Scaling Up PPPs in the Arab World: PPP Units and Project Budgeting and Monitoring – Part II
How Are PPP Units Used in Arab States?
Specialized PPP units can provide important focal points for scaling up successful operations. A number of Arab states have established PPP units to advise ministries and local authorities on various technical aspects of PPP project identification and appraisal, such as the PPP Central Units in Egypt. Similarly, in 2008, Tunisia established a Concession Monitoring Unit to study all concession projects, assess project opportunities, and provide inputs at various transaction stages. In Jordan, a PPP Committee Advisory Unit links the Executive Privatization Commission (EPC) and the Privatization Council; a Technical Committee and the EPC assist each PPP project.
Challenges with centralized PPP units include ensuring that there is good understanding of sector-specific issues, sufficient human and financial resources, and coordination between central units and line ministries. In Morocco, efforts are underway to address the lack of resources with the help of international donors, and in Egypt, fees were introduced on PPP projects to build PPP Unit capacity. Alternatively, specialist PPP advisory units can be established in line ministries that are heavily involved in PPP transactions, as was done in Algeria, Egypt, and Jordan.
In examining PPP challenges in Algeria, Egypt, and Morocco from a variety of angles, it is clear that additional guidance and regulations are needed. For example, Algeria needs a standard approach to assess project feasibility and business cases, a more balanced bidding approach to attract foreign contractors, and more investor-friendly regulation for foreign investors. Egypt has a fairly advanced PPP law but a fragmented and complicated general legal framework for procuring infrastructure; the lack of PPP expertise in individual ministries leads to some gaps in due diligence and delays. And Morocco does not have a comprehensive legal and institutional framework applicable specifically to PPPs and should clarify financial and economic risks in issuing invitations to tender.
PPP Budgeting
In most Arab states, budgetary processes are fairly centralized, with line ministries generally bidding for budgets that are mediated by the ministry of finance. However, PPPs are not integral to the national infrastructure plan, and often funds are not set aside for PPP projects. Morocco is an exception; a multiyear infrastructure PPP plan has provided the basis for a PPP pipeline and linkages with national development priorities. And in Egypt's power sector and Algeria's water sector, there is also a strong track record of a particular ministry in PPP project procurement and a clearly identified budgeted PPP program.
More generally, a specific PPP budget can help bring greater certainty to resource availability and encourages PPP transactions across sectors. Resources are also needed in line ministries to support project implementation, contract management, training, monitoring, and knowledge sharing.
Local Governments Need More Autonomy in PPPs
Globally, where PPPs work well, local authorities and municipalities tend to have a high degree of autonomy to initiate PPPs, with the central government's strategic involvement and oversight. In the Arab world, however, PPPs tend to have a high level of political importance and are largely driven by central governments and high-level inter-ministerial committees. There is more scope for involving local authorities in PPP opportunities and mechanisms to encourage communication with the central government.
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.
