Borrow cheap and spend fast was a motto often heard in the heady days of Dubai’s property boom, but now things are different. Money costs more to borrow and is harder to obtain for everyone. So it is no suprise that Gulf states are starting to look at alternative ways to fund infrastructure and guarantee service – PPPs are entering the region.
Abu Dhabi, through Mubadala has been the first state to successfully bring in capital from contractor consortia to fund University projects (Zayed, Sorbonne, Al-Ain) in return for a guaranteed payback over 25-30 years. Abu Dhabi gets high service standards for the forseeable future, contractors and their banks get a secure return. “It might cost more but Abu Dhabi is paying for a service,” says one local expert.
Long term maintenance, of structures, roads, water infrastructure etc is a challenge for Abu Dhabi’s public sector and one it will gladly pass on to private firms in return for guaranteed service levels. Personally I would happily outsource the maintenance of my home/car to a private party for a fixed rate. I like certainty – and so do many public authorities.
So it is no surprise that a range of projects, roads, railways, hospitals etc, are all turning to PPPs to get built. For states with no experience of certain types of project, such as railways, it also reduces the planning and scoping period and gets the infrastructure built faster. In a region where social infrastructure is much needed, it looks like PPP is going to be used a lot more.
Read the full construction finance piece at: http://www.meed.com/sectors/finance/project-finance/developers-seek-out-new-public-private-partnerships/3004172.article