All the stakeholders in a public-private partnership (PPP) programme should ideally win from the efficiencies fostered by the programme.

Funding risks are apportioned between the government and the private sector, significant costs savings are achieved through efficient procurement and contracts management, quality is monitored from design to operations optimising reliability of infrastructure projects, and potential costs and risks throughout the life cycle of the infrastructure are properly appraised and managed.

In addition to the fiscal savings for the government, the private sector could also bring their technology, expertise and experience to benefit the projects.

However, actual PPP projects have yielded mixed results and there have been as much failures as success, if not more.

The Washington-based International Monetary Fund (IMF) has warned that PPP projects in countries that are motivated solely by the need to circumvent budgetary constraints rather than efficiency tend to not live up to their promise. “This has led some governments to proceed with low quality and fiscally costly projects that would otherwise have been excluded from their public investment plans,” the IMF cautioned.

The risks of a PPP project failing, points IMF, arise from poor contract designs, over-optimistic assumptions on revenues based on user fees, as well as minimum income guarantees provided by the government.  

It is clear that some GCC governments’ renewed interest in PPPs is motivated primarily by fiscal concerns. Doing so seems to guarantee a negative outcome if one goes by IMF’s observation.  

However, an awareness of this weakness can produce a positive outcome by allowing the concerned government entities to undertake a higher level of due diligence along with the most trusted advisors. This could then lead to the adoption of watertight regulatory frameworks and oversight committees to maximise the likelihood of fostering efficiencies and strong commitment from all PPP participants.

They can then select the most suitable PPP variants – build-operate-transfer, build-operate-own, or build-lease-transfer - that suit their risks appetite, regulatory environment and culture.

Finally, one could bet on the strong appetite displayed for many years by aspiring participants – from lenders, equity investors, consultants, legal advisors, developers and contractors - to garner a share of public infrastructure projects in the region to conclude that they are as desperate as the public sector in getting the best out of the pending PPP boom in the region.