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PARTNERSHIPS FOR GROWTH
Egypt is entering an ambitious era.
Between the current levels of foreign investment and national development
objectives, we’re embarking on projects of impressive scale.
Whether related to transport, power or other aspects of infrastructure,
these endeavors will not only provide jobs and improve living conditions,
but form the basis of all future growth. As such, their conception
and implementation requires an enlightened partnership between the
private and public sectors (PPP) that is not merely rhetorical,
but actively pursued by both parties.
Over the past decade, we’ve agreed on several principles for
growth. Foremost among them is that Egypt’s private sector
would drive the economy – and it has. We’ve also agreed
that our primary objective, the goal of the greatest economic, political
and social significance, is to create jobs.
Not only must 700,000 annual entrants to the job market find employment,
the existing levels of unemployment and the fact that so many workers
are underpaid and their talents under-utilized must also be addressed.
This issue, however, may be looked at from a different perspective
since this untapped man (and woman) power is an invaluable resource;
one that asks nothing better than to be gainfully employed.
Another agreed-upon goal is a consistent annual growth rate of 7-8
percent. Other developing countries have been able to maintain rates
of approximately 10 percent, so our target is feasible. Reaching
it, however, relies on our ability to successfully execute the public-private
partnership.
Any partnership is, in essence, a contractual arrangement that involves
a meeting of minds. In legal terms, contracts require “mutual
assent of the parties” – that is, agreement with respect
to mutual rights and obligations, with the understanding that the
risk will be proportionately shared. PPP is not just a catchy acronym,
but a commitment to shared goals based on the parties’ trust
in one another’s ability to deliver. This is not a matter
of talk, but hard work. Just as the role of the private sector has
changed, assuming greater importance and commensurate responsibility,
so must the role of government adapt and pave the way for efficient
cooperation.
The government’s ideal role is that of facilitator. It can
regulate and organize the market with full disclosure and transparency,
leveling the playing field for fair competition. Ultimately, the
real beneficiary is the public. Fortunately, we have a government
with private sector representatives who fully understand these mechanisms
and have proven their ability to implement them.
Some of the new projects will cost billions of dollars to be raised
inside and outside Egypt. This project finance comes with conditions.
Banks will require a security package to ensure that the projects
will earn sufficient cash flow to consistently service their debts,
i.e. the loans the banks are being asked to provide to finance such
large projects.
Toll roads and railroads are examples of public works projects that
will require substantial funding. An important consideration is
how much the public can afford to pay for the services in order
to generate returns that would make the project bankable. Ticket
prices and toll fees, when set in accordance with average people’s
income, will not produce enough revenue to meet financing requirements.
Infrastructure and public service projects are therefore not just
a matter of economic growth, but public good, and this social dimension
is critical to the projects’ success.
The question then, is how will the government assist private sector
investors in rendering these projects feasible? Assistance can be
offered through subsidies, traffic volume and/or income guarantees,
ancillary land development rights, appropriate adjustments to inflation,
exchange rates, or other benefits. But the point is that costs and
risks must be shared, and government support must be carefully evaluated
and agreed upon from the outset.
In the past, the private sector engaged in several BOOT power plants.
This kind of effort should be revived. Power to fuel the nation
is a priority, but we have yet to arrive at a comprehensive energy
policy that constructively engages the industrial and transport
sectors, and sets forth coherent, cooperative strategies for resource-efficient
growth. The utilization and distribution of oil and gas resources
would need to be defined in this much-needed policy. Likewise, as
the world moves towards oil-replacement, alternative means of generating
power, such as wind, solar, biofuels and nuclear energy must be
taken into account. Renewable energy is a valuable commodity, and
our new generation of industrial facilities needs to incorporate
these advances and objectives.
In short, we have work to do to arrive at the formulas that will
foster our public-private partnership in the interests of Egypt’s
future. The good news is that we have all the necessary resources
at hand. In any successful partnership, all parties must give their
best, and the PPP is no different. But because of its scale, if
well-managed, a PPP can produce results far greater than the sum
of its parts, and Egyptians can benefit for generations to come.
TAHER HELMY
President, AmCham Egypt
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