Presentation Session 3: Marc Frilet, IFEJI ISMED Annual Conference, Defining a Way Forward for Infrastructure Investment in the Middle-East and North Africa (MENA)

1. INVESTMENT SECURITY IN THE MEDITERRANEAN (ISMED)
ANNUAL CONFERENCE
SESSION 3 : MAKING PPP HAPPEN IN THE MENA REGION
Roger Fiszelson, Directeur Général CICA
Marc Frilet, Chief Specialist, UNECE Center of Excellence on PPP,
Vice Président IFEJI
4th December 2014-Paris, France03/12/2014 1

2. The CICA and IFEJI PPP working groups together with UNECE experts having analyzed the ISMED Guide for policy
maker are in full agreements with the analysis of the guide on some key obstacles on Concessions and PPP in the
MENA region .
Our group has participated to many projects in the region as well as various conferences and other exchanges on
the conditions of success of concessions and PPP in Morocco , Algeria, Tunisia, Egypt and Jordan.
There is no doubt that there is a substantial practical experience of Concessions and PPP in some countries.
However, those experiences are contrasted between countries. Ex :
- Morocco having the largest experience in local infrastructure public service (Concession) and hardly no
experience with PPP at a State level.
- Algeria has a long history Concession, but hardly no projects in the last 20 years, linked to an important
potential in public payment PPP.
- Tunisia and Jordan, with substantial experience in infrastructure of public service concessions and hardly no
project developed for public payment PPP in spite of new sets of regulations.
- Egypt, which was one of the leading country for the public service infrastructure for the Suez Canal is now
struggling with difficulties for new projects.
From there, it is not easy to identify the route for making PPP happen in the MENA region.
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PPP in the MENA Region : A real practice
but few positive lessons learnt .

3. The possibility of developping a PPP beneficial to both parties remains to be much better
understood by the stakeholders.
1. Negative Factors
• The decline of Public Payment PPP in UK and in France, and mounting critics for some projects.
• The rate of PPP in distress for new projects in developping countries as quoted by world bank.
• The little practical impact of the PPP Laws in the last decade in most developping countries
2. Positive Factors
• The amazing rate of success when a series of conditions of success are altogether fulfilled.
• Statistics in the matter are currently misleading and need to be based on an agreed definition of
PPP ( we have identified more than 25 000 real PPP in operation around the world)
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The need to clarify the meaning and
potential of PPP in the MENA region

4. 1. What is not PPP ?
• PPP is not a public infrastructure paid by the Public Authorities upon delivery.
• PPP is not a facility designed and built by the private operator with output
requirements if fully paid by the public authority, after test and commissioning .
2. What is PPP ?
• The consensus view on the underlying condition to all of PPP is the participation of
the private sector to the operation of a service of public interest .
• PPP always involve financing and developement of a Project by the private sector,
together with the participation to the operation of the service, in part or in full with
recovery over a long time period in consideration for the operation of the service.
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More Clarity needed in PPP definition (1)

5. More Clarity needed in PPP definition (2)
3. The two families of PPP
Taking into account the importance of risks and opportunities transfered to the private
company, the growing consensus is that it is essential to distinguish two families
within the PPP definition
- A first family having a very long history around the world and a long track record in
many jurisdictions,( including MENA) : the Concession family where the private
party is delegated the full operation of a public service and recovers entirely or
mostly from users fees.
- A second family which emerged in the early 1980’s : the PFI PPP Family where the
private party is not entrusted with the full operation of the public service and
recovers entirely from public budget.
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6. PFI / PPP : less risky than Concession but limited by public budget constraints.
The risks incurred by the private party are easier to accept than in Concession since no
obligation to deliver a full public service which must be adapted to the needs and affordable
over a long period.
Obligations for payment coming from public authority or States are easier to enforce and / or
to lead to satisfactory guarantee than in Concession PPP.
The State or Public Authority has all chances to have the public infrastructure built on time and
meeting the output specifications.
However, PFI-PPP impact on the tax or public budget for all payments to be made to the
private party for the duration of the contract (often decades).
PFI-PPP are possible in practice only if public budgets permit this long term liability .
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How to make either Concession PPP and/or PFI PPP
happen in the MENA region : When to use PFI PPP ?

7. Concessions /PPP : more risky prima facie than PFI PPP but much lower impact on tax
budget.
• When the evaluation of public needs indicates that there is a real public interest
for an improvement of existing public services or creation of new public services
linked to a willingness to pay for such a service, the concession PPP family has a
real potential.
• However, it is often heard that it is only a potential and that there are few
chances to develop pipelines of concession PPP in the MENA region due to the
level of the additional risk triggered by this delivery form over PFI PPP.
• If this is true, the future of private investments for essential public infrastructure
services in the MENA region would be very limited in practice, due to budgetary
constraints in most States (With some notable exceptions such as Algeria).
• Conclusion : the need to identify and promote underlying conditions for
success for Concession PPP is a top priority : otherwise, the UN Sustainable
Development Goals have hardly any chance to be met.
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How to make either Concession PPP and/or PFI PPP
happen in the MENA region : When to use Concession
PPP ?

