GCC should look at PPP model for future infrastructure spending

Adopting the public-private partnership (PPP) model for future infrastructure spending would mean GCC governments can save valuable public finances during the current challenging period, according to accountancy and finance body ICAEW.

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It would also enable them to attract more foreign investment, create jobs and encourage the transfer of skills to the public sector. This was the consensus during ICAEW’s Corporate Finance Faculty roundtable in Dubai about PPP prospects in the region. Panelists agreed there is a lack of understanding about the PPP concept in the region, which is largely considered to be purely a financial tool.

Speakers explained that GCC governments have to appreciate the PPP model is a long-term partnership that brings to the public sector a number of benefits, including the transfer of expertise, innovation and efficiency from the private sector. It also transfers many risks that typically have been borne solely by the public sector, to the private sector.

Public Procurement Law required

Panelists advised that in order to facilitate collaboration between the public and private sectors, there is a need for a good ‘Public Procurement Law’ which is transparent and sets out the processes to be followed for all forms of public procurement.

Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia (MEASA), said: “Using PPPs to develop infrastructure means governments have the opportunity to shift large upfront capital spending off their near-term financing commitments. However, PPP has to be structured in the right way from the outset.”

He added: “There needs to be an approach by both government and  private sector providers that looks carefully at how the deals can be structured in the most effective and efficient manner. Because it is a partnership, it must be attractive and beneficial not only for the government, but also for those investing their personal funds.”

Speakers agreed the most important lesson learned in other jurisdictions that can be applied in the GCC is each PPP structure should be tailored to serve the project. Parties need to be patient in order to get the structure right and must not rush PPPs.

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