With new, untested regulations, giving investors clarity and security will be essential
Kuwait, Egypt, Oman and Dubai have made significant strides towards using public private partnership (PPP) in 2015, and although early progress has been made, each country faces different challenges when it comes to delivering their planned projects successfully.
Banking sector liquidity is falling in Dubai and Oman and that will make financing projects more expensive. Kuwait will struggle to shake off previous delays and reversals in its PPP programme. Egypt has not resolved its burning issues around currency convertability.
But the primary challenge across all countries is structuring bankable projects. As PPP moves away from the utilities sector, inputs, outputs and risk becomes more complex.
Banks are looking for clarity, security, and above all, government guarantees.
Kuwait has made encouraging progress with its 2014 reforms, and Dubai has made a start with a 2015 law, although the executive regulations are still a work in progress. But both sets of regulations are untested, and only Egypt has awarded a project under current laws.
The ideal regulatory framework is clear but gives enough flexibility to structure individual projects across different sectors attractively.
Oman is at a much earlier stage, although PPP projects could go ahead under current laws. A new framework is currently under discussion in Muscat, and much depends on its eventual form.
Oman is also throwing PPP at a plethora of projects to see what will stick, across transport, health, housing and wastewater, to name but a few sectors. The sultanate has been the GCC country most committed to PPP in its utilities sector, and has had a string of successes.
But Muscat needs to consider carefully which projects outside utilities are suitable for private sector development, and how best to structure them before coming to market. Otherwise the result could be long delays and a policy retreat.
PPP schemes have foundered in the region before and could easily do so again.
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