Egypt plans to offer billions of dollars worth of transport, energy and other projects in partnership with private firms over the next five years after rules to ease such deals are approved, officials said on Monday.
The most populous Arab country is eager to get private companies more involved in education, healthcare, infrastructure and other sectors traditionally handled only by the government to boost economic growth and trim its budget deficit.
But its “public-private partnership” programme still faces obstacles, including limitations on local bank financing, foreign exchange rate fluctuations, red tape, and competition from nearby countries with similar programmes.
Orascom Construction Industries, Egypt’s biggest listed builder, won the country’s first public-private partnership concession last year in a 50-50 joint venture with the water division of Spain’s FCC.
“Egypt by its sheer size represents an attractive opportunity in infrastructure development, and it is sustainable,” Osama Bishai, managing director at Orascom, told a conference in Cairo.
He said Egypt’s young, growing population, increasing consumption, and need for more infrastructure were incentives for firms interested in public-private partnerships.
But one complication for such projects is that contracts can last decades, meaning they often require long negotiations to settle complex contractual terms, officials and businessmen said. Shifting exchange rates can also put off foreign firms.
“The contractual burden is much higher. It takes a lot more effort to do those particular projects,” said Moazzam Mekan of the International Finance Corporation.
Finance Minister Youssef Boutros Ghali said Egypt aimed to draw $17,3 billion of investment into public-private partnerships over the next five years.
To spur the process, Egypt’s parliament passed a new law on public-private partnerships in May which codifies procurement and tendering processes and makes other changes aimed at making the deals proceed faster and more smoothly.
Rania Zayed, director of the Public Private Partnership Central Unit at the Finance Ministry, said she expects the cabinet to approve executive regulations for the law by the end of the year, which will allow the government to start opening tenders. “We expect the approval to come out by the end of this month so we can be (in) gear in January 2011,” she said.
Some banks have taken notice. A spokesman for investment bank EFG-Hermes said the bank was aiming to close a £2,5 billion fund by the first quarter of 2011 to invest in transport, energy and other infrastructure in Egypt.