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Highlights on Public Private Partnership in Egypt

Guiding Principle

The Public Private Partnership Law No. 67 of 2010 (hereinafter  “PPP Law”) was promulgated on May 18, 2010 as part of the government’s strategy to reform the countries economy and increase energy and infrastructure development by leveraging private sector know-how, experience and efficiency to facilitate the timely and cost effective procurement of  public utility services.

A. Introduction1

Before the PPP Law was introduced, the government’s procurement of previous projects was governed by the Tenders and Bids Law No. 89 of 1998 and its Executive Regulations issued by the Minister of Finance Decree no.1367 of 1998 .

Under Law No. 89 of 1998 the procurement of goods or services are carried out by virtue of a tender, competitive negotiation or, in special cases, through direct agreements.
Although Law No. 89 of 1998 may have been an adequate framework for procuring simple goods and services on a regular basis, the government realized this was not an adequate framework for large scale complex projects. As a result of its exorbitant nature provisions, Public Private Partnership transactions had the administrative nature in procedural and substantive rules. This lead to the new PPP Law which introduces important new features compared to Law No. 89 of 1998.

B. PPP Law No. 67/2010

The Egyptian legislator promulgated the law in summer 2010 and its Executive Regulations were issued by a Prime Minister’s Decree No.238 of 2011
Egypt’s PPP Law provides a framework for the procurement of infrastructure projects as well as other utility projects and services under a public- private partnership model.
The first two, of the Law’s four chapters, define the projects covered by the Law as those with a total contract value exceeding EGP 100 million ($17.7 million) and involving a concession or off take agreement of five years or more in duration.

The second chapter also provides clarity on the roles of existing regulatory bodies and gives a legal grounding to other new bodies, including the Supreme Committee for Public Private Partnership Affairs.

The said Committee is chaired by the prime minister, and with membership of competent ministers involved with economic development, as well as the head of the Public Private Partnership Central Unit (hereinafter PPPCU), the council is competent for the followings2:

  • setting of an integrated national policy for PPP and identifying its framework ,objectives, mechanisms, and targeted scope of the projects
  • endorsing in the application of the PPP structure on the projects of Administrative Authorities
  • monitoring the allocation of financial funds to ensure the fulfillment of financial obligations resulting from the implementation of PPP contracts. 
  • issuing the rules and general criteria for the PPP, and endorsing standard PPP contracts for use in different sectors
  • endorsing the recommendation of the Competent Authority of the Administrative Authority related to the selection of the contracting party entering into the PPP contract and approving the conclusion thereof.
  • Conducting studies and proposing means to provide and develop the market tools necessary for the provision of the appropriate financial structures for PPP projects

The Law also introduces the concept of a mandatory prequalification process for each project, as well as the introduction of a competitive dialogue process intended to improve the tender documents for specific projects. Bidders will be required to present an initial non-binding bid, which forms the basis of discussions with the client. The bidding documents can afterwards be refined as the client sees fit.

C. Public Private Partnership Central Unit3

PPCU is the "center of expertise" it’s authority empowered for providing and disseminating policy of partnership between the public and private sectors, the development of practices for the implementation of projects and plays a vital role in providing the first projects.
PPPCU was part of technical office of the Ministry of Finance and now became a legal independent entity affiliated with the Ministry of Finance by virtue of law.
PPPCU is competent for the following:

  • Provide technical, financial and legal expertise to the Supreme Committee for PPP and to the PPP satellite within the Administrative Authority
  • Lay out and monitor the procedures to tender and conclude PPP contracts and their execution
  • Prepare and publish studies, information and statistics related to PPP projects both locally and internationally.
  • Selection of advisors for the tender of PPP projects and contracting with them in accordance with the rules and procedures set forth in the Executive Regulations of this law

One of the main responsibilities of the Unit is to make sure that the proposals for partnership projects are based on a good analysis of the actual needs and the value of these projects. The Unit will make sure that those projects got their necessary approvals on the budget and that the choice of partners is based on fair competition.

