On the Imperative of Ratifying a PPP Law in Lebanon

Electricite De Zahle (EDZ)
Electricite De Zahle (EDZ)

On February 16th 2016, Lebanon’s Higher Council for Privatization (HCP) and the Alumni Caucus of the French HEC University for Graduate Business Studies organized the opening of a conference entitled ‘Public-Private Partnership Projects Opens Up New Horizons’ at the Higher Institute of Business (ESA) in Beirut. Centered on the need to involve variant actors and develop opportunities through public-private partnerships (PPP) when addressing Lebanon’s most pressing development issues, the conference gathered notable personalities such as then Minister of Economy and Trade Alain Hakim, HCP general director Ziad Hayek or head of the World Bank’s Public-Private Partnerships Lawrence Carter. All participants agreed on the potential of partnerships between public and private sectors when confronting the infrastructure deficiencies that the country still endures, and urged for the adoption of a PPP law that is still waiting to be ratified by parliament since its first draft was submitted by the HCP in 2007.

A long-standing issue

The debate on the potential role of PPPs in rejuvenating the Lebanese economy dates back to the early 2000s and the establishment by Law 228 of the HCP in 2000. PPPs are seen by most economists worldwide as the best way to set the innovative thinking and technological input of the private sector within the legal and institutional framework that the public sector provides, thereby responding most efficiently to society’s needs. On March 2015, Lebanese economists gathered in occasion of a forum organized by the Lebanon Institute for Strategic Affairs (LISA) and endorsed this global trend by calling for the implementation of a PPP law in the country, as infrastructure deficiencies were viewed as “one of the main factors crippling growth”.

Amongst the first successful PPP-like concessions in the history of the Middle East was the Beirut-Damascus road in 1858, followed by the Nahr el Kalb water concession and the construction of the Port of Beirut’s first basin. The National Postal Services, currently known as LibanPost, were rebuilt and modernized after the civil war by a private operator, Canada Post & SNC Lavalin. On June 22, 2010, the Lebanese Cabinet approved an electricity reform plan pivoting around the participation of the private sector.

Opportunities

The Lebanese authorities have continually understood the imperative of tapping into the private sector’s ingenuity and resources in service of the general welfare, and adopting the draft law proposed by the HCP would increase the odds of strengthening the economy. Sectors as diverse as energy, logistics infrastructure, internet distribution, mobile services and water management represent as much opportunities for investors as they are responsibilities for public servants. HCP secretary general Ziyad Hayek couldn’t be clearer on this matter: according to his estimates, a series of successful PPP projects in Lebanon would “secure over 200,000 new jobs over a period of five years, including 80,000 jobs for fresh graduates”, all the while seeing to the economy’s most basic needs in a timely manner.

The case of Zahle

Looking retroactively at a specific private initiative that attended to a public need, the case of Electricity de Zahle (EDZ) CEO Assaad Nakad’s decision in late 2014 to provide Zahle’s citizens with 24/7 power is a compelling tale. Despite long-standing interests of alternative power providers hindering the development of a viable distribution network, Nakad took upon himself to revive an old power plant and, in his own words, make of Zahle “a gateway for electricity decentralization”, thereby relieving the 53.000 subscribers to EDZ of having to pay double energy bills. Despite the fact that the EDZ case didn’t occur within a classical PPP framework (another problem that could be remedied by the adoption of the aforementioned draft law), a lot of similarities can be drawn from simple facts: EDZ is a private company founded in the 1920s and holds a concession to “fulfill the electricity needs of the Central Bekaa.” Realizing that its concession was scheduled to end in 2018 if there’s no extension, and that the Beirut based national company EDL would not be able to provide the power needed for the region, EDZ officers decided to partner with Aggreko, a British power supply company, thereby procuring themselves with a 2-year lease to supply Zahle and effectively bridge the power gap.

It is this kind of simple private initiatives that could set the Lebanese economy back on track despite the momentous structural challenges that it currently faces. When set in partnership with public officials that are needed to safeguard the public interest imperative, private contractors, with their expertise and resources, could effectively remedy to the country’s infrastructure woes. This is why the adoption of the HCP’s PPP draft law should be on any Lebanese state body’s top agenda.

Image Credit: EDZ facebook page

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