Public-private tenders worth $1bn on offer in Egypt

African Development Bank Group

• Water treatment PPP projects
• Part of drive for more FDI
• Airports may be privatised

Eleven tenders worth more than $1.2 billion for public-private partnerships (PPPs), mainly involving water and waste water treatment, are about to be issued by the Egyptian government.

Atter Hannoura, director of the PPP Central Unit at the Egyptian finance ministry, said that the total value of PPP agreements to be tendered is about EGP62 billion ($1.26 billion).

Since the unit’s launch in 2006, PPPs have played a relatively minor role in the Egyptian economy, which multilateral institutions such as the International Monetary Fund say is dominated by the public sector, to the detriment of private enterprise. 

The new tenders are part of the government’s wider efforts to attract and expand the private sector. It has said that it will announce a new national privatisation programme before the end of this month. 

In the previous financial year investments in PPPs amounted to less than EGP20 billion ($402 million). However, Egypt’s finance ministry said that the value of PPP tenders under procurement was likely to increase steadily over the next few years, including projects in power, water, logistics, waste management and tourism.

The plans to roll out more PPP contracts come within the context of often fraught negotiations between Egypt and its international backers, who frequently point to a need for Egypt to increase the role of the private sector.

“Egypt has to really show not only to the IMF, but also to the international market, progress with reform,” Hannoura said.

After an $8 billion IMF deal in March, Egypt has ramped up austerity measures to address its ballooning debt obligations, which stood at 89 percent of GDP at the end of the last financial year. 

In recent years government spending on infrastructure projects has been a big driver of growth in the economy. Egypt is now looking to private investors to plug the gap. It is seeking a record $30 billion in foreign direct investment (FDI) over the current financial year.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, said: “They have to really focus on fiscal reform. On the other hand, Egypt’s infrastructure really needs to be upgraded. That’s going to be vital for not only domestic investments, but attracting foreign direct investments.”

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The first projects of the 11 PPPs to be put out to tender by Egypt’s government will include a sludge treatment plant for the Abu Rawash waste water treatment plant, which was itself built under a PPP contract. The plant currently treats 1.6 million cubic metres of water a day, generating about 700 tonnes of sludge in the process.

The finance ministry is offering a build, operate, own, transfer contract in the region of EGP6.5 billion, with pre-qualification expected to be issued imminently.

The ministry is also issuing contracts for an industrial wastewater treatment plant in Sadat City for about EGP8 billion, a surface water purification system at Mostor, south of Cairo, for about EGP1.3 billion, and substations to enable water to be pumped from the Nile to the new administrative capital, worth an estimated EGP8 billion.

Further down the line, the ministry will call for tenders for a water desalination plant with a capacity of 250,000 cubic metres a day, in Ain el Sokhna, on the Red Sea coast, for an estimated EGP18 billion. Hannoura said “tens of companies” had already expressed interest.

Airports under spotlight

Discussions are also under way to outsource the management of Egypt’s airports to the private sector. Marsa Alam airport, on the Mediterranean coast, is currently the only airport in the country managed by a private company, EMAK Marsa Alam, which constructed the airport on a build, operate, transfer contract and opened it in 2003. 

No plans for the tendering of airports have yet been announced. The ministry said that the decision had not yet been made which airports will begin accepting bids and a feasibility study was still being carried out.

The bulk of FDI over the past few years has come from the Gulf, most notably the $35 billion deal struck with the Emirati sovereign wealth fund ADQ to develop Ras El Hekma.

However, the finance ministry said that while Gulf companies had shown some interest in the PPPs on offer, there was wider interest from European, North American and East Asian companies.

There is hope that more experienced companies, in addition to increasing fresh investment into Egypt, could improve the quality of services. 

Hannoura said: “Public-private partnerships have a main role in the infrastructure projects, infrastructure and public services, which the private sector can better manage.

“What we are pushing now is to have more understanding and knowledge at the different ministries and different authorities.”