Service contracts .. Strategic option for the advancement of Iraqi infrastructure

30/7/2018 12:00 am

Yacoub Younis *
Service contracts represent the strategic option for the advancement of Iraqi infrastructure. Infrastructure means the service structures necessary to operate the economy, sustain and improve the conditions of community life ... Thus, it includes the basic facilities and services that provide the services required by the community,
- Power generation, transmission and distribution plants
- Means of communication, internet and mail
- Transportation means such as airports, roads, railways and tunnels
- Health institutions such as medical centers and hospitals
- Fresh water and sewage plants
- Waste disposal projects
- Housing projects
- Culture and Education Projects


General assessment of infrastructure projects in Iraq
A general overview of the level of performance of infrastructure projects in Iraq, it can be said (without access to the world of numbers and comparisons) that there is a large deficiency in keeping up with the infrastructure projects of the requirements of the community and the general services provided
- Shortage of the streets to accommodate the increase in the preparation of modes of transport
- The inability of schools to absorb the increase in the number of students
- The lack of housing units to absorb the increase in the number of families
- The lack of hospitals in providing necessary treatment for citizens
The reasons for this deficit lie in the limited development of infrastructure projects (and their decrease due to destruction incidents) compared to the increase in the population as follows:


population
According to the National Development Plan 2010-2014
Year Number
1965 8
Name 12
1987 3,16
1997 22
2003
2008 30.5
According to the National Development Plan 2013-2017
2009 31.6
2011 33.3
2012 34.2
2013 35.1
2017 38.3


 The population increased from 26 million in 2003 to 38.3 million in 2017, which represents an increase of about 50 percent in 15 years with an annual increase of 3 percent ... It is expected that the population of Iraq in 2025 to approximately 50 million people according to He obeys the plan.
The big question:
What is the rate of development in the infrastructure projects that faced the population increase?
The answer
The lack of tangible progress in any of the services provided, but on the contrary there has been a clear decline in some of them.


Reasons for inadequate infrastructure projects
For many years now, Iraq has been suffering from the lack of infrastructure projects to cover the needs of the citizen has been exacerbated this phenomenon by a large proportion since 1991 and as follows:
1. The first period: the period between 1991 and 2003
A - Due to the military operations against Iraq in 1991 that led to the destruction of many
Of infrastructure projects.
B. Impose the embargo on Iraq and stop the export of its oil, which is the main supplier in financing
Its various projects including infrastructure.


2. The second period: the period between 2003 and 2017
(A) because of military operations;
B - fluctuation of the resources of the state on which the investment budget depends on the state, especially those
Conflicting the whole world (the global economic crisis - in 2008)
C - fluctuation of oil prices up and down, which was to postpone the implementation of several projects, including infrastructure projects.
D - not to give priority infrastructure projects on the list of state investment projects making them vulnerable
For adjustment and write-off as budget allocations are subject to reduction.
E - corruption in the management of public funds
And (d) the destruction caused by existing projects which rendered them incapable of providing services
It was completed and this destruction contributed to the expansion of the infra-structure of the infrastructure projects
Cover the needs of the community.
The implementation of construction projects is affected by several factors, foremost of which is the cash surplus of the general budget after covering the current budget requirements, most of which are priority items (especially salaries) ... The more allocations these items, the less the balance can be allocated to investment projects, including infrastructure projects
In light of this painful reality and lack of infrastructure projects ... It is very difficult to keep pace with the current funding formula adopted by the State in covering the existing deficit on the one hand and cover the needs of newborns on the other hand and must resort to new formulas and methods to eliminate the gap gradually And evaluate the march of infrastructure projects to be the level and size required.



Options for upgrading infrastructure:
 Application of service contracts
In view of the circumstances that Iraq is going through for years and the economic indicators for the coming years about oil prices and the reforms and programs that the state intends to carry out to improve the economic performance can not achieve significant development within a concrete time frame acceptable due to the significant deficiencies in all the axes of infrastructure and limited annual allocations that are supposed to create The balance between the items of current and investment spending because most of them suffer from a reduction in the allocation and demand an increase, foremost of which is the salary item
And wages.
In this case, it is necessary to resort to unconventional methods and formulas in accordance with the Iraqi reality ... under which we propose the adoption of the BOT (Purchase, Operation and Transfer) contracts with the participation of the public and private sectors (PPP)
Service contracts (sometimes referred to as franchising contracts) are contracts concluded between the State and one person or companies from the private sector to undertake the construction or rehabilitation of a project of infrastructure at its expense and manage it for a specified period under certain conditions and under the supervision and control of the State.
 After completion of construction and construction of the project, the contracting company will manage, invest, operate and maintain it during the concession period and collect revenues from service provision to the public to cover operating and maintenance costs, pay financing obligations, repayment of loans and interest and residual income represents the company's profit ... After the concession period, And the operation of the project to the first party (the government) free of charge.
The importance of this system lies in providing the private sector with the opportunity to participate in the financing and implementation of public utilities (especially infrastructure projects) instead of depleting the resources available to the state, allowing the state to direct these resources to strategic sectors that may not be impeded or impeded by the private sector. To increase the employment and operational capacity of the national economy and as a result reduce the pressures of unemployment and borrowing ... Because the projects that can be implemented through this system are different because of different types and size and ways to invest in them, has been developed new implementation formulas that fit with this diversity and difference Contracts with similar names appeared in accordance with the formula of the agreement
 Example
Build - Operate - Transfer Ownership.
Build - lease - Transfer.
ROT Rehabilitation - Operate - Transfer.


Advantages of the service contract system
- Creating new jobs
- Reducing the burden on the public budget, where the private sector bears the burden of financing the project and the risks of its operation.
- Supporting the private sector by providing them with opportunities to build infrastructure projects and benefit from their profits.
- Assistance in the transfer of technology and new technical knowledge.
- Ownership of the project shall be transferred to the State after the end of the concession period and free of charge and according to the agreement.
- contributes to the efficiency of the operation of public utilities through the acquisition of technical expertise.




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