Public Private Partnerships across the GCC – taking stock

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Many long-term observers of the public private partnership (PPP) market in the GCC have developed a healthy degree of scepticism over the years. Too many false dawns have unsurprisingly led them to believe that the PPP model of procurement is one that simply won’t ever take off in this market - at least outside of the power and water sectors. The increased interest in PPP over the past 24 months is, in the minds of the sceptics, a short term blip that will be forgotten as soon as the oil price begins to climb or structural changes on the expenditure side allow regional governments to balance their budgets by other means.

Despite this, approaching the end of 2016, it appears that most if not all GCC governments are seeking to implement PPP procurements or have announced their intention to do so. The oil price remains stubbornly low and expectations of future rises have been dampened. There is also an increased awareness of the need for structural change in many of the local economies. Although many challenges remain before there is a healthy pipeline of PPP deals across the region – and we don’t expect many of the sceptics to have been converted – there is a real feeling that the stars have never been better aligned to allow that pipeline to develop. Of course, the GCC is not a single market and the situation varies markedly between the different countries. It is increasingly clear that each country will develop its own approach, including as to the legislative framework, implementing bodies and types of projects undertaken. Sponsors, funders, contractors and consultants need to be aware of these differences to ensure they are best placed to capitalise on the opportunities presented.

This paper takes a high-level look at each of the GCC counties, considers the progress they have made to date in developing a PPP market, and explores how they might progress in 2017. One of the challenges in addressing this topic is that there are many different understandings of what constitutes a PPP. Whilst a variety of different models is healthy, in this paper we are primarily referring to long-term contracts (typically 15 years or more) between a private partner and a government partner in which the private partner provides a public asset or service, including financing, design, construction, operation and maintenance, with the bulk of its remuneration being based on the availability or condition of the asset and/or the quality of the service over the operating period. This paper does not address the power (including renewables), water or natural resources markets in any detail, as these are generally progressing – very successfully – along a parallel track, often based on sector specific legislation.