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Executive Insight – Public-private partnership

The only option for progress

by Ziad Hayek

In order to grow our economy and provide a better standard of living for our people, we need to invest in modern infrastructure urgently. We need roads that are well maintained, renewable energy projects that reduce our fuel bill, dams and waterworks that harness our most precious natural resource, fiber-optic networks that allow us to be part of the global knowledge economy and water and solid waste treatment plants that preserve our environment. We need projects that create a large number of jobs to help stem the emigration of our best and brightest. Everyone can agree that investing in infrastructure is investing in our future.

For more than a decade now, public sector salaries, the servicing of the public debt and the subsidizing of electricity have consumed our national budget and left little money for development projects. To finance infrastructure today, the government has three options. Firstly it could borrow money — a frightening prospect considering our dangerously high level of debt. Secondly it could raise taxes — a politically unpalatable and economically inadvisable course of action in the context of declining real incomes. Or thirdly, it can look to the private sector to invest in infrastructure that can later be transferred to the government. It is obvious that this last option, i.e. that of a public-private partnership (PPP), is our only viable way forward. 

Lebanon already has two of the main elements that are needed to execute successful PPP programs. First, we have the know-how and the human resources. Lebanese companies and individuals are investing in and managing PPP projects in the Arab world, in Africa and beyond. Many have repeatedly expressed their readiness to invest in Lebanon. Second, we have the financial resources. Our banking system is flush with some $115 billion in deposits. Short-term deposits to be sure, but more than enough to fund the $3 billion or so for the immediate infrastructure required in sectors such as electricity, water, rail and many others.

So what else do we need? What is stopping us from embarking on this road to social and economic development? We need a legislative framework that safeguards the interests of the government and people of Lebanon while providing sufficient comfort to investors. It must also impose transparency, for serious investors do not participate in the often-complex PPP tenders if there exists the possibility of a minister or official manipulating the results. Finally, the legislative framework must establish, on the government side, an inter-ministerial organ that has a capable team who are able to speak the language of the private sector and help structure a bankable deal.

This is what the current planned legislation, drafted by a multidisciplinary group of experts and will hopefully be approved by the Council of Ministers before long, aims to do. 

I have proposed and championed the enactment of a PPP law since I took office in 2006 because I truly believe that it is the most important factor in our future economic development. I am disappointed that we have not been able to see it through until now.  Draft legislation was approved by the Council of Ministers in 2007 but was not taken up by Parliament. It was again proposed in Parliament in 2010 but the Council of Ministers wanted to approve it first. A new draft was then prepared and discussed in several ministerial meetings but discussions were unfortunately not finalized by the time the government resigned in January 2011. In the meantime, we have lost many opportunities to invest in our country’s infrastructure, to grow our economy, to increase our productivity and to raise our income per capita. Instead of sharing in a bigger pie and comparing the size of our portfolios, we are sadly left to argue about the minimum wage and fight over the crumbs.

It is high time that our government and our Parliament get their act together and do the right thing by our people.

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Ziad Hayek

Ziad Hayek is the secretary general of the Higher Council for Privatization
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