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09 December 2023

Private sector key to infrastructure growth

Private sector involvement will be encouraged further, through public-private partnership arrangements Dr Nasser Saidi, DIFC. (SUPPLIED)

By Shuchita Kapur

As the need for infrastructure development increases across the region, private sector will play an important role in meeting the demands, said analysts.

"Both governments and private players are expected to play an important role in the development of infrastructure in the region. Governments will still undertake bulk of the work but private sector involvement will be encouraged further, through public-private partnership arrangements (PPP)," Dr Nasser Saidi, Chief Economist of DIFC told Emirates Business.

"For instance, Dewa is considering involving the private sector now in its projects. Abu Dhabi has already gone for privatisation as far as electricity and water is concerned," he added. According to Dr Dirk Buchta, Vice-President and Managing Director at AT Kearney Middle East, the role of private sector in infrastructure development should be encouraged to offload the burden on the government.

"PPPs [can be used] for existing and new facilities [and] complete privatisation of existing facilities, that already have demands cashflows, as a means of raising funds for new projects. PPPs are generally viewed as a fine opportunity for governments to cover some of their infrastructure investments.

"The government and the private sector need to work jointly to supply the vast needs of infrastructure in the coming years. For example, the power demand for Dubai is still higher than most locations in the world putting immense pressure on supply and securing future supply," he said.

The private sector can play a role in various kinds of projects and at many levels. It should not just be limited to financing projects, said analysts. "Private sector can take up projects like power plants, water desalination, highways etc. They can build, operate and transfer (BOT) such projects. There should be opportunities available not just in financing infrastructure projects but also in building, owning and operating them," said Dr Saidi.

"In this region, the government is generally both the regulator and operator of public infrastructure, and is expected to continue to play a leading role in its development. However, going forward in power, water and wastewater, roads, and railroads, public-private-partnerships will likely play a more significant role than they have in the past. In our experience PPPs can help governments to identify and unlock value typically hidden in assets, benefiting all key stakeholders: citizens, asset owners, and operators," added Dr Buchta.

Greater federalism will also help in meeting infrastructure needs, said Dr Saidi. "Take the example of the Emirates Railway, which is a federal project. Core infrastructure [power, transport, water and desalination, waste management, public utilities] should be integrated across the various Emirates, and preferably built and financed at the UAE level. This will help in greater economic integration and help reduce costs of building and operating," he added.


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