Fouad Lahgazi, Senior Partner, KPMG, on new legislation governing public-private partnerships (PPPs)

Fouad Lahgazi, Senior Partner, KPMG

Historically, Moroccan authorities have called upon the private sector to partner on initiatives that are under the jurisdiction of the state and the local authorities. This has been an established practice for decades in public utilities such as water and electricity. Starting in the 1980s, the role of the private sector has grown substantially and has come to include a number of new areas including the collection of waste, management of sewage, urban transport, water and electricity supplies, port operations and energy generation.

Currently, most contracts between the government and private partners are typically concessions or delegated management. However, a real need has emerged for the development of new legislation to prevent problems encountered completing the contracted work, especially given the proliferation of such contracts.

Therefore, a draft law regarding PPPs was proposed by the Ministry of Economy and Finance. This law is to guarantee important principles such as ensuring equal opportunities in tender procedures for all contractors, equality of treatment and of competition, transparency and respect for the rules of good governance.

Governance in relation to PPPs is the process by which the different interests of public and private actors are maximised. The draft law provides guidance on good governance in the form of information on the equitable sharing of risks, responsibilities and gains; the description and monitoring of the implementation objectives of the PPP; the auditing of the preconditions and modalities of preparation; allocation and execution of the contract; and finally the clarification of all the contractual terms between the two parties.

The new legislation also establishes new procedures for the management of public procurement, especially through the pre-assessment of all proposed projects and a competitive dialogue for the set-up of complex projects. The new law also helps to reassure private investors about PPP contracts. Those contracts are now more transparent and more respectful of the contractual clauses with built-in recourse to arbitration.

The benefits of the draft law, once adopted, may be huge; however, it is important to acknowledge that PPPs are not a magic bullet for everything.

First, the proposed text needs to be supplemented by implementing regulations. The modes for awarding PPP contracts are very important to ensure effective implementation of the law in spirit and content. These modes should be defined in a very precise manner in order to avoid any challenges to the process. The desire to involve Moroccan companies in public initiatives, including through subcontracting, should be confirmed in the law or in the implementing regulations.

In the end, the law provides for the structure of PPP contracts. Capitalising on the Moroccan experience, complemented by international expertise where appropriate, helps to better serve the interests of the kingdom. In addition to achieving greater efficiency and effectiveness, the state should ensure that contractors have access to a robust pre-assessment methodology to maximise the chances of success on a given project. Indeed, training should be provided to instruct public sector officials so they are properly prepared for the decision-making and management that PPPs involve.

Finally, it is important to discuss the cost issues in relation to PPPs. Choosing to pursue a PPP is driven by the need for the state and local authorities to reduce their expenditures and to enable them to better afford to finance major projects. It will facilitate the need to achieve balanced budgets. However, the application of PPPs also needs to be justifiable by criteria other than budgetary concerns. For instance, the use of PPPs must also be accompanied by great vigilance to avoid any overpricing of products and services generated.

Performance criteria should be established to help promote Morocco as a competitive country. This is why it is important that PPPs avoid unnecessarily increasing the cost of living for the population. Nevertheless, funding, costs of project implementation and operations must be competitive and attractive. These are the essential components of the proposed draft law.

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Fouad Lahgazi

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The Report: Morocco 2013

Tax chapter from The Report: Morocco 2013

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