D. The Egyptian Government and the PPP4

In order to attract more investments in Egypt, “MENA Project Finance & PPP” conference was held in Egypt on 17th & 18th September 2012 under the patronage of his Excellency Hesham Kandil, Prime Minister of Egypt, with the participation of ministers from Jordan, Bahrain, Qatar and Tunisia, and excellencies from the World Bank, heavy industries company in Saudi Arabia and Japan Bank for International Cooperation, UAE in addition to Egyptian Ministers: Minister of Planning and International Cooperation, Minister of Investment and Minister of Finance.

In the course of his inaugural speech, the Egyptian Minister of Finance Dr. Momtaz El Saeid said , “that the economic development of Egypt will not be achieved without the participation of the private sector. The state target is to increase the volume of investments to about EGP 276 billion in this fiscal year in order to achieve a growth rate of the national economy of more than 4.5 %. The government strives to increase the growth rate during the next three years to 7.5 % of the GDP so that they can create about 750,000 jobs needed annually in the society. The minister pointed out that public investment are currently EGP 106 billion of which EGP 56 billion are government investments and EGP 50 billion are financed by economic bodies and public companies and public business sector.

Furthermore, Dr. Momtaz El Saeid said that Egypt’s target is that EGP 170 billion, will be dumped by the private sector and the government has already been preparing a list of 15 projects in various economic sectors to set up the system of participation as tools for promoting the participation projects with the private sector, noting that such projects are offered on a lot of investment delegations that visited Egypt recently as well as during his recent visit to Turkey, where they received great interest from investors and businessmen.

Mr. Osama Saleh, Minister of Investment, pointed out that the Ministry of Investment is currently working on 3 axes: the first axis is the development of different governorates of Egypt as there are 128 projects on 27 governorates of Egypt ready to start work; the second axis are partnership projects with the private sector which is handled by the Ministry of Finance; and the third axis is the development of the Suez Canal, which 9% of the total world trade passes through it, in addition to the establishment of the largest industrial city in Suez being an area of 40 square kilometers.

The Minister of Investment added further that the second sector is the focus of the development of Upper Egypt-Red Sea Road, which connects six provinces in southern Egypt in the Red Sea. The target is to develop the region on both sides of the road, having a length of 414 kilometers.

E. Expected PPP Projects in Egypt in 2013:

Mr. Atter Hannoura, Head of PPPCU at the Ministry of Finance mentioned that the Unit is now working on feasibility studies for several projects, participating with the Private Sector during the next few months which include:

  • Technological area project for export of telecommunications services and technology in Maadi;
  • The establishment of a railway linking the area of Ain Shams with Tenth of Ramadan;
  • A highway linked Shubra – Banha; and
  • Factories for recycling solid waste in the governorates, which includes the expansion and development of the industrial port of Safaga, Suez Canal Specialist University Hospital and Nile Schools.

Mr. Atter Hannoura added that there are many future projects expected to be launched during the last quarter of next year including: the establishment of the Egyptian Italian University, Academy for Cardiac Surgery at Ain Shams University, the establishment of a new hospital for Children at Ain Shams University, a Specialist Center for patients with brain , nerves and the treatment of victims of road accidents, a hospital for Zagazig University as well as the  creation of 3 ports river for the development of transport system river.

F. Conclusion :

Today under the provisions of the new PPP law :

  • The Investor can enter into an agreement with the Administrative Authority under the PPP law regardless of traditional procurment law and its executive regualtions.
  • There is an express prohibition on confiscation or compulsory acquisition of project assets by the government
  • The foreign investors is well protected: for instance, his consent is required to amend the contractual stipulations and the administration cannot unilaterally amend the stipulated prices
  • Egypt amended its rules for public private partnerships (PPP) to allow disputes to be resolved through arbitration rather than through Egyptian courts. Under the new rule, arbitrations would be carried out at the Cairo International Arbitration Centre and be based on the regulations and procedures of the United Nations Commission on International Trade Law (UNCITRAL)

The above mentioned advantages would encourage more foreign investors to invest in Egypt and the government is working on that.

October, 2012 Abdel Hameed Galal
Meyer-Reumann & Partners, Egypt Office

2.  According to Article 15 , Law no. 67/2010

3.   According to Egyptian Ministry of Finance Website

4.   According to Egyptian Ministry of Finance Website

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