Oman puts hope in PPP

27 October 2015

Lack of funding for next five-year plan prompts turn to private sector

Oman is preparing a new five-year investment plan with low oil prices at the forefront of decision-makers’ minds.

In 2015, they reportedly set the budget using an average oil price of $75. The deficit overshot targets by some way, and spending controls have been implemented.

Muscat plans to run a smaller deficit in 2016 to avoid depleting reserve assets too rapidly.

The 2016 to 2020 five-year plan is expected to be conservative, with civil servants stating they have submitted less ambitious spending plans. But the government is worried that any drastic cuts will shock the economy into recession.

One solution is the use of public private partnerships (PPP), in sectors as diverse as wastewater and real estate.

Oman is hoping that private sector investment and finance will bridge its infrastructure funding gap over the next five years.

PPP frameworks and a new investment law are being prepared to facilitate this investment.

Despite previous successes in the utilities sector, it is not clear that Oman is ready to carry out multiple PPP projects, using a new, untested framework. Ministries are still unsure of which projects are suitable for private investment, whether the private sector will show an interest, and what the PPP model or models will look like.

Feasibility and risk allocations will inevitably be the subject of long negotiation with investors and financiers.

It may be a long road to bankable projects. In the meantime, the Omani government may have to continue carrying the burden of infrastructure and social investment.

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