GCC requires $1.6T over next five years to build infrastructures, Oliver Wyman

With the GCC region continuing along its growth trajectory whilst simultaneously reducing oil dependency, there is now a requirement for more capital to flow into physical and social infrastructure. According to a new report launched by Oliver Wyman, 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’s investment of $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. 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.

The number of PPP projects in the region have increased gradually as governments are now inclined towards the idea of enhancing greater private investment in the delivery of infrastructure services. The planned government projects pipeline is set for 2040, resulting in bringing PPPs into the limelight as the catalyst in raising the capital required.

For companies to operate successfully across transport, health and the educational sectors, governments are required to shift the focus to improving the legal and regulatory framework, enhancing the institutional framework, providing financing and increasing government transparency in supporting private investors looking to commit to the region. It is fair to say that the government are in competition to entice the right investors and in the end, whoever meets the investor needs first will win the majority of the investment.