How Egypt can initiate a profitable PPP

How Egypt can initiate a profitable PPP

Since its inauguration in Egypt, articulation of the Public-Private Partnership scheme has been stagnating badly. The Egyptian state believes that private sector business engagement should only occur once it has maximized its returns on its investments, leaving the private sector with just a few “financial bites” to chew on. This approach has discouraged many entrepreneurs from engaging with the government, which in fact is happy to maintain its control over public sector enterprises.

Our government’s most obvious defect lies in its low productivity, which is wrapped in a cloak of bureaucracy that can potentially be dissolved through bribes. When it comes to business decisions, the experience of government executives restricts their comprehension of intrinsic business principles; therefore the partnerships they initiate are often miscalculated. Meanwhile, the private sector, which is willing to take business risks and bear their consequences, is kept at a distance.

Many alternative formulas that are better suited to our economy could be used to articulate a successful PPP. Focusing on economic growth, ensuring better returns on project investments and reducing the government’s expendable expenses are the most important factors that the government needs to address in this partnership. To tackle its economic challenges constructively, the best route the government can take is to empower the private sector to compete in producing ideas for better management of government projects.

The main problem facing the Egyptian government regarding the founding of a PPP project is that it is using its bureaucratic mindset to design a partnership proposition for an entrepreneurial mindset — a losing formula. The private sector is known for being a better business operator. As long as it can secure better profitability and is willing to bear the entire business risk, it should be the initiator of any given business opportunity.

Meanwhile, Egyptian government overemployment could be tackled by offering investors the option of hiring government personnel, who would keep their entire government compensation and receive extra bonuses from their new temporary employers to work on PPP projects. This scheme would help alleviate the government’s overemployment burden, offer the private sector a temporary workforce at a reduced overhead, and advance government personnel experience — even a fractional success of this scheme would be of value to both parties.

Egypt’s privatization program has not been very successful because it has been based on getting rid of public sector enterprises with no consideration whatsoever for economic growth. The government put up its most promising and profitable companies for privatization and was left with the loss-making enterprises (aside from any corruption that may have occurred during the privatization process). Our government needs to change its approach by offering its enterprises to whomever is able to bring about, first, a better economic standing and, second, higher financial returns.

The Egyptian government, which tends to believe that economic reform is its exclusive responsibility, needs to acknowledge its competency shortcomings and encourage the private sector to remedy them. The government needs to alter its economic approach, along with advancing the knowledge of the officials in charge of establishing PPP projects. The best form of partnership for the government to pursue is to offer the entire population the opportunity to either contribute solutions to the government’s economic challenges or take over the responsibility for non-performing projects.

Many government enterprises and projects could easily supply better financial returns if the government was to agree to take its heavy bureaucratic hands off and invite entrepreneurs to manage them. The government would then maintain its ownership of project assets that will generate consistent future revenues. The Egyptian government must work to encourage entrepreneurs to take on any government project, as long such a takeover brings better economic returns.

 

  • Mohammed Nosseir, a liberal politician from Egypt, is a strong advocate of political participation and economic freedom. Twitter: @MohammedNosseir

 

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