport: A US$1.2 billion expansion of Medina Airport in Saudi Arabia was the first full airport PPP in the GCC and fully funded by Islamic-compliant finance. A consortium of Turkey’s TAV, Saudi Oger, and Al Rajhi will increase double the airport's capacity and operate it until 2037 under a 25-year concession agreement. This is the third successful PPP that GACA conducted; Saudi banks financed the project with predominantly local currency debt.
Julia Devlin is nonresident senior fellow in the Global Economy and Development program at Brookings Institution. She formerly worked as consultant at the World Bank Group and as a lecturer in economics at the University of Virginia. Her focus is economic development, private sector development, energy and trade in the Middle East and North Africa. She holds a Ph.D. in Economics.
