Future for Middle East PPPs cast into doubt

17 May 2011

The public-private partnership sector desperately needs some successful deals in the region

In mid-May, Abu Dhabi managed to complete the financing of its Shuweihat 3 independent water and power project (IWPP). It was a rare bright spot in an otherwise largely barren project finance landscape.

Just a few weeks earlier, Abu Dhabi had decided not to develop the Mafraq-Ghweifat road project through a private sector partnership deal.

“People are … sceptical that the region’s ambitious PPP plans will be seen through to completion”

The contrasting fate of these two projects illustrates the dichotomy of private involvement in the Middle East projects sector. Whereas power projects have generally been successful and attracted a great deal of competitive appetite from international firms, projects in other sectors have a much poorer track record.

The Saudi Landbridge scheme, originally envisaged as a public-private partnership (PPP) was dropped because it was considered too big for the private sector. A car parks PPP in Abu Dhabi is struggling with risk allocation. Meanwhile, Egypt’s PPPs are effectively on hold due to the political crisis.

To reassure the private sector that the region is serious about its PPP plans, governments desperately need to start getting a few deals done. That will prove that the legal infrastructure is there, as well as the private finance.

Unfortunately, the pipeline is now fairly weak. Saudi Arabia may successfully complete the Medina airport transaction, but how much confidence the rest of the region gets from that will be limited.

Already analysts are starting to become sceptical that the region’s ambitious PPP plans will be seen through to completion. Instead, they expect that only a few projects will be done and others will go through similar experiences like the Mafraq-Ghweifat road scheme. As of now, the PPP sector in the region is not dead. But its future does not look entirely healthy.

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