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Failed Tunisian airport exposes major problems with public-private partnerships

Added 16 Dec 2019
· World Bank, EIB and other major donors continue to push failed PPP model in the MENA region, according to new report

Monday December 16 2019


A major public-private partnership (PPP) backed by the World Bank (WB), the European Investment Bank (EIB) and other public institutions has turned out to be a failure, according to a new report published today.

The Enfidha Airport - a multi-million dollar ‘user-pays’ concession project feted as a flagship PPP by the World Bank - led to lengthy and costly renegotiations and potential legal action.

It was the first major infrastructure project or ‘megaproject’ carried out under a PPP in Tunisia and perfectly illustrates why Tunisia is not ready for risky and expensive PPPs.

The new report, titled Failure to Fly - Challenges and lessons learned from public-private partnerships in Tunisia - looks at the country’s experience of PPPs over recent decades and considers the legal framework and national regulations governing PPPs. It shows that despite the experience with the Enfidha Airport, the WB and other donors do not appear to have learned lessons from the case and went on to back reforms to the legal framework that encourage PPPs.

The report is authored by Jihen Chandoul from the Tunisian Observatory of Economy (OTE) and Cecilia Gondard from the European Network on Debt and Development (Eurodad).

Cecilia Gondard said: “Major institutions – and the World Bank in particular – have been pushing PPPs to deliver infrastructure in the Middle East and North Africa region for many years. However, PPPs serve investors’ interests and place too much risk on the public purse.”

EUR 505 million (US$ 560 million) was put into the Enfidha Airport project by the International Finance Corporation (IFC) – the World Bank Group’s private sector lending arm – and other international donors. In addition, TAV Tunisia – the private company chosen to operate the airport – received a EUR 11 million (US$ 12.1 million) subsidy from the Tunisian State.

The report found that:

  • The selection of TAV Tunisia was not transparent and its bid was questionable from the start. Local communities were not consulted, and contract documents and bidding documents have never been released.
  • The Enfidha airport was not considered profitable by the public authorities in the first place, but it was hoped that the revenue of the existing Monastir Airport would cancel out any losses at Enfidha.
  • The concession fees offered by TAV to the Tunisian state were higher than the other bids, but at the same time the estimation of the traffic that the airport would generate were not realistic or feasible, with or without the crises that subsequently hit the country.
TAV Tunisia began lengthy and costly renegotiations with the Tunisian government in 2010 to review the concession fee due to be paid by the company. TAV then stopped paying fees. Threatened with costly investor-state dispute settlement (ISDS) procedures, Tunisia is in negotiations with TAV airports to find an agreement. The payment of fees has been suspended since 2010.

The report makes a series of recommendations including fresh reform of the country’s legal framework; a warning to take the utmost caution in the implementation of PPPs; and it calls for an end to the aggressive promotion and incentivising of PPPs by the World Bank and other donors in the region.

Jihen Chandoul said: “Our analysis shows that international institutions have exerted undue influence over the domestic regulatory framework in Tunisia. Changes made in 2019 are a missed opportunity to reform the legal framework in the public interest and learn from the failure of the Enfidha airport. In order to make sure that the regulatory framework is fit for purpose, it should restrict PPPs to very specific cases; the role of the national parliament and civil society needs to be strengthened; there needs to be greater transparency and oversight of PPP contracts; and strengthened administration capacities to negotiate, manage and monitor contracts to make sure that projects are operating in the best interests of the people they are supposed to serve.”

A new airport is in the pipeline of projects within the Ministry of Transport. Feasibility studies are currently underway for Airport City, which would replace Tunis-Carthage airport. Other options are also under consideration, including renovating the actual Tunisian airport.

The national authorities should make sure they put in place safeguards to prevent the catastrophic failure of another major PPP project and ensure these megaprojects fit with a national development plan.

ENDS

Media contacts:

Ismail El Hamad, Communications Manager at OTE: Ismail.elhamad@economie-tunisie.org / +21658558622/+21620186183

Julia Ravenscroft, Communications Manager at Eurodad : jravenscroft@eurodad.org/ +32 486356814

NOTES TO EDITORS:

· Public Private Partnerships (PPPs) are increasingly being promoted as the solution to the shortfall in financing needed to achieve the Sustainable Development Goals (SDGs). With ever greater frequency, PPPs are being used to deliver economic infrastructure, such as railways, roads, airports and ports, as well as key services such as health, education, water and electricity in both the global north and the global south.

· US$ 560 million of financing was put into the Enfidha Airport by the IFC – the private sector arm of the World Bank - and the African Development Bank (AfDB); the European Investment Bank (EIB); French development finance institution, Proparco; the OPEC Fund for International Development.

· Tunisia was the first country in the region to implement PPPs through “user pays” concession laws, and now PPPs are high on the national political agenda. The five-year Tunisian development plan, launched in 2016, included energy, water, and waste management and agriculture projects to be financed through PPPs.