Experts push PPP to fund GCC transport solutions

October 24, 2011

CPCS vice president Sean McDonnell speaks on ‘Investment opportunities and PPP in the transport and railway sectors’ as Yusuf Saeed, Anil Bhandari, Khalid al-Ghalib and Moazzam Mekkan look on. PICTURE: Jayan Orma

By Ramesh Mathew/Staff Reporter

GCC states have been urged to avail of an array of options to finance their massive rail, port and road infrastructure projects.
At a session on ‘Investment opportunities and private-public-partnership (PPP) in the transport and railway sectors’, experts asked government planners and decision makers to identify potential investment opportunities for the private sector.
The speakers also deliberated on the roles to be played by financial institutions and multilateral development institutions, which they said could co-ordinate various segments involved in developing major projects.
Speaking on the modes for financing projects, some of the speakers also made presentations on the successful PPP projects, implemented in different countries.
Initiating the discussions, International Financial Corporation (Dubai) Infrastructure Advisory Services manager Moazzam Mekan said there is a great level of misunderstanding among governments and people on the issue of private participation in the execution of mega projects.
The senior infrastructure policy professional said private participation in projects simply means transferring risk element in a major ‘build operate and transfer’ (BOT) project by government to private entrepreneurs.
“No private investor willingly bears the risk to get involved in the development of a public utility unless he is convinced of reasonably good returns on its completion,” said Mekan. This could perhaps be one of the main reasons why PPP projects are still in the infancy even today in most GCC states, he said.
For successful implementation of PPP projects, the speaker argued for the participation of different players at different levels of building and operating.
The GCC states has at hand rail, port and other transport infrastructure projects worth $142bn to be executed over the next decade, said Qatar National Bank senior manager (syndications) Yusuf Saeed.
Of these, the GCC railway network alone would cost approximately $25bn and the first phase of Qatar’s Metro and GCC line network would cost approximately $35bn.
Financing options that Saeed mooted included deficit financing, direct borrowing, GCC syndicated lending, GCC bonds, equity reserves, project specific borrowing, government grants, joint ventures, and private participation.
The QNB official said along with the international banks, inquiries could also be entertained from the regional banks and local banks as well depending on the size of the projects. The speaker also felt that infrastructure funds have a major role to play in coming years.
National Commercial Bank of Saudi Arabia senior executive vice president (Corporate Banking) Alsharif Khalid al-Ghalib shared the concerns of Mekan on the issue of PPP as a mode of financing the key projects.
Insisting that the entire GCC is fast emerging as the global transport hub with a series of economic activities, the speaker said the six GCC states together have close to 30mn vehicles on their roads.
Highlighting the necessity of strengthening the public transport network through the GCC rail and building of major highways, al-Ghalib said PPP is still to make any headway in the region.
He cited the formation of government-backed financial bodies on the lines of the KSA’s Public Investment Fund (PIF) to finance major transport projects.
The official said there is so much for the GCC to learn from the successful PPP experiences in Europe in recent years, especially in the transport sector. Out of the over 30bn PPP investments made by the European companies in 2008, more than 20% were to strengthen the transportation networks elsewhere, he said.
Canada Pacific Consulting Services vice president Sean McDonnel and Dubai-based Ab International CEO Anil Bhandari made presentations on the PPP projects in railway in Canada, Hong Kong and Nigeria.
The success of the railway projects in Nigeria including the three-lane mass transit metro in Abuja showed how the best could be derived from the available choices and resources, said Bhandari.
The $3.3bn 1315 Lagos-Kano line is one of such successful examples of the private participation that GCC states could try to emulate, said Bhandari.
McDonnel said the Canada Pacific Railway Company is carrying approximately 1.6bn passengers a year in their Hong Kong Metro project and the stakeholders are getting sufficient returns on their investments, said McDonnel.