Question

Lebanon’s infrastructurewas extremelydamaged by the 1975-1990 civil war. The quality of public utilities decayedfurther after the war in 2006 and the Syrian war in 2011.Since then, Lebanonhas lacked sustainableelectricity, education, health, transport and other basic networksdue to the chronic inability of successive governments to manage and plan them.As a result, the growth of the economy has been severely constrained.The public company Electricite du Liban (EdL) weighs heavily on the government’s expenditures. Subsidies to EdL stood at an average of $1.85B per year in the last 5 years. In addition, EdLis unable tosupply houses and businesses with24 hours ofelectricity, pushing them to use private generators.Road infrastructure isoutdated and need rehabilitation, in addition to theneed of investment in new roads. Traffic jam is increasing every year with wasted time on the roads costing the economy hundreds of millions of dollars per year, with the country lackinga well-functioningand organized public transport.Even though water is abundant in Lebanon,it is pollutedand wasted, due toleaking distribution infrastructure. Lebanonis currently facing a critical standing in terms of water shortage, driven by a changing climate with rising temperatures and unprecedented scarcity in rainfall.Aplanned network of 27 water retention dams has been delayed for decades.As for waste, it has piledup on the roads for around 10 months, with nosustainable waste treatment being implemented.This has ledto a growing environmental disaster that threatensthe health of its citizens andendangers the country’s beautiful valleys and beaches.Due to the limited budget resources, Lebanonhas made no significant investments in infrastructure.Lebanon’s high public debt, standingat 129.26% of Gross Domestic Product, hinders the government’s ability to renovate the infrastructure.Moreover,the government is incapable of increasing its revenues, which are $3.95Blower than its expenditures.Investment in infrastructure plays a key role in the economy’s potentialand ensuring sustainablegrowth, in addition to improving the living standards of the population.One way to develop new infrastructure without crippling the country’s fiscal policywould be through Public-Private Partnership (PPP).According to the European Investment Bank, PPP is the private-sector construction and operation of infrastructure which would otherwise have been provided by the Public-Private Partnershipin LebanonBLOMINVEST BANKApril16, 2016 public sector.PPPis an agreement between the publicsector and private sector companies, in which the private sector participates in governmental projects providing the skills, technical assistance, funds, and risk absorption or any other element needed forthe completion of the project. The private sector assumes substantial financial, technical, and operational risks in the project andplays a great role in themaintenance of public facilities or service delivery.PPP is based on the strengths of both the public agency and the private partner, which are directed toward the achievement of goals that optimize public needs, funds and services.Different Legal PPP FrameworksTypeOwnership & Operation of AssetsOperation & MaintenanceInvestmentUltimate OwnershipDuration (years)Management ContractPublicPrivatePublicPublic3-5LeasingPublic Private partnershipPrivatePublicPublic8-15Build, Own & TransferPublic Private partnershipPrivatePrivateSemi-private20-30Build, Own, Operate & TransferPublic Private partnershipPrivatePrivateSemi-private20-30ConcessionPublic Private partnershipPrivatePrivatePublic20-30Build, Lease & OwnPublic Private partnershipPrivatePrivatePrivate25+Build, Own & OperatePublic Private partnershipPrivatePrivatePrivate25+Partial PrivatizationPrivatePrivatePrivatePrivate25+Full PrivatizationPrivatePrivatePrivatePrivateIndefiniteSource:Higher Council for PrivatizationPPP offers many benefits, be it for the public at large, consumers,the local economyand the government.Public-Private Partnershipserves the economy as a whole bydecreasingunemployment rateand brain drain. PPP wouldcreate new jobs as companies enlargetheir operations and seek to gain market share in a competitive environment. Moreover, throughPPP, the government can attract foreign capital, which isan important ingredient for job creation and economic development. Thisnewbusiness environmentwouldhelp young Lebanese, who are in the country, to stay as they will find jobs domestically, and it will even encourage Lebanese living abroad to come back and contribute to the country’s production. Due to the monopoly-free environment, PPPwill ensure consistent quality services and products. Companies will need to innovateand invest in modern equipmentso as to differentiate their service offering from that of their competitors, leading to all round better services and products that are consistent and continuous. This will increase productivity levels and encourage innovation since it is well documented that private companies are generally more productive and efficient as they tend to have the financial and human resources, as well as the organizational flexibility, needed to operate at an optimum level. Public organizations, meanwhile, tend to score low on productivity as they often operate in monopolistic environments, lacking the financial incentives to innovate and be more productive. The competitive market would lead to lower prices in the long run.The entry of different operators to the market will increase competition and lead to a reduction in prices for the consumers. However,sometimes the market will remain monopolistic or oligopolistic, especially in a small market like Lebanon.Hence the governmenthas to intervene to prevent manipulation of prices by the private sector.3Public-Private Partnership in LebanonSALPPPwill help reduce the bureaucracy and red tape that has historically plagued public entities to the detriment of consumers. Private companies are requiredto operate with minimal bureaucracy to survive and thrive in an ever-competitive market. PPP will allow the private sector to play a larger role in the privatized sectors as entrepreneurs establish supply, distribution and other ancillary businesses around the privatized entities. PPP would reduce the government’s burden of subsidizing unprofitable public entities.P3will put an end to the financial drains of state-owned enterprisesthat have put a strain on the public treasury. Asan example, the state has had to subsidize EDL for up to a billion dollars a year; an