Public-private solutions to future needs

Joint ventures offer the Government a low-risk way to meet infrastructure demands

Desalination plants are the kind of infrastructure that could be built through public-private partnerships. (Sarah Dea / The National)

The relentless pace of modernisation in this country does not stop for much, and certainly not for fluctuations in the global economy. As we reported yesterday, the Environment Agency – Abu Dhabi has projected that demand for desalinated water in the emirate is expected to double by 2030. There are likely to be similar upgrades required in sectors like roads, electricity and other infrastructure to keep ahead of requirements.

At a time when oil prices have been much lower than expected for a protracted period, leading to deficit budgets in the UAE, meeting these obligations requires a delicate balancing act between keeping a rein on spending while also ensuring that it will not cause problems in the future. This is clearly a time for nimble thinking and innovative answers.

One such solution is the public-private partnership (PPP), in which major projects are built as joint ventures between governments and private corporations, with the latter being remunerated through a fee charged on users. Companies that help the government meet its projected desalination requirements, for example, would receive some of the money charged for utilities. Those who build roads could get a share of a Salik-like toll.

PPPs are a tried and tested method that have been used overseas for generations. With many of the world’s leading companies and consultancies already well established in the UAE, having carried out multibillion dirham contracts on behalf of the government, they are well placed to bid on whatever PPPs may be awarded. With many of these organisations feeling the pinch from the flow-on effect on low oil prices on the domestic economy, their bids are certain to be competitive.

One reason PPPs are attractive to governments is that there is very little risk for them. Even if the private partner fails to turn a profit from its involvement, the government will get the infrastructure it needs. But for well-managed companies that can keep control of spending, there is the potential to earn a good return on their investment – this is the epitome of rewarding the efficiency of the private sector.

By rewarding competence while meeting the demands for future infrastructure needs and also keeping a rein on spending at a time of deficit budgets, the case for PPPs is compelling.