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PPPs gain momentum in Mideast as low oil, Covid crisis bites

DUBAI, October 19, 2020

Installing world-class infrastructure and delivering effective public services are central to national agendas across the Middle East region, as governments strive to meet the needs of growing populations. 
 
Equally important is the need to increase the role of the private sector in driving growth and creating jobs, said a report by GlobalData.
 
"If executed properly, PPPs provide a model that will allow GCC governments to continue developing strategic national projects and services without the need to increase direct state capital spending," remarked Richard Thompson, the editorial director at GlobalData’s MEED.
 
"At the same time, a reliable flow of commercially attractive PPP projects will stimulate private investment and ensure that strategic performance targets to improve services and reduce waste are achieved," said Thompson.  
 
"However, despite these compelling selling points, PPPs have, so far, largely failed to gain traction in the region outside the electricity sector," he stated. 
 
According to him, there were many reasons for this, including lack of capacity, track record, and failure to provide bankable projects that are attractive to investors. But the biggest factor, he stated, had been a lack of political will to move to PPP. 
 
There has been no urgent need to hand over state assets to private developers, he added. 
 
Thompson pointed out that since 2015, weak oil prices have had a significant impact on the revenues of oil-producing countries, particularly those in the GCC. 
 
"In 2020, Covid-19 applied breaking strain to the regional economies, and traditional public spending trends are being reviewed and cut back," he said. 
 
Historically, governments have invested heavily in infrastructure projects and public assets such as hospitals, schools, transport and more. In the post-Covid-19 world, new forms of project finance is required, he added.
 
Thompson said governments across the Mena region are turning their focus to alternative project finance solutions, and PPP contracts are taking shape across the region, perhaps most notably schools projects in Saudi Arabia, healthcare in Kuwait, and water and power projects in Qatar.
 
"In early 2020, Abu Dhabi announced its intention to tender $2.7 billion in PPP projects to finance and operate new social, municipal and transportation assets," he revealed.
 
"For contractors, consultants and anyone else involved in the region’s construction and infrastructure industry, PPP is arguably the most exciting and lucrative source of new business opportunities around," he added.
 
Thompson said countries that do not already have PPP legislation in place are moving hastily to prepare frameworks, while those that do are drawing up significant pipelines of projects to take to the market. 
 
According to him, some schemes are being tendered even before legislation is put in place.
 
"It will not be easy though and the latest push towards PPP must avoid the pitfalls of the past to succeed. Selecting appropriate and bankable projects will be key, as will building up institutional capacity and developing a body of skilled civil servants," he added.-TradeArabia News Service



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