amount that could have been spent on education, health care, security or other sectors in need of financing. Given the lack of public funds and the ongoing political stability, which hinders development of any substantial project by the state, many sectors could benefit from PPP. Beirut airport can be renewed and expanded and an additional airport could be opened. Water infrastructure can be upgraded and expanded to provide continuous supply across the country. In the transportation sector, main highways could be upgraded, a proper public transport system could be developed, and railways could be revived.PPP can also be adopted to expand the existing infrastructuresof health and education sectors and to improve their operations and productivity.EDL is one of the best examples in which PPP would apply. Partnering with the private sector to put the EDL on a profitable track through enhancing its operations will be a major achievement on the infrastructural level, and has proved successful in regions such as Zahle. The double billing borne by people and businesses’ from EDL and the private generators will be terminated, and they will enjoy 24 hours of electricity. On the fiscal side, adjusting tariffs based on the current oil prices, enlarging the tax base, and reaching a higher production, will generate higher revenues and save over $1.5 billion in current expenditures. Moreover, the treasury will be transferring the cost of this investment to the private sector, thereby sparing its own accounts.Worth noting that the first concession in the history of Middle East was the Beirut-Damascus road, in 1858.This was followed by the water concession of Nahr el Kalb and the construction if the 1stbasinof Port of Beirut. After the civil war, in an attempt to rebuild the infrastructure and modernize the National Postal Services, the government appointed a private operator, Canada Post & SNC Lavalin, to “Build, Operate and Transfer”the National Postal Services, what is currently known as LibanPost. However, adopting PPPalso has its shortcomings.While private sector can make it easier to get financing, investmentwill only be available whenthe operating cashflows ofthe project are expected to provide a return on investment. This means that if returns are negative,the cost has to be borne either by the customers or the government through subsidies, to encourage investments.Some projects may be politically or socially challenging to introduce and implement.For instance, there might bean existing public sector workforce that fears being transferred to the private sector.Private firmswill be cautious about accepting major risks beyond their control. If they bear risks then their price for the service will reflect this. Private firms will also want to know that the rules of the game are to be respected by government such as providing fair regulationand increasing tariffs.To accept significant risks, the private sector would want to have substantiallevel ofcontrol over operations.Private sector will do what it is paid to do and no more than that. Therefore incentives and performance requirements need to be clearly set out in the contract. Thefocus should be on performance requirements that are output-based and relatively easy to monitor.4Public-Private Partnership in LebanonSALGovernment responsibility would not halt. Citizens will continue to hold government accountable for quality of utility services. Government will also need to retain sufficient expertiseto be able to understand the PPP arrangements, to carry out its own obligations under the PPP agreement and to monitor performance of the private sector and enforce its obligations.A clear legal and regulatory framework is crucial forachieving a sustainable solution.Given the long-term nature of these projects and the complexity associatedwith them, it is difficult to identify all possible contingencies during project development.It is possible that some of the projects may fail or may be terminated prior to the plannedterm of the project, for a number of reasons including changes in government policy, failure by the private operator or the government to perform their obligations or due to external circumstances such as force majeure. While some of these issues will be able to be addressed in the PPP agreement, it is likely that some of them will need to be managed during the course of the project.Preparatory work to adopt a PPP law has been completed in Lebanon. The Higher Council for Privatization,established by Law 228 in 2000,is the authority in charge of planning and implementing privatization programs.Since 2006the HCP has started lobbying for the passage of a public private partnership (PPP)law, butto no avail.On the 14thof February 2014, the HCP issuedthe guidelines of the PPP draft law. The draft law is made up of six chapters: The first is an introduction about PPP; the second is about how to study and prepare for a joint project; the third is the phase of studying a joint project; the fourth is about how to choose a private partner; and the fifth is about guarantees of PPP projects. The final chapter discusses the means to supervise and follow up on the project.Such a law is essential for the development of Lebanon’s crumbling infrastructure, job creation and the stimulation of Lebanon’s economy. Lebanesebanks can also play a rolein PPPs. They can act as an advisory in the pre selection process, a direct financer through traditional loans, and as the equity/debt issue manager if the financing happened through the capital markets.Finally,Lebanon needsa modern PPP law that provides the transparency and competence needed for the success and sustainability of PPP projects.This would encourage investors to take on more PPP projects that would improve Lebanon’s infrastructure, which in turn would lead to higher economic growth. Question 2 (Word limit: 750 words) In collaboration, different types of power can be referred to better run the partnership. In the case, when there are shortcomings and to ensure an acceptable significant risk, the private sector seems to prefer referring to one tpe of power rather than the others. Identify and discuss this type of power. Critically discuss why the private sector would refer to this type of power rather than the others. Support your discussion with external references. Hint: in your essay, you need to reflect on the following: - Discuss the three types of power: power over, power to and power for. - Refer to the case and identify why the private sector is referring to this type of power.

