The newly opened terminal at the Queen Alia International Airport in Jordan is a prime example of how the private and the public sectors can work together to create growth.
A private consortium worked in concert with the Jordanian government, built the new terminal, renovated existing buildings and will operate the terminal for the next 25 years. By accommodating up to 12 million passengers a year, the airport will boost cross-border trade and support Jordan's tourism industry, which accounts for about 10 per cent of the country's economy.
Despite such success stories, the Middle East and North Africa (Mena) region has the lowest private sector participation in infrastructure in the world. While other regions have sought to address infrastructure challenges by harnessing finance and expertise from the private sector, policy objectives in Mena countries have historically placed little emphasis on developing infrastructure, especially through private investments.
As a result, it is essential that the region upgrades its infrastructure to address past underinvestment, meet new demand and help facilitate faster economic growth for a rapidly increasing population.
A recent World Bank study on infrastructure and employment creation in the Mena region estimates that to provide basic services such as schools, power and health care - about US$106 billion (Dh389.28bn) must be spent across Mena every year until 2020, corresponding to about 7 per cent of the region's annual GDP. The need for investment is especially urgent in the electricity and transport sectors.
It is widely known that the majority of Mena governments are strapped for cash. With a growing population, innovative financial models need to be explored to provide the much-needed economic development.
Public Private Partnerships (PPPs) are a potential solution to these problems. If structured transparently, they ensure that governments benefit from the experience and expertise of the private sector and allow them to focus instead on policy, planning and regulation. PPPs increase access to and improve the quality of public services while alleviating the budgetary constraints of governments.
Another advantage of PPPs is that they spread the cost of a project over a longer period of time. In this way, public funds do not have to meet expensive upfront costs and governments are free to invest in other sectors. What is more, when public bodies partner with the private sector, they indirectly acquire skills in finance, law and contract management that are sometimes poorly developed in government agencies.
Beyond delivering basic services, infrastructure projects can also create jobs quickly. According to the World Bank study, every billion dollars invested in infrastructure has the potential to generate more than 100,000 jobs in oil-importing countries such as Jordan and Egypt, about 50,000 jobs in developing oil-exporting countries such as Libya, and 26,000 jobs in the GCC economies. More than 18 million people are already employed in Mena infrastructure sectors, including construction and related services.
In spite of the difficulties inherent in plotting a stable trajectory of reform since the events of the Arab Spring, more than a few Mena governments are mainstreaming PPP agendas as a model for economic development. As well as advising on the Queen Alia airport public private partnership in Jordan, International Finance Cooperation (IFC) has been assisting the governments of Saudi Arabia on the Medina airport and Egypt on airport and water treatment projects.
As for new markets, discussions under way in Morocco, Pakistan, Yemen, Iraq and the West Bank and Gaza represent a testament to IFC's commitment to PPPs as a reliable force for development.
Ultimately, well-structured PPPs have the potential to plug the infrastructure gap in the region while creating much-needed jobs. In this way a cycle of increased economic activity can be perpetuated to encourage further investment and make a real difference to people's lives across the region.
Mouayed Makhlouf is IFC's director for the Middle East and North Africa
