Wed, 26 Jun 2019

2018 Dubai MENA PPP Forum: Key takeaways

The World Bank Group
12 Oct 2018, 02:49 GMT+10

Against a milieu of positively changing PPP enabling environments in the Middle East and North Africa (MENA), a public-private partnership (PPP) forum took place last month in Dubai. The forum focused on anchoring solid partnerships and unlocking the full potential of PPPs in delivering the national visions that will drive MENA's future economic growth.

My biggest takeaway is that the efforts to attract private sector developers and investors to participate in the PPPs in the region are serious and well underway. Attendance was robust, with 120 PPP practitioners and champions from the public and private sectors, including leaders of seven MENA government PPP Units, high-ranking ministerial representatives of many Gulf Cooperation Council states, bankers, investors, public servants, and consultants.

Preparation, procurement, and management of PPP projects was front and center. Unsolicited proposals were also discussed, and some felt there is merit considering them if PPP laws and guidelines are in place that address their implementation, as well as PPP units to serve as regulators when deciding if unsolicited proposals offer innovation and value for money.

Participants recognized that if countries' visionary development programs were to succeed, their evolving pipeline of PPPs must be secured by strong procurement practices, and that PPP laws and units will play an integral role in creating investment-friendly environments. Each MENA country has its own infrastructure priorities as outlined in the table below.

Unfortunately, civil unrest in MENA has created an unfavorable investment environment for PPPs in certain countries, particularly Syria where peace will have to prevail before post-conflict reconstruction PPPs can be considered.

Other Takeaways.

Agreeing on a clear definition of PPPs Attendees from Saudi Arabia said the terms privatization and PPPs are still used interchangeably, but in countries with a long history of implementing PPPs (i.e. Egypt, Jordan, and Kuwait) this confusion doesn't exist. The vast majority of attendees supported PPPs being defined as a partnership between the public and private sectors to provide services and works that do not embrace privatization of national assets and services.

The need for PPP laws and legal frameworks - Although many countries have enacted national PPP programs without legal frameworks, there was almost unanimous consensus that PPP laws and guidelines create an environment that protects both the public and private sector from legal jeopardy when projects are awarded and/or experience difficulties. Reference was made to the relatively new Dubai PPP law and efforts by Saudi Arabia to create a legal enabling environment. Speakers also pointed out that PPP laws should be relatively simple and focused on the essential elements of an enabling environment, rather than on cumbersome clauses that hinder the smooth implementation of PPPs and confuse investors.

The growth of PPP units - There are well-established PPP units across the region, including in Egypt, Jordan, Lebanon, and Kuwait. There are also PPP units either just established or in their infancy that include the Saudi Arabian National Center for Privatization and the PPP unit in Abu Dhabi formed by the Abu Dhabi Investment Fund. Most attendees agreed the role of PPP units should be that of regulators and enablers of PPP projects and the implementation of PPPs should rest with line ministries and agencies that initiate them.

Tapping into Islamic finance - Islamic Finance is alive and well. The biggest challenge is the lack of understanding of what financing PPPs through Sharia-compliant processes entails for Western investors. Also, there is not always a standard approach to adopting Islamic financing because Sharia scholars can have different opinions on how a financial package is structured. Blended financial packages are becoming more common, where mega PPP projects can include both Western and Islamic finance elements.

Long-term commitment to PPPs - Numerous attendees stressed that oil-rich Arab governments should have a long-term commitment to PPPs. Investors agree on this need, and that wavering on honoring existing and future PPP agreements if fossil fuel prices increase would be detrimental to investor confidence.

Growing PPP national pipelines - It is critical that governments develop a meaningful pipeline of feasible, bankable, and prioritized PPP projects to attract investor interest in their national programs to procure public works and social services. Because it takes time for private sector developers and investors to develop an interest in a country's program and mobilize resources, the more distinct a realistic national pipeline is, the more investor interest there will be. Investors are not sentimental and will easily invest in neighboring countries if offered more attractive opportunities and incentives.

Managing allocation of risk - A fundamental foundation of PPPs is the allocation of risk to parties that can best manage them. It will take a mindset change in MENA to move to a true partner-partner approach in order to have successful PPP programs.

Increasing interest in social service PPPs - A session was dedicated to social service PPPs (e.g., schools, hospitals, penitentiaries, etc.) - an area many participants felt has been neglected but will become a priority for many MENA countries in the near future. Attendees from Kuwait highlighted their interest in launching education PPPs, and Saudi Arabia expressed a deep interest in social service PPPs.

Much remains to be done. PPPs need to be better understood and governments need to build their capacity to implement PPP them. Happily, it did emerge at the forum that MENA governments are taking the need to create enabling environments seriously.

Disclaimer: The content of this blog does not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, staff or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.

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