As countries in the GCC region continue to drive economic diversification plans and fast-track growth in several areas, the role of Public-Private Partnerships (PPPs) is becoming more powerful and ever-more attractive. PPPs provide one of the best opportunities to leverage private sector capability and capital toward driving critical infrastructure projects and public services. All GCC states have now put regulatory and institutional frameworks in place, designed to enable and increase their uptake.
The commitment to PPPs across the region reflects forward-thinking in its approach to economic development through collaboration between public institutions and private firms to deliver resources, innovation, and efficiencies that will propel the nation toward its strategic goals. The model enables some of the large-scale projects that might otherwise put a big strain on public budgets by leveraging the established, vibrant, and competitive private sector.
Benefits of PPPs
The benefits of increasing the share of the private sector in public investments are many. First, there is the fact that PPPs attract investments that allow the public sector to spread the costs of major infrastructure development over time. It is this degree of financial flexibility that defines the modern ethos and allows for ambitious projects without fiscal stability being jeopardized. In addition, as governments are leveraging the expertise and best practices of the private sector, better operational efficiency can be achieved. This, combined with new ideas and global best practices, can be applied to make GCC infrastructure future-proofed and more resilient.
Furthermore, PPPs can further support the local economy by creating new jobs, developing new capabilities, as well as creating demand for local goods and services, positively impacting economic and social development.
Several sectors would benefit greatly from PPPs. The transportation infrastructure, including airports, seaports, railways, and road networks, is essential to future development and growth. The energy sector, specifically renewable energy projects, will also require significant capital to fuel their creation and adoption. And the social infrastructure core pillars of healthcare and education are ripe for strategic private partnerships to drive transformation. However, this isn’t to say PPPs are limited to the sectors that historically benefited from them and are leveraged broadly where it makes sense across sectors.
The importance of establishing a PPP framework and operating model
A robust long-term PPP framework will have profound implications for the GCC’s infrastructure and strategic projects. We will witness a rapid acceleration in the development of smart cities, cutting-edge transport, and sustainable energy solutions. These changes will further enhance citizens’ quality of life and enable the region to enhance its competitiveness as a global hub for business and innovation. More importantly, knowledge transfer and capacity building through such collaborations will contribute to long-term resilience and the maturation of the economy.
Proactive and collaborative stakeholders across the board will leverage the benefits of this new dynamic. The government’s role will be to maintain a transparent and stable regulatory environment that attracts private investment while protecting public interest. Private sector participants, in turn, have a commitment to making long-term value-creating ventures with objectives in line with national development aspirations. Local businesses should seize that opportunity to build their capacity and enhance their competitiveness in order to be key players in future PPP projects.
Having a clear operating model, rather than just regulation, is crucial for the success of a PPP agenda. Given the complexity of these contracts—often long-term, spanning over 30 years, and requiring alignment across multiple stakeholders and capabilities—investors will likely only engage if these rules are clearly defined and unified to mitigate risks.
Moreover, countries in the GCC have recognized this need and are actively establishing robust PPP ecosystems. For instance, the UAE has recently introduced a PPP manual at the federal level, which is a key enabler for driving the country’s ambitious agenda.
Read more: UAE introduces new framework to boost public-private partnership projects
Challenges
Implementation of the PPPs does not come without challenges. Strong monitoring and evaluation mechanisms are important to ensure partners create value for the UAE and for the PPP project in general.
Clear framework requirements in local content regulation will be key, but they should still remain flexible enough to adjust to the particular needs of individual projects. It is also precisely this flexibility that will enable us to balance the long-term transformation objectives — increased GDP and job creation — with successful and timely implementation of concrete projects. In this respect, moving forward, the fulfillment of PPP projects will depend upon effective coordination among all players.
As we embrace this new frontier in public-private collaboration, we must also recognize that PPPs will only flourish through the capacity to develop local talent and skills. Furthermore, Curricula in all learning institutions and vocational training centers should be oriented toward the skills required in such major projects. This will not only guarantee that the local workforce is sufficiently prepared to make relevant contributions to PPP endeavors but also further maximize localization gains.
Ultimately, the true value of these partnerships lies in the realization of the benefits for the region’s economy and society as a whole. Additionally, by focusing on sustainable development and long-term value creation, the PPP benefits can extend long past the cycle of single projects and into the future of a prosperous and thriving nation.
Chiara Riffaldi is partner, strategic operations; Javier Carinena, principal, energy and process industries; and Pierre Sahakian, principal, governmental and economic development at Kearney Middle East & Africa.
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