A new bill that intends to govern Public Private Partnerships (PPPs), which will enable the private sector to finance public infrastructure and utilities, was tabled to the Council of Ministers last Friday. The Bill comes at a time when the government is struggling to fund high capital requiring infrastructure projects.
It was drafted by the Ministry of Finance & Economic Cooperation (MoFEC) with the aim of raising the participation of the private sector in the economy, according to Abraham Tekeste (PhD), minister of MoFEC.
The Bill was drafted after the Ministry conducted a two-year feasibility study to understand and decide if PPP projects are of public interest and whether the government can afford to handle them.
The feasibility study which was financed by the government, the African Development Bank, and the Department for International Development (DFID), a United Kingdom government department responsible for administering overseas aid, had organised four consultation sessions with the private sector and public institutions to collect relevant inputs.
Lessons from the experiences of South Korea, Columbia and Peru, which have applied such kind of partnerships for more than a decade, was also taken into consideration during the process of preparing the Bill.
The country has never had mainstreamed laws and institutions that govern PPPs in an organised way, except that relevant line ministries have been implementing such projects under their auspices.
The Bill, which is the first of its kind, will guide contracts of public and private entities in their initiation, preparation, procurement, supervision and execution of PPPs. In the draft proclamation, it is indicated that the length of deals between private and public sectors ranges from five to 13 years, according to sources.
PPP contracts involve companies injecting money into various state projects such as road, railway, airport, energy and other infrastructural development projects. But the contracts need to be regulated in an organised way.
"It is a regulated privatisation," said a source at MoFEC's infrastructural and capacity building directorate. "Government alone cannot always fund all infrastructural development projects although it has a principal responsibility for ensuring delivery of public services."
A policy economist and analyst who agrees with the above statement said, "The government has limited resources so that the partnership will improve issues that arise from project mismanagement."
There are concerns, however, that such kinds of partnerships are exposed to cronyism unless preventive measures are taken.
"Taking Indian experience into account will be helpful here," the policy economist commented. "PPPs are exposed to abuses."
On the other hand, Ahmed Kellow, manager and shareholder of First Consult Plc, a business consultancy company, believes that the new law would even have an impact on the debt risk of the country.
"It is big news for a country which is stressed by high debts," said Ahmed, who has four decades of experience in developmental projects. "It is an ideal move by the government."
A PPP committee that comprises of ministers and state ministers, will be formed in MoFEC to pass crucial decisions on contracts. Members of the committee will serve for three years, according to sources.
A directorate will also be set in MoFEC to help the committee in the process of project selection, development, tendering and management.
The draft will apply to all sectors except those which are not opened to the private sector such as telecommunications and finance, a source disclosed. But, a priority is given to organisations that want to be engaged in other infrastructural development projects.
Although PPPs have been growing rapidly in several neighbouring countries such as Kenya and Tanzania, its implementation in Ethiopia has so far been limited to few projects, such as Saygin Dima Textile Factory, which was established in 2009 by Turkish investors and the government with a capital of 78.5 million Br.