With more than $121 billion worth of social projects planned and underway across the GCC, the private sector is expected to play a more significant role in infrastructure project delivery going ahead, said Cyril Lincoln, the Executive Vice President and the Global Head of Real Estate Finance and Advisory at Mashreq Bank, citing data.
According to regional projects tracker Meed Projects, more than $50 billion of social infrastructure work is being executed, while the remaining $70 billion is in various stages of planning. Of the overall total, nearly $71 billion is located in Saudi Arabia.
“Social infrastructure will continue to top the agenda for GCC governments, as they prioritize quality of life, medical care and education for their growing populations,” remarked Lincoln.
Seeing a need to diversify the way these projects are delivered, Lincoln warned that "it should not be seen as the government’s responsibility alone” especially that there are an ample volume of planned and underway projects in this segment where private developers, contractors and asset managers are presented with a sizeable opportunity to support long-term goals set by the region’s governments.
Data from Meed Projects further highlighted that $17.8 billion worth of healthcare projects are under construction in the GCC, while education projects accounted for $8.5 billion while $66.3 billion worth of social housing schemes accounted for the lion’s share of active social infrastructure projects in the GCC. More than $24 billion is under construction, while the rest is in various stages of planning, design and procurement.
Typically, these projects are funded by the public sector resources which in recent years have dwindled due in part to the COVID-19 pandemic and unstable oil prices that impacted committed infrastructure spending.
With oil prices steadying in 2022, it is natural to expect that these projects will be given a new lease of life. But it may be advisable for governments to exercise caution when it comes to procyclical spending. “The experiences of recent years should serve as lessons for the way forward,” said Lincoln. “It is important to balance spending even during periods of vulnerabilities such as those caused by lower oil prices.”
Procuring through models such as a public-private partnership (PPP) agreement allows the state to transfer key risks to the private stakeholders, while still retaining full ownership of the asset.
“Another aspect to bear in mind is the technical expertise that the private sector can bring to such projects, especially in areas such as healthcare and education,” Lincoln said.
