The Higher Council for Privatization (HCP) was created nine years ago; since then there have been no successful privatization programs, and after six years the public-private partnership (PPP) law is still gathering dust in Parliament. Executive challenged the Secretary General, Ziad Hayek, to find out why his office still exists.
Has the HCP failed in its mission?
We have not made any privatizations so in some way you could say we have failed. However, I would like to say that the HCP is not a corporate entity that has a legal identity of its own. It is a permanent ministerial committee, so it is not an entity that can succeed or not succeed in what it is doing. We are an arm of the Council of Ministers [Lebanon’s cabinet] that assists in carrying out their decisions regarding privatization. Some council ministers have been pro-privatization while others have been against.
Has the failure to develop independent and empowered regulatory bodies for the telecoms and energy sectors precluded previous or current privatization policies?
Yes. Having a regulatory authority is an important ingredient of the privatization process because as you privatize and move activities out of the purview of a particular ministry and pass those activities onto the private sector, an independent group of professionals needs to regulate that private sector involvement.
Why haven’t these bodies been created and given the powers stipulated under Laws 431 and 462 that govern the telecommunications and energy sectors respectively?
Under Law 431 for telecommunications a regulator for the sector was created, the TRA [Telecommunication Regulatory Authority], yet no regulator was created for the energy sector or civil aviation. The reason this has not been done in the last two cases and has been done poorly in the first is that a conflict of interest exists between having an independent body and the person of the minister in each one of these ministries.
The new plan from the telecoms ministry is to de-layer the sector, with a state-owned infrastructure and greater private sector involvement in the service operator and retail domains. Was your office involved at all in the adoption of this strategy?
No. I think it is unfortunate that ministers tend to devise strategies for the ministries that are not consistent with laws that have been passed by Parliament.
Why is this plan not in accordance with the law?
Law 431 is very clear that you need to establish the TRA and afford it certain powers. It also gives a clear path as to what should be done with regards to the development of a corporate entity called Liban Telecom that will own and operate the fixed line infrastructure and have a mobile license. This entity, Liban Telecom, is yet to be created and other policies about how to organize the sector are not consistent with 431 unless you create Liban Telecom.
How would you describe the current status of the TRA?
It is a diminished version of what it should be. We don’t have a true regulator at this time.
If the laws pertaining to the telecoms, electricity and aviation sectors are not being implemented, should they not just be consigned to the dustbin and new ones drawn up?
Those laws are not sacrosanct. They can be amended and likely should be amended. But in essence they are good laws. Ministers have tried to avoid implementing them. The laws have caused the ministers plenty of headaches. I have lobbied ministers and will continue to do so, to stop them circumventing legislation. If they don’t like it they need to work with Parliament to amend the laws, but if they are not amended [the ministers] need to implement the legislation.
Is the PPP law going to pass?
We have been working on this for the past six years and a fourth version is now being discussed in Parliament. Meanwhile, the finance and budget committee has taken it up on its agenda and it is favored by the president, the prime minister and the speaker of the parliament.
Yet there is still much opposition. Is that primarily ideological or political?
It is for the same reason that privatization has been delayed, and that is that the ministers perceive the passing of any project that hands the delivery of any public service onto the private sector as a reduction of their own authority. They pay lip service to it but in reality they don’t want to have an actual partnership with the private sector. They want to give the private sector some kind of modified version of a management contract or an outsourcing contract upon which the minister has the ultimate say.
Would PPP projects attract mainly native investors and funds from Lebanese bank deposits, or foreign investors?
I think it will in the first instance be Lebanese funds. The banks have around $140 billion in deposits and they are very interested in finding investment opportunities. We have Lebanese entrepreneurs running PPP projects worldwide. So we have the entrepreneurs and the money but we don’t have the enabling framework to make that happen in a professional and transparent way in Lebanon.
In 2010 you said that within the power sector the transfer of the national utility from being a government to corporate entity was a cornerstone of your efforts. Are you closer to achieving this goal?
No. We don’t set the policy for the sector. It is the same problem of the minister not wanting to transfer authority or employing people and granting contracts.
There are plenty of cases of PPPs failing to deliver better services, cheaper prices or more efficiency. With Lebanon’s record of poor transparency and corruption, shouldn’t widespread administrative reform come first?
PPP legislation has as one of its main objectives increased transparency and limits to the corruption you are talking about. Today in Lebanon you can do PPP projects, in fact we already have many. The problem is that they are all problematic. They are controversial and lack transparency. What we are trying to do is to remedy those problems.
The energy sector is in such a mess, can it really be considered a viable and attractive investment opportunity for the private sector?
I don’t think anyone is interested in a privatization of the power sector, not foreign or local investors. PPP is a different animal. Many people are interested in PPPs in the power sector.
Everyone is talking about offshore oil and gas. Is the Petroleum Administration vulnerable to the same resistance and inertia as we have seen in the other sectors we have discussed?
I believe so because of the way in which it is set up. It is dependent on the minister, so as long as these decision makers are not independent we will have the same problems. This is not a fully independent board. The government does not have the ability or the wherewithal to fully exploit this sector so there will be a huge involvement of the private sector and this is where my concern lies.