ABCS OF PPPS

Oman 2017 | ECONOMY | FOCUS: PUBLIC-PRIVATE PARTNERSHIPS

Public private partnerships (PPPs) are supported by the government as an important pillar of the country's plan to fund its infrastructural development in key areas and drive its diversification efforts.

Considering the economic climate that surrounds the commodities market around the world, the government of Oman is no longer capable of independently financing large-scale investment projects in the country, including costly infrastructure projects. In the country's economic blueprint, which guides national economic goals until the year 2020, the government has placed a special focus on the private sector and activating PPPs for the realization of key projects.

PPPs enable the government to sidestep large, upfront capital costs in big projects that need to be financed in the near future. PPPs promote efficiency and competition, as the government will only pay to work with a company that is best suited to carry out the work in question. This involvement of private sector companies will also reinforce the timetables of large projects because a stalled or delayed project would not be economically viable for private sector companies, which will help the sometimes beleaguered government stay on track. PPPs are necessarily two-way activities, meaning the knowledge transfer brought from international firms will be shared with the government, and vice versa, bringing value-adding benefits to both parties.
Speaking on the future of PPPs in Oman, the Vice Chairman of Al Madina Investment, Khamis Al Kiyumi, made several insightful comments on the matter. He remarked on the fact that these partnerships, in order to be utilized to their full capabilities, must be carried out with a focus on high-growth sectors. He continually stressed that it is of utmost importance that any investments made through PPPs should aim to add significant value to whichever sector they are working to improve. He also issued what amounts to a shrewd call to arms of sorts when he said, “It is time for the government of Oman to create businesses that can help Omanis capitalize on PPPs.”

The government is now looking for partners in the private sector wherever it is going. In addition to providing more powerful investment capabilities, PPPs can adapt to best practices seen in successful models across the GCC region. Thus, PPPs as new engines for growth, will work to combine the best of both sectors, which is extra important because a noted financial issue in the country is liquidity. This may also mean having to make some changes in the laws as government and non-government investors work together. In this capacity, the government of Oman is set to release a new law governing the relationships for public-private partnerships moving forward. PPPs are also growing in popularity in the larger GCC region as well, with Dubai publishing its own PPP law in 2015, for example.

One suggestion from Al Madina to bring about a domestic environment more conducive for PPPs was for the Ministry of Finance to introduce a reduction of taxes on PPPs, which will, more importantly, also incentivize their creation from the private sector's point of view. A possible challenge to these partnerships in the Omani market is that there are also a limited amount of investment development firms that specialize in localized, liquid asset assistance.

Keeping his attention focused on PPPs, Abdul Samad Al Maskari, CEO of Al Madina Investment, also commented that there is a perfect fit for these partnerships in the economy of Oman because there is a natural shortage of projects in key sectors where the government wants to expand. More specifically, he mentioned both the healthcare and the logistics sectors as prime investment areas that can attract beneficial PPPs in Oman. Al Madina is introducing an investment opportunity in for form of a USD200 million healthcare complex in Oman to help create additional value in the healthcare capabilities of the country and increase the quality of life for Omanis, an idea that is the driving force behind Al Madina's investment strategy in the country. Above all, Al Maskari stressed and echoed the sentiments from the Vice Chairman that any proposed investments in these fields must create real value.