With the GCC region continuing along its growth trajectory while simultaneously reducing oil dependency, there is now a requirement for more capital to flow into physical and social infrastructure, according to a report by Oliver Wyman.
The research states a cumulative sum of $1.6 trillion (excluding mega projects) in capital is needed by the government and private sector combined for GCC countries to upgrade and build infrastructure in the next five years. The private sector across the GCC emerges as a key player in contributing towards the resources required in an attempt to ease burden on governmental sectors. National governments need to bridge the gap with private sector investment of USD 600 billion.
Infrastructure development is one of the key components of the various national development strategies announced by regional governments in facilitating diversification from oil. Launched at the 10th edition of Oliver Wyman’s flagship event in collaboration with Financial Times, the report titled “Private investment is key to unlocking long-term capital for Gulf infrastructure” examines the trends driving the region’s growth and the increased need for more and better infrastructure. It also outlines the extent of the funding gap, how the gap can be closed, and the hurdles that need to be cleared in doing so. With the rapid increase in population, there is now an immediate need to develop advanced infrastructure across all industries. According to the report, governments will need to attract an investment sum of $400 million by the private sector to address the demands.
Steady economic growth, along with national development plans has enabled GCC economies to provide an ecosystem to foster an investor-friendly environment. With regulatory bodies now focused on introducing investment policies, it is apparent that Public and Private Partnerships can play a significant role in encouraging Gulf countries to meet their infrastructural requirements.
“Gulf countries are actively introducing PPP programs to ensure they reach their strategic and sustainable goals. Currently, the region’s macroeconomic fundamentals are solid and it is clear that the factors driving demand for the improved and established infrastructures will continue to remain in the future. This results in the GCC countries being an interesting geography for long-term private investors looking for healthy and stable returns. PPPs are now emerging as the preferred path to bring private investment projects that are part of the various national development plans for GCC governments,” commented Jeff Youssef, Partner, Public Sector, Oliver Wyman.