1. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 1 “Different PPP Designs in the MENA Region”: Establishing an Effective Legal & Contractual Framework Frequently Asked Questions on PPPs: The EIC Response Frank Kehlenbach BIAC Representative / Director of European International Contractors PPPs for Infrastructure Financing in the MENA-Region

2. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 2 European international contractors take a leading role in developing the world’s TRANSPORT infrastructure, such as toll roads, railroads, ports and airports, but some diversification into other sectors. European contractors have developed over the past decades expertise not only to build infrastructure facilities, but also to design, operate and finance these structures in industrialised as well as in emerging & developing countries. About EIC - Experience 1

3. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 3 Bigger Market International Financing Institutions must reserve sufficient funding for infrastructure investments in developing countries Promotion of Public-Private Partnerships Better Market Quality-Based International Competition (due to project life-cycle costing) About EIC - Goals Fair Market Balanced Contract Conditions Effective Dispute Settlement International Arbitration Ethical Market Corruption-free environment Environmentally sound and sustainable projects 1

4. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 4 PPP Developing Markets Overview World Regions Investment in Infrastructure with Private Participation in Developing Countries (1990 - 2005) by Region Source: World Bank PPI Database WORLD TOTAL : 970 billion US$ 2 ”Asian Crisis”

5. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 5 PPP Developing Markets Overview Infrastructure Sectors Source: World Bank PPI Database SECTORAL TOTAL : 970 billion US$ 2

6. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 6 PPP Developing Markets Overview Focus: MENA Region (excluding Extractive Industries) Source: World Bank PPI Database MENA TOTAL : 43.5 billion US$ 2 In the MENA Region, the dominance of the telecom and the energy sectors is even more obvious than on average (94%). Around 72% of investments accumulated in only 3 countries, i.e. Morocco (38%), Egypt (17.5%) and Algeria (16.5%). Projects in the transport sector comprised airports (588 million), seaports (1.300 million) and railroads (182 million).

7. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 7 World Bank statistics suggest that telecom projects (ca. 50%) are easier to set up in lower income countries, due to comparably lower up-front investment costs. Many projects in the energy sector (ca. 33%), since there is the possibility of agreeing on long-term off-take agreements a either with a government entity or an independent power producer. This model has triggered criticism from many angles. Some transport projects (15%) may be “commercially viable” if they are structured around insulated assets frequented by industrial clients, e.g. airports, seaports, freight rail. Other transport projects with socio-economic benefits, such as toll roads, bridges and tunnels and passenger rail, as well as water & sewerage projects apparently are less often structured as a PPP, since they relied in the past on (non cost-covering tariff) payments by private customers and thus were “not commercially viable”. PPP Developing Markets Overview Lessons Learned on PPP Structuring 2

8. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 8 Published in April 2003 Based on the broad experience of EIC member companies as concessionaires in preparing for PPP projects in the transport sector Advise to Governments, Contr. Acting Authorities and International (Financial) Organisations in structuring PPP projects Comprises 21 recommendations for the technical and financial implementation of PPP projects EIC White Book on BOT/PPP Basic Features 3

9. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 9 1 GENERAL PRECONDITIONS – –Ensure true Government Support – –Create a PPP Task Force – –Enhance Country Legal Framework (Accounting, Taxes, Procurement) 2 PROJECT PREPARATION – –Put in place sound procurement strategy – –Present comprehensive, reliable project documentation – –Provide for a steady and secure payment mechanism – –Agree on affordable level of tariffs 3 TENDER PROCESS –Use Pre-qualification of bidders –Ensure Transparency & Confidentiality throughout process –Present clear award criteria –Reimburse Bidding Costs –Unsolicited Bids ??? (outside EU ) 4 RISK MITIGATION –Provide for optimal risk identification & allocation –Invite financial risk mitigation through IFIs, ECAs, etc. EIC White Book on BOT/PPP 21 Recommendations 3

10. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 10 EIC on FAQs on PPP Political Arguments on PPP 3 Value for Money ? – Life cycle approach Off-balance Financing ? – Not always Government Flexibility ? – Public duties Government Control ? – Retained Public Sector Comparator ? – Reliable? Complexity & Costs ? – Can be limited Re-negotiations in PPP ? – 20-30 years (Increase of) Tariffs ? – Right Blend State Subsidies ? – non-viable PPPs Role of SMEs ? - Important Role of architects & consultants ? - dito Labour rights ? – state responsibility Sustainability of PPPs ? – Definitely

11. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 11 Challenges for PPPs Public sector skills Legal and regulatory sector- specific framework Steady revenue flows Transaction costs, right blend of public and private funds (Role of IFIs /EU) Political & Economic risks Benefits of PPPs Project life-cycle approach Project completion on time + on budget Project operation according to pre-defined standards Risk transfer to the private sector (e.g. interface risk) Additional private funds 4 Conclusion

12. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 12 WORLD Bank PPP Working Paper (2003) “Whatever policies countries choose, governments cannot avoid the inescapable realities that infrastructure services have to be paid for, whether provision is public or private. Most of the concerns about the sustainability of private infrastructure really reflect the difficulties governments have in sustaining cost-recovering tariffs and commercial principles in these sectors... The real issue is not public infrastructure versus private infrastructure. Put this way, it is more simple the argument is about less infrastructure versus more.” Conclusion 4

13. Istanbul, 08th November 2006PPPs for Infrastructure Financing in the MENA Region 13 EIC Contact Address:EIC Secretariat Kurfuerstenstrasse 129, D - 10785 Berlin, Germany Phone:++49 (0)30 /21286-244 Fax: ++49 (0)30 /21286-285 E-mail: eicontractors@compuserve.com Internet: www.eicontractors.de