Private investment will play a key role in generating infrastructure if the nations of the Gulf Cooperation Council (GCC) region are to continue to grow while reducing their reliance on hydrocarbons, a report has found.
The report by management consultancy Oliver Wyman said that nearly $1.6tn needs to be spent on upgrading and building infrastructure across GCC nations over the next five years – a sum national governments cannot afford alone.
As a result, the scale of private investment in the region will have to rise to bridge the gap. The preferred path to bring investment infrastructure into Gulf economies is public-private partnerships (PPPs).
The report outlined how national governments can attract investors when PPP frameworks are still in their infancy.
It called on the region’s governments to ensure that regulations and PPP laws are in place and clear to follow, that the project pipeline is robust and feasible, and that any risks are acceptable. The report also suggested governments should work on engaging with investors, while accepting they need to make profits from their investments.
The GCC’s rapid increase in population means there is now an urgent need to develop advanced infrastructure across all industries, the authors said.
With economies that provide an investor-friendly environment, the number of PPP projects in the Gulf has increased gradually as governments begin to favour greater private investment in the delivery of infrastructure services.
“Gulf countries are actively introducing PPP programmes to ensure they reach their strategic and sustainable goals,” said Jeff Youssef, partner, public sector at Oliver Wyman.
“Currently, the region’s macro-economic fundamentals are solid and it is clear that the factors driving demand for the improved and established infrastructures will continue to remain in the future.
“This results in the GCC countries being an interesting geography for long-term private investors looking for healthy and stable returns. PPPs are now emerging as the preferred path to bring private investment projects that are part of the various national development plans for GCC governments.”
The report added that governments will need to improve legal, regulatory and institutional frameworks, provide financing, and increase government transparency to support private investors looking to commit to the region.