8. With Latin America, the MENA region has a priviledge of having experienced many projects
of the Concession PPP family (essentialy « affermage » and infrastructure public service
concession). If many projects are in difficulty, some projects have good track records.
Many lessons can be learnt on the removal of some obstacles. Some of those lessons are of
universal nature :
- Condition of good planning then good preparation
- Efficient procurement
- Contract conditions with clauses unknown in traditionnal contracts
-Institutional framework etc.
In addition, the tradition of written laws and of equitable public contract law principles in
most of the countries is a real asset to promote further legal and regulatory certainty.
From there, it is already possible to draft a fresh set of policies taking into account the
particular experience of the region and supplemented by lessons learnt in countries and
regions having experienced similar issues in a similar legal economic and political environment.
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How to make projects of the Concession PPP family
happen in the MENA region (1) : aggregating useful
lessons learnt and drafting policies

9. .
Various obstacles which become a red flag in most Concession PPP’s due to the nature of the investement ,the
long term recovery, the adaptation of the service to public needs remain to be removed in a majority of
situations.
It is important to listen to potential investors declining to bid for a project : Some examples from a recent survey
with investors /operators having a good PPP track record in developed and developing countries.
- No confidence in the evaluation of the needs and socio-economic feasibility studies
- No confidence in the prima facie evaluation of design engineering and construction costs
- No confidence in the possibility to have the land put at the disposal on time and free of uncombrances.
- No confidence in the effective customs and tax budget over the period.
- No confidence in the evaluation of income stream and effective payments from users of the service
- No confidence in permitting process
- No confidence in dispute avoidance and setlement mechanisms
- No confidence in the effective indemnification in case of dispute
- No confidence in a fully transparent and efficient procurement process.
- No possibility to introduce contractual clauses essential for equilibrium of the venture over the years.
- More broadly afraid of a weak investment climate and political risks
The lessons learnt internationnaly indicate none of those obstacles are unsurmontable, even in the most fragile
States .
A top priority is to draft new sets of policies addressing those issues and related solutions.
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How to make projects of the Concession PPP family happen
in the MENA region (2) : Developing and promoting additional
sets of policies addressing practical obstacles

10. As well put by the G20 « Private parties will not invest in the dark »
This means that most policies must become part of a clear, simple and enfoceable laws and
regulations.
This is an enormous challenge for all stakeholders and lawmakers, since many policies are
sector or project specific.
The need of a « clear and transparent legal framework that both the public and private
parties trust », as well put in the OECD guide , is a prerequisite for developing pipelines of
projects in the MENA region.
The experience shows that the content of the legal framework should ideally be made of :
- A framework law dealing with the key obstacles for PPP development as percieved by a
private investor or operator and including provisions protecting always legitimate public
interest.
- Implementing regulations and set of standards procedure and documents.
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How to make projects of the Concession PPP family happen
in the MENA region (3) : Policies are not sufficient,
Development and promotion of comprehensive framework
law and regulations is essential

11. How to make projects of the Concession PPP family
happen in the MENA region (4) : Framework Law,
lessons learnt
The law must address a list of issues much more comprehensive than existing laws in the
MENA region.
Some provisions will appear prima facie unacceptable either by the private sector or the public
sector.
Consequently, it may only be developed after an indepth analysis of all real issues and related
solutions.
It must take into account regional and international experience and best practices.
This is only possible through a well tested methodology for an efficient law making process.
Due to the numerous issues at stake which are under the authority of different ministries, an
extensive consultation process much more comprehensive than for any other law is necessary.
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12. Lessons learnt Example of content; Illustrative
provisions of the CIS Model Law (1)
This law has just been enacted after more than two years of extensive consultation with all the
CIS countries and with the international community : some illustrative provisions
1.Principles
- Mutual beneficial cooperation for a specified period of time.
- Transparency and accessibility of rules and procedures
- Good faith implementation
- Planning and economic and financial feasibility studies leading to robust economic and
financial scenario before considering any tender.
- Competitive bidding, with very few exceptions competitive bidding taking into account the
particular nature of PPP where functional specifications are more important than technical
specifications and as a result :
- pre-qualification
- two-stage tender
- competitive dialogue
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13. Lessons learnt Example of content : the
CIS Model Law (2)
2. Provisions securing public interest.
- adaptation of the service rendered in the public interest.
- ensuring continuity for rendering public service.
- insuring non discriminatory access to the service.
- Right to terminate.for public interest reasons,
-Right to use equipement and workforce of the private party in default
3. Provisions securing private interest :
• Right to be compensated for any losses deriving from illegal action or failure to act from the State and /or
Public Bodies.
• Right to reinstatement of the economic equilibrium of the contract in case of hardship grossly
detrimental to the private party.
• Right to stability of the legal framework at the date of entering into the contract.
• Right of full indemnification ( including loss of profit) in case of termination for public interest .
• Right to efficient and fair dispute resolution mechanisms.
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14. Implementation issues for any framework law should not be underestimated.
In our experience, it is necessary, in addition:
- To develop and publish authoritative comments in line with international best practices
- To promulgate enabling regulation in several areas: they must be clear and legally
enforceable: policies are not sufficient.
- To provide for set of standards documents such as bidding documents and template
contracts
- To insure that in the meantime, the institutional framework in charge of implementing
PPP is operational with a well trained staff.
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Lessons learnt for the substance : the need of
implementing regulation, standard documents
and capacity building

15. Conclusion : making PPP happen in the MENA region
is a process based on a methodological approach
where carts should not be placed before the horses.
Contrary to many situations learning by doing is not an option.
Concentrating resources for developing a particular project without a minimum level of long term legal certainty for key
practical issues is frustrating and generally a waste of time and money.
Pipeline of resilient projects will not emerge unless most practical issues are well taken into account, with secure
solutions in line with the reality of the region and international best practices.
We may only vote for quick implementation as a priority of two important steps in that direction in line with the
ISMED proposal 9 and 11, ie :
- 9: drafting a Vademecum aggregating and summarising all best practices to be implemented together for
successful projects. (this document should be longer than 15 pages )
- 11 : proposing series of template contractual clausesunusual in traditionnal contracts and essential for the
satisfactory and long term equilibrium of the PPP venture.
Those steps are themselves a prerequisite for the subsequent drafting of comprehensive regulatory framework
acceptable by all stakeholders and easy to implement in practice
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