Dubai’s Roads & Transport Authority (RTA) is in the midst of planning its first public private partnership (PPP) scheme. The project is part of the emirate’s increasing shift towards private sector service provision.
Just a few years ago the idea was anathema in Dubai. Infrastructure was funded directly by the government or through short-term borrowing and many in the government remained sceptical of the PPP model.
As Dubai’s financial situation has worsened, partly because of the problems of funding long-term infrastructure projects with short-term debt, it has had to look to the private sector for help. Dubai Electricity & Water Authority (Dewa) is planning to use private operators to develop utility projects. The RTA is looking at several potential PPPs.
This will help avoid the assets and funding mismatch that is at the root of Dubai’s current financial problems. It may be too late to convince wounded investors still hurting from the restructuring at other government-owned firms.
Successful PPP projects require a strong government guarantee to give the private sector comfort that they are not shouldering all the risk. Dubai is currently incapable of giving investors that assurance.
Dewa is widely expected to need support from either the federal government or Abu Dhabi. This is despite it being considered one of the most creditworthy organisations in Dubai with stable revenues from utility bills.
The RTA is a different story. It is already behind on paying contractors and has no clear sister-organisation to act as a guarantor for it.
It also faces time constraints. It must purchase the water buses it has ordered in October. To get a PPP programme in place before the end
of the year would be a major achievement, let alone by October.
The water buses scheme is small enough to offer an interesting pilot programme, but Dubai may be too weighed down by government debt for it to be able to float.