Middle Eastern nations warm up to PPP model to accelerate development projects

Saudi Arabia to set up 20,000 hospital beds and 224 health centres across the Kingdom in line with its Vision 2030 and the projects are worth SR48 (Dh46.99) billion

Middle Eastern countries could utilise public-private partnership (PPP) model to execute large scale infrastructure projects that will reduce the financial burden on the governments to fund these projects, where the private sector brings in the financial and technical resources, according to officials at the 2nd Public-Private Partnership (PPP) Mena conference, which is being held in Dubai on Wednesday and Thursday.

Governments of the Middle Eastern countries are increasingly relying on private capital and private sector resources to build and expand physical infrastructure such as roads, highways, bridges, utility, energy, power, civil aviation and telecom sectors. Across the Middle East and the North Africa (Mena) region, PPP pipelines are either in full flow, or are primed to admit a slew of new projects under a climate of increasing cooperation between the public and private sectors.

According to a World Bank report, countries in the Mena region need to invest $100 (367) billion per annum in a bid to expand their oil-dependent economies.

The total value of infrastructure and construction projects in the six-nation Gulf Cooperation Council (GCC) region had risen to $3.2 trillion (Dh11.74 trillion) in mid-2021, according to the report, of which a large chunk is expected to be executed through the PPP route. This has created a massive opportunity for big players.

Worldwide infrastructure spending is expected to grow to $9 (Dh33.06) trillion in 2025, according to a forecast by global accounting firm PricewaterhouseCoopers (PwC).

Government officials, business leaders and experts will discuss these economic opportunities at the two-day PPP Mena Forum that opened at Movenpick Grand Al Bustan, Dubai, on Wednesday and will conclude on Thursday.

More than 300 government officials, project owners, experts, business leaders, regulatory officials are expected to underline the key issues in the development sector.

Boost for job creation

Emphasising on the social and sustainable public-private partnership, Nasser Massoud, chairman of the 2nd Mena PPP Conference and specialist in social sector PPP, said: “For every $1 (Dh3.67) billion spent in projects, 168,000 jobs are created. This leads to a 0.48 per cent growth in gross domestic product (GDP), and can create 442,000 jobs indirectly.

“According to the World Bank, Mena countries have been spending less than three per cent of their GDP on public projects. This needs to be increased to 8.2 per cent of the GDP by 2030 in a bid to accelerate economic growth.”

As of last June, the total GCC construction project market was estimated to be worth $3.2 (Dh11.75) trillion, covering buildings, infrastructure, and industrial, along with the power and water, and oil and gas sectors.

The PPP Mena Forum will show the PPP model could help the large funding gap in the massive infrastructure development being undertaken by the governments of the Middle Eastern countries.

“Given the challenges that governments in the region are operating under, it is clear that governments will seek private sector support in infrastructure projects delivery and look to attract private sector participation and funding to reduce the burden on the already stretched public finances. PPPs will play a critical role in the region’s post-Covid-19 recovery phase,” said a report by PwC.

“Although, most countries in the GCC have placed the provision of modern infrastructure and world-class public services at the heart of their respective national visions, our survey, reveals that the region is finding it challenging to implement infrastructure projects efficiently and that increased market volatility, oil price volatility and the economic cost of Covid-19 are putting a strain on government resources across the region,” it added.

The forum is tackling timelines and requirements of current and future multibillion-dollar PPP project pipelines from across the region and PPP legislation plans.

Saudi Vision 2030

The Saudi healthcare sector currently offers SR48 (Dh46.99) billion worth of projects that will create 224 primary healthcare centres and add more than 20,000 hospital beds across the Kingdom by 2030 in line with its Vision 2030.

At the inauguration of the 2nd PPP Mena Forum, Dr Ibrahim Al Omar, deputy assistant minister for investment development, compliance and director-general of Private Sector Participation Programme, Ministry of Health, Kingdom of Saudi Arabia (KSA), said: “We’re undergoing a huge transform as part of the Vision 2030 and healthcare and wellbeing of our people are at the core of the development.”

“Our primary objective is to ease access to healthcare services, improve the value of the healthcare services, strengthen precaution against healthcare threats. So, we have created a strong regulatory environment,” he said.

“Now, we’re shifting towards investment and execution of projects that are at various stages of planning, tendering and construction. We’re developing a large number of hospitals, clinics and healthcare centres across the country that will increase the wellbeing of the people,” he added.

Altogether, 242 public-private partnership projects worth $223 billion (Dh818 billion) are under development in the Mena region, according to recent reports, which is set to go up as project execution picks up with return to normalcy and higher oil price that will fuel economic growth in the Middle East and will also push the PPP sector.

The PPP projects are in sync with a World Bank projection estimating that the Mena region would need between $75 (Dh275.48) and $100 (Dh367) billion of investment per year over the next 20 years to meet its needs.

PPP holds the key

Leila Masinaei, managing partner, Great Mind Events Management and organiser of the 2nd PPP Mena Forum, said the region is growing rapidly and all the governments in this region are trying to work together to make it the centre of all the businesses.

“Most Middle Eastern countries have updated their PPP legislations that give a lot of clarity to the private sector as well as foreign investors willing to participate in the public projects,” she said.

“The discussions, which will come out of this edition of the PPP MENA Forum, will act to crystalise the activities and help to regain the momentum after the Covid-19 pandemic,” she added.

“PPP development is still slow in Africa as a whole – in 2019, the continent only accounted for $7 billion of the $97 billion of private investment commitments made across the world’s low and middle-income countries,” according to research by PPP Mena Forum.

At the forum, a distinguished expert panel of speakers will include all the key stakeholders from government entities, PPP units, developers, operators, investors, contractors and financial institutions to discuss pressing challenges facing the sector and exchange ideas on how PPP projects can be fast tracked, best practices for managing contractual issues and innovative funding models for upcoming PPPs.

The panel discussions include, restructuring PPPs in the age of Covid-19, the future of PPPs in healthcare, the future of PPPs in healthcare, managing the fiscal risks of PPPs in a long-term contract, a force for good — enhancing social impact through public private partnerships, and Power, utilities and waste-to-energy — building a sustainable future in the power industry.

The forum will also include presentations and country briefing sessions by officials.

— joydeep@khaleejtimes.com