In Qatar, there are plans to spend some $200 billion on infrastructure development to realize the National Vision 2030 development plan. Qatar has the potential to become a hub for infrastructure and project finance activities, according to a new research study, “Public Private Partnerships: A Vehicle of Excellence for the Next Wave of Infrastructure Development in the GCC”.
The study, released by Markab Advisory and sponsored by the Qatar Financial Centre Authority and the Ministry of Business and Trade, concludes that Public Private Partnerships (PPP) are poised to play a key role in underpinning the success of the next wave of infrastructure development expected in the GCC. Yousuf Al Jaida, Director of Banking and Asset Management – QFC Authority, said: “As this new study shows, it is clear that there are many opportunities for the development of PPP in the region as economic growth and infrastructure development continue apace.”
Qatar offered some “particularly exciting opportunities across a variety of sectors as we continue to diversify the economy away from hydrocarbons and as we gear up to host the FIFA World Cup in 2022,” he said. “We at the QFC Authority are keen to support the opportunities which PPP brings for financial services firms in the region,” Al Jaida added. “Our mandate is to help develop a competitive, modern financial sector in Qatar fitting to the country’s needs in the twenty-first century. I am confident that PPP can be at the heart of realizing this ambition.”
The GCC plans to invest some $1.5-2 trillion in infrastructure projects alone over the next 10 years, with additional spending on the development of new economic clusters in sectors such as tourism, science and technology, healthcare and education. In Qatar, for example, there are plans to spend some $200 billion on infrastructure development to realize the National Vision 2030 development plan, “Qatar already has the building blocks for a PPP program in place. There is a reservoir of infrastructure projects planned for the next decade,” Mohammad Athar, Managing Director of Markab Advisory, said in his statement.
“Resident PPP experience of the power sector, strong growth momentum and leadership support for PPP can be leveraged to promote PPP in other infrastructure and social sector projects,” he said. “Qatar can draw lessons from successful examples from around the world to develop its own home-grown PPP program” Athar added. Given that massive investments will be made in building assets of a long-term nature for public use and benefit, efficient planning and execution will be critical.
While capital is abundant in the region, the study found that experience of PPP initiatives around the world, notably in the UK, Canada and Australia, suggests that expertise, knowhow, risk sharing and a long-term commitment to success are equally important. In the GCC, the PPP model can play a key role in addressing these challenges and bringing these factors together in an efficient and transparent model. The study found that the potential advantages of PPP to the GCC economies include: *Potential economic benefits and cost savings of billions of dollars through investment efficiencies such as avoiding time and cost overruns.
These economic benefits can reach up to $30 billion, equivalent to 25% of Qatar’s Annual GDP *Rapid acceleration in the pace of infrastructure development *Securing knowledge-transfer to the local economy *Promoting greater transparency and accountability *Encouraging excellence in infrastructure development In terms of Qatar specifically, the study found: *Qatar already has a successful track record in PPP in the power sector.
Over two third of Qatar’s power generation capacity is installed through PPP arrangement. Now Qatar has an opportunity to transfer this success in other infrastructure sectors *Opportunities across a range of sectors including power, water, railways, roads, education, healthcare and sports infrastructure for the FIFA World Cup 2022 *Qatar has the potential to become a hub for infrastructure and project finance activities The Mena region has completed over 100 projects on a PPP basis over the last 10 years.
However, most of these have been predominantly in the power sector. The study found that the Mena region stands at a critical stage in its development and that PPP is poised to play a strategic role in that development. However, the focus in the use of PPP in the region will need to shift from projects to programs across a variety of sectors including power, airports, railways and roads, healthcare and education as well as social housing.
“As a catalyst to promote PPP in infrastructure specifically in social sectors, public sector can consider delivering funding to projects through a dedicated incubation fund to nurture the innovation culture as well as align interests of all the stakeholders,” Aamir Rehan, Managing Partner, Markab Advisory, added.
“Example of PPP Canada where the federal government established a dedicated fund to promote PPP in various infrastructure sectors throughout the country can be a good case study for Qatar,” Rehan added. During a press conference at which the report was launched, reporters were invited to direct questions at officials that included Yousuf Al Jaida, Mohammad Athar, Aamir Rehan and Dr Al Adad of the Ministry of Business and Trade. The questions centered on whether there would be support for SMEs to be able to take advantage for the push towards PPP and also looking at where the PPP coordinating unit would be placed. Al Jaida was positive in his response that there would definitely be incentives and opportunities for SMEs in the PPP process and they would be encouraged to take part in the bidding processes.
Athar said that there would be ample opportunities for the medium enterprises, particularly in the health sector, where the projects were smaller and ideally suited to emerging companies as opposed to the road or rail projects that demanded more resources. QCS asked whether the panel felt that the GCC financial markets were robust enough. Rehan responded that in their opinion the markets were well adjusted and for the larger contracts, the private investors would be bringing in their own finance and access to finance.
He added that the partnerships would have to be innovative and look at new ways of structuring capital as the recession would possibly have closed off traditional capital routes. In a related news report, HE Sheikh Abdulla Bin Saoud al- Thani, Governor of Qatar Central Bank, delivered a vote of confidence in Qatar’s ability to finance more than $100 billion worth of projects to be completed to realize its 2030 National Vision. Sheikh Abdulla Bin Saoud was speaking on the second day of the Qatar Projects 2012 conference.
He said that the total assets of the country’s commercial banks grew by 22.3% to $190.6 billion in 2011 over 2010 while customer deposits increased by more than 18.5% to $100 billion. Meanwhile, credit facilities to customers rose by 28.2% to $103.5 billion. Qatar’s financial performance was all the more impressive, given fears of contagion from the eurozone debt crisis and slow growth in the US and other developed markets, said Sheikh Abdulla Bin Saoud. The strength of Qatar’s banking sector underscores the Gulf state’s ability to finance major planned projects, given its financial sector’s performance and its projected GDP growth of 6% in 2012.
Sheikh Abdulla Bin Saoud added: “Economies of many of the developed nations stagnated, suffering from a series of shocks due to the situation in the eurozone and reduced credit ratings for a number of major countries.”
