This chapter examines the main barriers and obstacles to the implementation of infrastructure projects through Public-Private Partnerships (PPPs) throughout the Middle East and North Africa - across all sectors. Extensive consultations with international financial institutions involved in the region, together with private sector operators and financiers, have led to the identification of common issues in the design, use and implementation of PPP projects. Barriers identified and steps to address them include: • Political/Legal: Counterparty risk remains a dominant issue for investors. Measures to address these concerns include sovereign guarantees, political risk insurance and a clear legal and regulatory framework including robust dispute resolution provisions. • Financial: The reluctance of many commercial banks to lend beyond a project's construction period creates refinancing risk which is difficult to address. Foreign exchange risk is a challenge that can be mitigated by funding the project in local currency, by paying project company revenue in hard currency and by hedge contracts. • Capacity: Government experience and expertise in PPP projects is sometimes lacking. The creation of well-resourced and empowered PPP central units and satellite PPP units in tendering authorities is essential in this regard. • Tender/contract-level risks: Governments should prepare carefully for PPPs including completing demand and feasibility studies and obtaining permits and approvals where possible. The tendency to produce very detailed tender document should be resisted, functional output requirements are preferable and allow the benefit of private-sector innovation. After reviewing this chapter, policy-makers will: • Have a better understanding of the issues and challenges facing investors considering participating in MENA-region PPP projects. • Be better able to draft PPP tenders to benefit from the private sector's ability to innovate and therefore provide value for money. • Be better able to draft PPP tenders that allocate risks in a manner more likely to be attractive to private investors. |
100. The OECD has engaged in intensive consultations with international financial institutions involved with PPPs and other forms of project finance in the MENA region. The knowledge gained from these consultations has been combined with OECD experience in Jordan, Egypt, Tunisia and Morocco, and broader OECD expertise to identify barriers facing PPP development in the region. Certain themes have emerged as inhibiting PPP projects specifically, and private infrastructure investment generally, in the MENA region. These themes are reviewed below.