A vast need for new infrastructure in the MENA region
As countries in North Africa and the Middle East scramble to modernise their economies, broaden their industrial base beyond the traditional sectors and provide jobs for rapidly growing populations, unprecedented levels of infrastructure spending are foreseen. According to one estimate, infrastructure investment over the next ten years could exceed US$ 300 billion. On request by countries of the MENA region the OECD has established the MENA-OECD Initiative on Governance and Investment for Development which has identified over the last two years the issue of PPPs for infrastructure financing as a key item for economic and social progress in the region.
An appropriate institutional framework
PPPs represent a tool for achieving public purposes while giving the private sector greater opportunities for an active involvement. Under the right conditions, a PPP can represent “win-win” schemes combining the respective strengths of the public and private sectors to furnish public goods. However, a PPP by itself cannot be considered a guarantee of low-cost quality services delivery. Rather, it must be understood as a policy alternative that requires the appropriate institutional framework and rigorous ex ante analysis to measure its feasibility and value. The design, management and evaluation of a PPP have implications for government capacity, which usually needs reinforcing.
The private sector to participate – as investors
Across the MENA region there is an increasing realisation that infrastructure needs cannot be met by the public sector acting on its own. Countries with few natural resources and strained public finances may choose to invite private investment in infrastructure mostly to obtain additional financial resources. But, even the region’s wealthiest countries increasingly realise the benefits of inviting private sector participation in infrastructure projects, to obtain efficiency gains through new models of corporate organisation and management, and benefit from international operators’ proprietary knowledge.
Public-private partnership: importing best practices to MENA.
Most countries’ preferred model of private involvement goes beyond mere subcontracting, but stops short of full privatisation. Public-private partnerships with the public and private partners sharing project risks and, in many cases, asset ownership, are increasingly the “order of the day”. This process should be strengthened by ongoing reform efforts. Public sector transparency, sound fiscal practices, regulatory reform and a commitment to open markets are priority issues in the countries participating in the MENA-OECD Initiative.
Encouraging early signs
Early examples of private investor participation in the infrastructure sectors of MENA countries have been encouraging. Some of these have taken the form of public sector disinvestment but many others have consisted of some sort of PPP. For example, Jordan, Morocco, Saudi Arabia, Tunisia and United Arab Emirates have all attracted large private investment flows into their infrastructure sectors. The main activity areas by far have been telecommunication and power generation.
Broadening the application of PPP
New sectors, new countries? One of the most spectacular recent developments in the region is currently underway in Dubai, where a number of high-profile property development projects also involve large private investment into local infrastructure. A new activity area within the infrastructure sector could be water resource management and distribution, where massive private investment is foreseen. According to estimates, MENA governments will spend some US$ 100 billion over the next five years, much of which in partnership with private enterprises.
OECD experiences and the MENA region. The workshop will bring together the expertise of OECD governments having pioneered PPP approaches and the hands-on experiences of private sector actors. The expected outcome is to assist MENA governments in their reform efforts and, as appropriate, develop concrete guidance on successful PPPs based on international best practices.
Presentations given at the MENA Workshop on Public-Private Partnerships for Infrastructure Financing