Lessons Learned from Public-Private Partnerships in Infrastructure in the Arab World – Part I

Julia Devlin, 05 Mar 2015

While private sector participation in infrastructure in the Arab world has tended to lag behind other middle-income regions, public-private partnerships (PPPs) have increased markedly since the 1990s. Most PPPs are concentrated in the telecommunications and energy sectors, similar to global trends, with a rising number of water and sewerage projects and transport transactions. PPP growth is in line with infrastructure development across the Arab world, which has outpaced other developing regions, most notably in electricity generation, transport (paved roads), and water and sanitation systems. Estimates top US$106 billion for the additional infrastructure investment and rehabilitation needed for the broader Middle East and North Africa region through 2020, or nearly 7 percent of regional GDP.


From 2000-12, the average size of private participation in infrastructure (PPI) transactions in the Arab world was US$5 billion. Algeria, Egypt, Morocco, Jordan, and Iraq together represented about 80 percent of total PPI transactions. While the trend has been upward since the 1990s, it trails far behind other regions (US$17 billion in East Asia and Pacific, US$22 billion in Europe and Central Asia, US$39 billion in Latin America and the Caribbean, and US$9 billion in Sub-Saharan Africa).


PPI Transactions in Arab Countries: A Historical Perspective (US$ million)

PPI Database (accessed November 2013).

Data include 15 Arab states, but does not include GCC country data.


Lessons Learned


Although PPPs have the potential to contribute significantly to growth, governments face several design and implementation challenges. The following lessons learned provide recommendations for PPP development and management:


  • Assess the fiscal environment and risks. PPPs tend to be more common in countries with heavy debt burdens and with large aggregate demand and market size. Government guarantees, usage, and availability payments are important incentives.
  • Develop capital markets. As PPPs require long-term financing, capital markets need to be developed for local investors, emerging market investors, or general foreign direct investment.
  • Develop market reform policies. Investors, governments, and transaction advisors need a firm understanding of market reform, along with political commitment to support the reform process.
  • Ensure well-structured PPP transactions and execution. Risk/reward ratios must be adequate, together with appropriate legal, technical, and financial expertise; economic and technical feasibility studies free from political pressure; outreach to investors; and a deal structured to ensure financial closure.
  • Monitor performance and contract compliance. For cost recovery, predictability in regulations and a fast dispute settlement process can help facilitate needed adjustments. The ability to monitor compliance in public entities is vital to guard civic interest and avoid rent seeking. “After care” support beyond financial closure is essential for PPP sustainability.
  • Provide a strong enabling environment. Institutional quality and capacity, an adequate legal framework, less corruption, a more effective rule of law, and a regulatory framework are all proven PPP drivers—they determine the quality and speed of PPI transactions, influence prices (ultimately affecting cost recovery and financial returns), and provide legal contractual confidence.
  • Provide transparent PPP implementation. Clear roles and responsibilities need to be delineated across ministries and agencies. A transparent procurement framework and proactive investor outreach can build the PPP pipeline and enhance competition. Dedicated PPP units can help coordinate and act as single contact point for investors.


Read Part II, Part III



Julia Devlin is nonresident senior fellow in the Global Economy and Development program at Brookings Institution. She formerly worked as consultant at the World Bank Group and as a lecturer in economics at the University of Virginia. Her focus is economic development, private sector development, energy and trade in the Middle East and North Africa. She holds a Ph.D. in Economics.

Julia Devlin Julia Devlin

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