View from the Middle East: the PPP problem
Public-private partnerships might seem tailor-made for the Middle East and Africa region, but the success rate is low. So what is going wrong, asks Mazdak Rafaty.
At first glance, public-private partnerships (PPPs) seem to be the perfect way for countries in the Middle East and Africa to develop their energy, water, transport and other large-scale infrastructure projects. Simply put, the public sector brings in large-scale projects crucial for the wellbeing and socio-economic development of the country while the private sector uses its knowhow, experience and financial access to develop these projects as effectively as possible. The two parties share the risk and the profit using different mechanisms of PPP projects.
But a look at the statistics shows that despite PPPs stretching back more than two decades, fewer than 20% of these projects are implemented in Africa and more than 25% of them fail in the Gulf Co-operation Council (GCC) region. So where is the problem?
Because of the involvement of the public sector, the overall political, financial and legal stability of the host country is a key element in attracting potential partners from the private sector for PPP projects. Corruption, a lack of transparency, political crises and an inadequate PPP framework are some of the issues that lead to problems in PPPs. However, the recent ‘PPP rush’ among the GCC countries, which have neglected these types of projects in their cash-rich past, highlights another key issue.
Heavily troubled by persistent low oil prices on the one hand and the heavy burden of national flagship projects such as Expo2020 in Dubai, the 2022 World Cup in Qatar or the overall economic restructuring in Saudi Arabia on the other, governments see PPPs as a way to finance their large-scale projects. However, similar to all types of partnerships, a PPP is a long-term approach, which binds both parties on different levels based on a holistic strategy and shared values embedded in a common vision for the future. Managing the complexity of expectations in the long term is key to the success of any partnership. PPPs are no exception to this golden rule of partnerships.
Mazdak Rafaty is managing partner of Ludwar International Consultancy and SME adviser to the joint Emirati-German Chamber of Commerce. Email: m.rafaty@lic-consulting.com
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