Cushman & Wakefield Middle East Insight: PPP – The Emperor’s New Clothes?
By: Mike Moore
In the Kingdom of Saudi Arabia, Public Private Partnerships (PPPs) are becoming a popular tool for funding new infrastructure and other facilities (universities, hospitals etc.) Traditionally, states typically tend to prefer the PPP route when they are facing one of more of the following:
- Budget deficits;
- The need to protect against project delays and cost overruns;
- A desire to diversify the economy by stimulating private sector investment; and
- A desire to maintain the pipeline of projects when government funds are constrained.
The basic concept is simple, a government wishes to build but is faced by one or more of these challenges, so it partners with a private company who builds and operates what the government needs at its own expense and then charges a monthly or annual fee across a predetermined term (say twenty five years) after which time the development becomes a government asset.
So, what does that mean for the FM industry? – Good news
The PPP approach is a great opportunity for world class developers to form consortiums with world class FM service providers to develop truly world class infrastructure and facilities to the highest of standards. In turn this will lead to a huge acceleration in the maturity of the local development/construction and FM sectors as well as giving a much needed boost to these flagging industry sectors.