Is the PPP drive losing steam?

A call for a show of hands – as to whether there was evidence of a partnership between the public and private sectors in line with long-espoused PPP objectives – appeared to capture it all! The occasion was an annual business summit that attracted a houseful gathering of top CEOs and high-level executives representing some of Oman’s leading private and corporate sector organisations.
To everyone’s surprise, hardly an arm was raised when the event moderator, Nima Abu Wardeh – the well-known journalist and presenter of the popular BBC World News weekly financial programme Middle East Business Report – called for a vote on the issue. An animated panel discussion that followed, interspersed with insightful observations from members of the audience, underscored what was evident to all: an urgent need to restore confidence in the PPP model as an avenue for delivering public projects and services amid today’s challenging economic environment.
Participating in the panel discussion were: Pankaj Khimji, Director – Khimji Ramdas; Shahswar al Balushi, CEO – Oman Society of Contractors; Qais al zakwani, Executive Director – Authority for Electricity Regulation Oman; Hatem al Shanfari, noted economist and Chairman of GBCM; and Srinivasa Rao Edupall – Project Finance & Syndication Department Head at Bank Sohar.
Pankaj Khimji welcomed efforts by the government to forge partnerships with the private sector but bemoaned the trust deficit that keeps the two sides apart. PPP, while a sterling success in sectors like Electricity & Water, as well as Oil & Gas, was unfortunately not being replicated in other sectors of the economy, he noted.
Giving examples, he said: “In other countries, governments are not buying cars anymore. Instead, they lease cars, thereby opening up more business for leasing companies. Also, in these difficult times, (does the government) need to own and operate hotels and resorts? Can they not be owned by funds, institutions or the private sector? Apart from critical, regulatory and non-security related areas, can the government not part with (non-critical) assets? May the government should consider handing over certain assets to the private sector under PPP. I’m sure the private sector has the competence to manage these assets.”
Shahswar al Balushi of the Oman Society of Contractors (OSC) lamented the absence of an interlocutor in its continuing efforts to address the challenges and concerns weighing down the construction sector in the Sultanate. Beset with severe cashflow issues, many contractors continue to struggle to pay their suppliers and staff, he pointed out.
Qais al Zakwani of the Authority for Electricity Regulation recalled the “tough decisions” taken by the Omani government over a decade ago that paved the way for strong private capital inflows into the electricity and water sector.
“There were big decisions taken then to put in place the risk matrix for the entire sector. It also made people accountable and transparent in their decision-making and also created the framework that gave credibility to incoming investors. These were the building blocks that paved the way for private sector investment (in excess of $10 billion) into the power sector starting in 2005.”
Qais underlined in this regard the need for investors to feel secure and confident about the Sultanate’s legal and regulatory environment before they seek to commit any funds. “For private investors to be attracted to any project regardless of the sector, there needs to be certainty; there needs to be clarity in the law, as well as the applicability of that law; there needs to be transparency, consistency in decision-making, so when investors see that their investment in a project was not played by the book, they will shy away from the next project,” the official said.
Part of the problem, Qais further noted, stems from a reluctance on the part of some officials to take decisions for fear of accountability – a situation that causes the decision-making process to stagnate, he said. It’s important to try to change the mindsets of such individuals in government and working collectively in the public interest, he said.
Hatem al Shanfari lamented the absence of the much anticipated PPP law and its framework, which he said, were indispensable to the success of the Public Private Partnership initiative. He also voiced the view that the PPP process should ideally be driven by the Supreme Council for Planning. “We need to see it is well structured with a focused objective,” he stated.
Srinivasa Rao Edupall, asked to comment on the credit situation in the domestic economy, observed that stress was building up in the contracting business primarily because of cash-flow constraints. What was imperative at this point, he said, is investment in infrastructure projects to create a “snowballing effect” that would have a ripple effect across all segments of the economy. “If there are new projects, they will infuse new cash flows into the system which can wipe out stress that has been building up,” he noted.
Raoul Restucci, Managing Director, offered the following take on how Petroleum Development Oman (PDO) delivers on its commitments, with the following example: “We decided to create 50,000 jobs – and we will create 50,000 jobs whatever it takes! We sought funding, but when funding proved difficult we introduced a training levy on contracts – 1.2 per cent in 2016 – which came straight out of our annual contract value. This allows us to ring-fence money to create those jobs. So if you can’t get it, you just try to get on with it and do it. It’s amazing what we can do together (with private sector) and move on and drive the change.”

Conrad Prabhu