In recent years, since the oil price slump, plans have emerged across the Gulf to curb fiscal deficits and diversify economies, most notably through the development of national infrastructure, highlights a new report by Oliver Wyman. Titled “How Public-Private Partnerships can support the Gulf’s Economic development,”the report highlights the significance of the private sector’s contribution to the emerging economies. Public-Private-Partnerships (PPPs) stand among the main levers being considered in the Gulf as a means to boost private sector contribution to the economy and to offload some of the financing burden from the government onto private investors.
Since the early 1990s, Gulf nations have been turning to the Public-Private-Partnership model to attract international investors, to energise the private sector and to develop local talent. These countries – through their national development programmes – aspire to attain world-class infrastructure within the next 15 to 20 years, in order to support the growth of their economies and populations.
Such programmes will aim to diversify the economies away from oil and gas whilst ensuring key sectors such as energy, transportation, health care and education, remain of world-class quality. According to the report, the establishment of the King Abdullah University of Science and Technology (KAUST) in Saudi Arabia and the construction of the Burj Khalifa in Dubai are both noteworthy examples of Public-Private-Partnership successes.
“Although PPP ventures have faced numerous challenges in the past, their increased adoption in the region is a positive signal given the current economic environment,” said Jeff Youssef, Partner, Financial Services, Oliver Wyman. “For these partnerships to flourish, a clear model that captures private and public sector objectives is required to ensure the smooth transition for successful PPP ventures. Initially, PPP projects should be aligned with national strategic objectives. Governments need to agree on which benefits to capture from partnering with private sector entities and define an operating model accordingly.”
Gulf countries have seen a string of PPP projects going live with regained private sector attention. However, benefits from such efforts may come with fundamental challenges if areas such as political consistency, legislation, regulation and communications are not addressed. The full report can be viewed here.