By Henry Teitelbaum, Editor, P3Planet.com
Being broke is not a necessary precondition for financially overstretched governments to discover the attractions of public-private partnerships for essential public infrastructure. But it sure helps.
A case in point is the tiny emirate of Dubai. The government’s efforts to turn a small Gulf port city into the pre-eminent global financial center of the Middle East and top tourist destination for the ultra-wealthy were at first financed by oil and gas reserves. More recently, spending has been sustained through the inflation of one of the world’s most over-valued property markets.
Over the course of the past five years that this was happening, Dubai’s more prudently run neighbours – notably Abu Dhabi – but also Jordan, Bahrain, Egypt, Israel and even Saudi were busy preparing the regulatory groundwork for creating long-term value through PPP. Dubai for its part has made few efforts to sort out its own regulatory regime so that it too might benefit from the private investment, expertise and risk management that PPP can provide.
There’s really no excuse for this failure. Fellow emirate Abu Dhabi, which has a smaller population and far greater carbon-based energy resources upon which to rely for funding its social and economic infrastructure projects, has been using PPP since 2005 and now has one of the most active pipelines of PPP development work in the Middle East. Its Abu Dhabi Water & Electricity Authority has successfully procured 10 integrated water and power projects using the model, and has been applying it to ever greater effect in developing schools, hospitals, transportation, military projects and universities.
The $2 billion 400 km road stretching across Abu Dhabi to the Saudi border and a $1.7 billion Satellite facility are two recent examples of how sophisticated the emirate has become in applying the model. They also exemplify a key point about PPPs, which is that the model can deliver value for money to public authorities in both the short-term through on-time, efficient delivery, and over the long-term, through operations and maintenance contracts that oblige the private sector companies to stand behind their work.
While Abu Dhabi was busy lining up its ducks, Dubai made little productive use of PPP, signing a single $150 million waste recycling facility in 2007 and an operations and maintenance contract for its Metro system in 2008. Projects in the emirate have faltered with private developers due to the lack of a robust regulatory regime to support PPP.
This is a pity, as Dubai reels from a humiliating bailout and contemplates the realities of a shrinking economy and the end of its oil and gas-driven spending bonanza. It took a financial crisis to focus attention in Dubai on what its regional neighbours and competitors have been doing for years in PPP.
But it’s also good to see that people there are willing to listen and learn. A recent study from the Dubai Chamber is now calling for greater use of PPP in Dubai and throughout the UAE. “Increasing PPPs will not only provide the government with a mechanism for financing, but also much needed public infrastructure at lower costs and high quality outcomes,” the report said.
That’s the kind of progressive thinking that Dubai needs to show more of at home – starting now.