On 20 September 2015, Dubai passed a new PPP law, Law No. 22 of 2015 (Dubai PPP Law). The Dubai PPP Law came into force on 19 November 2015 and will facilitate greater collaboration between the public sector and private sector parties looking to do business in the projects space in Dubai. The Dubai PPP Law is the first piece of legislation in the UAE (either at Federal or Emirate level) dealing specifically with PPPs. It represents an intention to seriously implement a major deviation from Dubai’s traditional use of self-funding to procure major infrastructure and energy projects. Dubai is less dependent on hydrocarbon revenues than its neighbours; however, it is no different in its willingness to utilise private sector resources in times of fiscal restraint. With Dubai being the host city for EXPO 2020, it is anticipated that new infrastructure demands will increase exponentially in the coming years, as will energy and other needs. In implementing the new regime, Dubai will certainly be able to benefit from a considerable amount of that global experience due to the multicultural nature of its professional population, which will include those with PPP experience from their home jurisdictions. The aims of the new Dubai PPP Law are stated to include regulating the partnership between the private and public sectors, procuring the best services at the best prices, increasing productivity, improving the quality of public services and transferring knowledge and experience from the private sector to the public sector, with a focus on UAE nationals. Explicit reference is also made to mitigating the financing burdens on the general budget of the Dubai Government and minimising financial risks to the Dubai Government.
The Dubai PPP Law contains a framework for the tendering and awarding of PPP projects, but we anticipate much of the detail required will be included in the implementing regulations that are yet to be issued. It is hoped that the regulations will address certain key issues which are uncertain and which will need to be addressed or clarified to boost investor confidence. To name a few such issues: the law is silent on the availability of Government guarantees for performance and payment, the requirements for capitalisation of the SPV and any local/foreign ownership restriction for the relevant SPV. A procedure for fair and transparent tendering and the award of PPP projects is set out in the new Dubai PPP Law. One point of interest is that if only one or no compliant bids are received, or if the project turns out to be more expensive than anticipated or if it is in the public interest to do so, the government entity is entitled to cancel the tender process. The law clearly states that no compensation for bid costs will be payable in such circumstances, a point which potential bidders will need to be mindful of.
A further point to note is that article 14C of the new Dubai PPP law would seem to suggest that the Government may contract directly with a private sector company proposing a PPP structure, without going through a tender process at all. We anticipate more detail will be made available about the tender process (and the law in general) in the implementing regulations to be published in due course. In summary, whilst it is still early days for ‘official’ PPPs in Dubai, the intentions of the Dubai Government are clear. There is every expectation that projects will be announced in the coming months, representing a major new opportunity for developers, investors and financiers. It is to be noted that the Dubai PPP Law obviously only relates to projects by the Dubai Government. It remains to be seen whether other Emirates or the Federal Government follow suit.
In an attempt to rectify shortcomings in Kuwait’s pioneering PPP law, the PPP law (Law No. 7 of 2008) (Old Kuwait PPP Law), and in order to further modernise and align its PPP law with international standards, Kuwait has introduced updated PPP legislation by way of Law No. 116 of 2014 (New Kuwait PPP Law). From a structural and governance perspective, the New Kuwait PPP Law provides for the establishment of two new bodies:
- Higher Committee for Public Private Partnerships (Higher Committee) – mandated with, among other things, approving entry into projects using the PPP model, approving the allocation of real estate for PPP projects, approving feasibility studies and deterring attempts by Government entities to terminate PPP projects in the public interest, the Higher Committee will be a key player in any PPP in Kuwait.
- Kuwait Authority for Partnership Projects (KAPP) – the KAPP replaces the Partnerships Technical Bureau and sits under the Higher Committee. The KAPP’s mandate includes establishing public joint stock companies to execute PPP projects, assisting the Higher Committee with assessing feasibility studies, developing contracts and other templates to be used for PPP projects and submitting recommendations to the Higher Committee and following up on the execution of PPP projects.
The key reforms in the New Kuwait PPP Law are set out in the following table:
Click here to view table.
The New Kuwait PPP Law heralds a positive step in the right direction for PPP projects in Kuwait. By remodelling the regime which existed under the Old Kuwait PPP Law so soon (relatively) after coming into existence, the Government of Kuwait has clearly signalled openmindedness to continue developing its PPP laws to align them with international standards and make foreign investment into Kuwait more attractive.In addition to the reforms set out in the table above, the New Kuwait PPP Law allows for key new incentives not provided for under the Old Kuwait PPP Law. These include targeted tax exemptions for foreign investors, exemptions from certain customs duties and relaxation of foreign ownership requirements.
Although Oman has a proven track record for utilising private sector expertise and finance in procuring projects (most notably IPPs and IWPs), the flailing oil market has encouraged it too to divert attention to establishing a focused PPP model in the Sultanate. The establishment of the new PPP model is part of the Government’s five-year plan to encourage PPPs. Although little is so far known about the direction which this plan will take, the Government has appointed advisers tasked with developing a legal framework for the procurement of PPPs, with a first draft of the PPP legal framework expected to be delivered within the first half of 2016.
Although the formulation of the PPP legal framework in Oman remains to be seen, it is hoped that not only will it build on the experience of other members of the GCC and the wider Middle East region, but it will represent a stable framework for foreign investors used to operating in a well-developed international PPP market.
While to date there have been no PPPs in Qatar, outside the power and water sector, the benefit of employing this type of procurement has been recognised by the Qatari Government. A report on the subject was prepared for the Qatar Ministry of Economy and Finance and the Qatar Financial Centre Authority in February 2012. Further, it is recognised that while Qatar was not required to invest in PPPs due to a lack of government liquidity, risk sharing inherent in this type of procurement provides an incentive for strong performance. Indeed, the Qatar National Development Strategy for 2011-2016 (published in March 2011) expressly stated that, in light of the construction in the leadup to the 2022 FIFA World Cup, PPP procurement should be considered within the public investment framework and would be of benefit to certain projects.
Notwithstanding this, Qatar is yet to make any significant advancements towards PPP procurement. Qatar currently maintains a strong fiscal outlook (as compared to other jurisdictions in the Middle East) as a result of large oil reserves. However, given the significant value of projects associated with the 2022 FIFA World Cup and the Qatar 2030 Vision, combined with increasing pressure on the country’s capital, the Qatari Government may consider following the UAE and seek to implement similar measures to ensure greater risk sharing across infrastructure projects.
Kingdom of Saudi Arabia (KSA)
Although KSA has long implemented informal PPP projects across various sectors, there are currently no local laws in KSA that specifically govern PPPs. The PPP tender process operates under the KSA Procurement Law in the same way that typical procurements do. That being said, in light of the well-documented fiscal struggles being faced by KSA due to declining oil prices, it remains to be seen whether KSA will more formally embrace PPPs by implementing some form of PPP legal framework.
According to a report in a recent edition of the Middle East Economic Digest (November 2015), the Kingdom is planning to ramp up its PPP projects pipeline and has already released an RFP (request for proposals) for the Taif airport scheme.
Bahrain does not have a dedicated PPP law, per se. However, the Government did enact legislative decree No. 41, “With Respect to Policies and Guidelines of Privatization” in 2002. This legislation deals largely with privatisation in general but does not specifically apply to PPPs in the mould of, for example, the Dubai and Kuwait regimes.