The Rising Trend Of Public Private Partnerships In The Middle East

by Arti Sangar on April 13, 2012

in Emirates-Middle East, UAE Investment and Finance, UAE Law and Business, UAE Law and Business

 Rights reserved photoGovernments in the Middle East are in the process of rapidly developing their physical and social infrastructures to provide necessary services to their citizens. In this regard, a public private partnership (PPP) can be a viable option to construct or develop a wide range of these infrastructure projects, including highways, power plants, bridges, pipelines, ports, airports, waste treatment facilities and hospitals.  Generally speaking, a PPP is a long-term contract between a government and a private sector party in which the government leverages the private sector party’s skills and assets to perform all or significant aspects of a project. The government and the private sector party share the risks and rewards of a project and typically, the government retains some measure of control over the project either through ownership of the project or contractual provisions binding the private sector party

Advantages of PPPs

Governments often prefer PPPs to other methods of infrastructure delivery because of several advantages. Firstly, PPPs allow the government to shift some or all of the risks of the project to the private sector party while retaining some measure of control over the project. Secondly, PPPs free up the public budget so that funds may be applied to other projects. Lastly but not the least, PPPs allow governments to take advantage of the technical and professional expertise of the private sector. Some projects are highly technical and require specialized knowledge. Many governments do not have the in-house expertise and personnel to develop and manage these projects.

Considerations & Issues

However on the other hand, PPPs can be complex and can raise many issues and considerations. PPPs involve extensive work and time in terms of the structuring and planning of these projects. The costs of employing professionals and consultants to manage the PPP process can also be significant, especially if project financing is also being used. From the government’s perspective, the government has to share revenues earned from the project with the private sector party. Nonetheless, the advantages certainly outweigh any issues involved in PPPs which is making it increasing popular in the Middle East. Moreover, PPPs across the world have – when properly structured and planned – improved efficiency and saved governments enormous investments in infrastructure projects.  We can confidently expect to see a significant rise in regional PPPs going forward.

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