The updated Proclamation introduces key adjustments to enhance the efficiency, transparency, and strategic implementation of PPP projects.
1. New Definition of “Direct Negotiation”
A crucial new definition has been added as Sub-Article 2(19) to Article 2, specifically defining “Direct Negotiation.” This term now refers to a method where a private party or parties are selected through direct discussions to undertake the development and implementation of infrastructure or public service projects. Such projects can originate from the private party itself, the contracting public authority, or the Public Private Partnership Directorate General, and importantly, they are not based on a competitive bidding process.
2. Expanded Scope of PPP Business Activities
To broaden the application of PPPs, a new paragraph (c) has been added to Sub-Article (2) of Article 4. This expansion includes within the scope of PPP business activities those conducted by a joint venture or a company established jointly by a public enterprise and a private party, a Foreign Government, or a public enterprise of a Foreign Government. This allows for more diverse partnership structures.
3. Revised Public Private Partnership Board Membership
Article 8(1), which previously listed the members of the Public Private Partnership Board, has been entirely replaced to update its composition. The revised Board now includes representatives from key governmental bodies and the private sector:
- Ministry of Finance
- National Bank of Ethiopia
- Ministry of Planning and Development
- Ministry of Water and Energy
- Ministry of Peace
- Ministry of Transport and Logistics
- Ministry of Urban Infrastructure
- Two board members specifically appointed by the Ministry from the Private Sector
4. Framework for Direct Negotiation Project Implementation
New Sub-Articles (3), (4), and (5) have been added to Article 8, providing a detailed framework for how projects implemented through direct negotiation are to be managed.
- Board’s Discretion for Direct Negotiation: The PPP Board now has the discretion to permit the implementation of a project proposal through direct negotiations if it determines that such a method would genuinely benefit the public interest and ensure quick financing. This applies particularly to understandings reached through Bilateral Government Economic Cooperation and Diplomacy, or when a project is directly initiated by a private party.
- Consistency with National Plans: Any project proposal submitted to the Board for consideration under direct negotiation must be consistent with the overall national development plan and strategy of the country, ensuring alignment with broader government objectives.
- Minimum Requirements for Private Parties in Direct Negotiation: Private parties or consortiums proposing a PPP project through direct negotiation must now meet specific minimum requirements.
- For foreign investors, this includes providing a certificate of incorporation from their country of residence and a document certifying government support for their participation in the project.
- Local private partners must demonstrate robust financial capacity, relevant technical skill, and a reputable image to successfully implement the project.
- The private party must exhibit a strong financial status sufficient to implement the project.
- They must possess the necessary technical capacity and experience, demonstrated by a track record of developing and managing two or more projects or providing services in the relevant area.
- The proposed project itself must be designed to actively promote domestic investor participation, encourage the use of domestically produced goods and services, and facilitate the creation of job opportunities for Ethiopian Nationals.
- To ensure integrity, the private party, its chief executive officer, directors, or any shareholders holding more than five percent capital share must have a clean criminal offense record for the five years preceding the Board’s decision.
- The private party must also provide clear evidence of secured financing from lenders for the loan portion of the project’s total cost.
- The Ministry may also prescribe additional detailed requirements through a Directive to further elaborate on these conditions.
5. Detailed Process for Direct Negotiation Project Proposals (New Article 40, Sub-Article 7)
A new Sub-Article (7) has been added to Article 40, establishing a comprehensive and structured process for handling project proposals that are intended to be implemented via direct negotiation.
- Initial Evaluation: The process begins with an initial evaluation by the Contracting Authority and the Ministry to determine if the project holds special significance.
- Feasibility Study Directive: If deemed particularly beneficial, the Ministry will then direct a detailed pre-feasibility study and the preparation of the private party’s technical, financial, and legal profile. This is conducted jointly by the Public Private Partnership Directorate General and the Contracting Authority.
- Board Reporting: The Ministry evaluates these studies and reports the results to the PPP Board.
- Board’s Endorsement: The Board may then endorse, revise, or reject the project proposal. It is important to note that an endorsement does not constitute final acceptance or a project award.
- Detailed Feasibility Study: If approved by the Board for direct negotiation, the project proposal is referred to the Ministry for a more detailed feasibility study. The Directorate General oversees and reviews this study conducted by the Contracting Authority.
- Draft Agreement Preparation: Upon the Board’s approval of the detailed feasibility study report, a draft project agreement is prepared for negotiation.
- Negotiation Ground Rules: Before commencing negotiations, all parties must agree on a timeframe for discussions and establish a clear code of ethics to guide the process.
- Joint Negotiation: The Directorate General and the Contracting Authority jointly conduct the negotiation process.
- Board Approval of Negotiation Results: Upon successful completion of negotiations, the results, along with the acceptance of the private party for project implementation, are reported to the Board for its final approval.
- Applicability of Existing Provisions: Specific provisions of the original Proclamation (Article 34 and Articles 44 to 68) will apply to the subsequent contract signing and implementation process.
These amendments, which became effective on 3 February 2023, represent a clear shift towards a more structured and regulated approach to direct negotiations within Ethiopia’s PPP framework. The aim is to carefully balance the public interest with the benefits of private sector participation, ensuring that such partnerships contribute effectively to national development goals.