All Systems Go

It’s been a busy 2023 so far for the Middle East PPP market, with social infrastructure taking an increasing hold

As we head towards the final months of 2023, the Middle East continues to lead the world in the procurement and development of PPP projects. At the forefront of the region is, of course, Saudi Arabia, which in April launched 200 PPP-assigned projects worth more than $50bn, under the auspices of its National Center for Privatisation and PPP (NCP).

Projects include four airports, seven desalination plants, six wastewater treatment plants, 10 strategic water reservoirs, four highways and a transit-oriented development project in Makkah. And that’s just the projects under the NCP. A swathe of PPPs are also underway in the kingdom’s many ‘mega’ and ‘giga’ projects, such as the Public Investment Fund-mandated smart city, Neom.

Saudi Arabia has not been shy in implementing its PPP plans this year. The last few months have seen a flurry of activity as new projects continue to be launched, tenders announced and bidders are chosen.

In the last few weeks alone, Cobra Instalaciones y Servicios was selected as the preferred bidder to deliver Saudi Arabia’s 150km Rayis-Rabigh water transmission pipeline project, while Altakassusi Alliance Medical won the Radiology & Medical Imaging Services PPP Project – one of the kingdom’s first healthcare PPPs.

A wider running theme across the Middle East’s PPP industry has been its focus on social infrastructure projects in recent months.

As the Gulf countries, in particular, look to grow their populations and diversify their economies, the provision of adequate social services is essential. Many Gulf countries are still playing catch-up in the provision of high quality, accessible social services, such as healthcare, education and affordable housing.

A case in point is the Gulf’s rapidly growing healthcare market, which is ripe for PPP investment, as nations look to ramp up their specialist care provision for citizens, expats and medical tourists alike.

There’s no doubt that the Gulf’s social infrastructure sectors are set to attract substantial PPP interest in the coming months and years, driven by rising demand, government commitment to economic diversification, and the potential for innovative services partnerships.

David Johnston, partner at law firm Norton Rose Fulbright in Riyadh, Saudi Arabia, says that alongside projects in the airport, rail, seaports and road sectors, coming to market in the future, he also sees “the continued development of the social infrastructure model, which has already had success in the education and healthcare sectors”.

Nico De Koning, head of PPP bids and assets management at developer Besix, says he expects Saudi’s social infrastructure sectors, including education, housing, and hospitals, to attract “substantial PPP interest in the coming years”, driven by rising demand, government commitment, and the potential for innovative partnerships that can bridge gaps and deliver essential services efficiently.

An example of this social push is the Zayed City Schools PPP deal in the United Arab Emirates - the first social infrastructure project in the UAE to achieve financial close.

The project relates to the design, build, finance, maintenance and transfer of three school campuses with a capacity of 5,360 students in Abu Dhabi’s Zayed City. The schools are scheduled to open for the start of the academic year in September 2024.

As the first project of its kind under Abu Dhabi’s new PPP regulatory framework, it is expected to pave the way for increased private sector participation in delivering social infrastructure in Abu Dhabi.

In higher education, the UAE’s Khalifa University is currently procuring a private partner to deliver its first student accommodation scheme under a PPP model. Student housing projects are seeing plenty of activity around the world at present, and as more states in the Middle East look to build their global profile and accommodate for burgeoning middle classes, this is a market that has all the right ingredients to be tailor-made for significant growth.