Answer 1

Answer:-

Three sorts of power are

1. Power over

2. Power with

3. Power to

The above focuses are clarified in subtleties

1. Power over : This is the conventional way how power are seen. This sort is constrained down the subordinates.This kind of power likewise searches for control in the relationship, generally it would consistently be a single direction correspondence where the individual would be providing orders and anticipate that others should follow. There would be no degree for conversation or voicing your perspectives. These kind of individuals additionally accept that

2. Power with : This is developed with collaboration,respect and relationship. This sort of power is refered as social power which looks all people as equivalent. This power can help in developing scaffolds within the gatherings. Power with prompts aggregate activity and the capacity to act together.

3. Power to : This alludes to the aggregate capability of power and the new possibility that can be made without utilizing connections of domincation. This is based on the interesting potentil of each person to shape their life and world. This offers power to make new and accomplish objectives.

Concerning running a partnership firm "power with" would cause a decent sort of power to follow. This would allowe to give shared regard amoung the accomplices and do the errand all the more proficiently.

With regards to private firms, the majority of the organizations accept and follow "power over" type. In private firms the dynamic responsibilty would be brought together and the individual would anticipate that individuals should underake requests and act in like manner. He will likewise go about as the sole leader in all parts of the business.

In this case study private sector is especially concentrating on the offered power to wipe out their hazard as given underneath:

Operational Power: As it is expressed in case study "To acknowledge huge dangers, the private sector would need to have significant degree of authority over activities". Here they are concentrating on getting progressively free on activity of different venture, They would no like to be a piece of Red tapism or Beaurocracy which diminishes their productivity to work in increasingly adaptable way.

They need full power over activity of different task under ppp consent to work in smooth way.

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