Oman upbeat about investor interest in PPP projects

With the Executive Regulations underpinning the landmark Public-Private Partnership (PPP) and Privatisation laws now officially published, local and international investor interest is now riveted on an initial handful of projects the success of which will bode well for the long-term sustainability of the Omani government’s groundbreaking efforts to rope in the private sector in the delivery of public works and services.

Dr. Dhafir Awadh al Shanfari

According to experts, Oman’s experience with PPP goes back more than 25 years, especially in the utilities and energy sectors. Over this period, the Sultanate has successfully established more than 20 operational ventures in the form of Independent Power Projects (IPPs), Independent Water and Power Projects (IWPPs) and Independent Water Projects (IWPs).

But a new chapter in PPP-based projects is now being kicked off in the Sultanate. Expressions of Interest (EoIs) were opened here recently for a Sewage Treatment Plant (STP) planned at Misfah just outside Muscat Governorate – the first-ever PPP project announced for qualification for development under the auspices of the newly established Public Authority for Privatisation and Partnership (PAPP).  The sizable number of preliminary offers was a heartening sign that the PPP model, notwithstanding the current economic downturn and the pandemic, is generating keen interest locally and regionally.

In comments to the Observer, PAPP Chief Executive Officer Dr. Dhafir Awadh al Shanfari (pictured) said investor interest in Oman’s maiden portfolio of PPP offerings – 49 projects spread across nine sectors – has been positive from the outset.

“All of these projects will test the appetite of local, regional and international investors, depending upon the timing and complexity of the projects,” said the CEO.  “But ever since we announced the first PPP project last December – the STP Plant of Haya Water at Misfah – interest has been positive.”

He further added: “We have other projects in the pipeline over which we are continuously engaged with potential investors. Outside of this portfolio, we have also been receiving a number of proposals from local and regional investors eager to participate in a number of infrastructure sectors.”

According to the official, economies around the world are increasingly adopting the PPP model to deliver infrastructure projects and services in partnership with the private sector rather than go it alone through standard EPC (engineering – procurement – construction) contracts.

“There is proven historical evidence that PPP models, when carefully crafted and managed, can deliver projects on time and within budget when compared to traditional government-driven projects.  So whether it’s a school, hospital, or road project, if the viability and economics make sense, then it’s prudent for the private sector to step in. Plus the risk is allocated between the government and private sector in an equitable way based on each other’s capabilities and expertise. At the same time, the quality, technology, and overall solutions available under PPP models are better than anything offered in the traditional way of implementing these projects.”

At the same time, PPP is not simply an opportunity to ease the fiscal burden on the government at a time of budgetary constraints, Dr. Al Shanfari pointed out.  “It’s only part of the objective; but the underlying goal is to tap into private sector finance, capabilities and expertise as well. Take a school project, for example.  The private sector may be more creative in designing, financing and optimising the use of the land space, while delivering it at a lower budget and in less time. On top of all this, the private partner may come up with a plan for the use of the facilities, thereby generating more value from the project when compared to traditional school development, while the core teaching component remains with the Ministry of Education.”

Importantly, knowledge transfer is a key spinoff of PPP, the CEO noted.  “While Omani investors will have the expertise to undertake some of the projects themselves, they may have to join hands with international players in the delivery of others.  In addition to gaining know-how, the local community will benefit as well through the procurement of local talent, materials, and services – which is part of the overall objective behind PPP.”