Lebanon appeals to private sector to meet $6.2B of infrastructure needs

Lebanon appeals to private sector to meet $6.2B of infrastructure needs
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Published November 12th, 2015 - 05:33 GMT via SyndiGate.info

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Lebanon has spent only 4 percent of its budget over twenty years on infrastructure projects, which has resulted in a deterioration of services. (File photo)
Lebanon has spent only 4 percent of its budget over twenty years on infrastructure projects, which has resulted in a deterioration of services. (File photo)

Lebanon will need $6.2 billion for the construction of infrastructure and this should be executed with help of the private sector, the secretary-general of the Higher Privatization Council said Wednesday.

“Lebanon needs $6.2 billion of infrastructure in the fields of electricity, water, transport and jails. But this should be done with the help of the private sector under the public-private-partnership program,” Ziad Hayek told participants in a workshop at Bassel Fleihan Institute.

He added that these projects would create a GDP growth of 4.4 percent and secure 216,000 jobs in the market.

The successive governments have all underlined the importance of PPP in their ministerial statements but not a single project was implemented with the help of the private sector.

Banks have offered in many occasions to finance the government infrastructure projects with special emphasis on electricity and water.

Some economists argue that the PPP program would also reduce the high cost of the infrastructure projects on the government, which is already facing great difficulties to finance major infrastructure projects.

Most of the government revenues are allocated to current expenditures such as salaries of civil servants and cover the cost of debt servicing.

Economists argue that major infrastructure projects in Lebanon would inject cash into the economy and create a bigger GDP growth.

One of the reasons behind the low GDP growth in Lebanon is due to the lack of infrastructure projects.

Hayek revealed that the state has spent only 4 percent of its budget over the last two decades on infrastructure projects, noting that electricity, health, education, transport and services have deteriorated as a result of this reality.

He added that the chronic budget deficit is not allowing the government to spend more on infrastructure.

Hayek estimated the value of the current infrastructure in Lebanon at $31.5 billion.

“The construction and development of infrastructure through the traditional means will only create jobs linked to the completion of these projects. But if the private sector helped in these projects, this would help in creating long-term jobs,” he explained.

Hayek added that the PPP program would implement projects without the need to wait for financing from the government.

“However, if the government wanted to finance infrastructure projects then this would cause a higher budget deficit or introduce new taxes,” he said.

Hayek believes that the private sector is capable of getting discounts from contractors and developers thanks to their wide connections.

He stressed that the private sector could complete the projects in a shorter period while the government may encounter cash flow problem from the treasury which would delay the delivery of the projects on time.

Hayek added that the private sector could offer innovative ideas as well as provide long-term maintenance of the projects it helps implement.

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