Qatar’s proposed law on public private partnerships (PPP) is expected to have a “synergistic” effect on the corporate sector and may pave way for infrastructure and project-specific bonds, but transparent arbitration clauses need to be unambiguously chalked out, according to market experts.
Although the broad contours of the proposed law is still not known, they have expressed the hope that it could turn to be a catalyst for the much-needed funding, given that the low oil price scenario has led to a reduced cash flow from the sovereign.
Expectations are that a macro PPP framework is expected to create an ecosystem that not only enhances capacity creation of individual stakeholders in each of the pillars, but also optimally allocates risks across stakeholders.
“It will synergise the private sector, which has assumed increasing roles in the economic development of the country, given the fact that hydrocarbon growth has plateaued,” an analyst with a leading bank brokerage said.
HH the Emir Sheikh Tamim bin Hamad al-Thani had recently said Qatar is acting on finalising a law on partnership between the public and private sectors, which will enable awarding of government projects to the private sector as well as ensuring their high-quality and low-cost implementation. He had said it will also help promote foreign investment in Qatar, especially in infrastructure.
“It is difficult to provide funds for all the projects that we want to execute as per the strategic plan,” HH the Emir had told the Advisory Council.
Experts across the fields are largely of the view that a new legal framework for PPP has the potential to further lift the growth in non-hydrocarbons sector and may not be limited to the infrastructure segment.
“A broad macro framework for PPP with supporting legislation can go a long way in strengthening the private sector, which has long been wanting such a legal environment,” an economic expert said, highlighting that the existing framework was rather based on a micro structure which lacks many features existent in the emerging markets.
Given the need to complete the infrastructure projects ahead of 2022 FIFA World Cup, and the strain in budget brought about by low oil prices, it has become imperative on the sovereign to find new ways of enhancing investment in the vital sector, which has strong direct and indirect linkages on the economy, a banking source said, adding there is also a need for long-term funds at low costs.
Cautioning that the low oil prices may “affect” diversification and funding of mega projects, Doha Bank Group chief executive Dr R Seetharaman had said recently developing the local debt market was a crucial solution for Qatar’s infrastructure development needs.
Qatar has one of the widest range of maturities compared to international issuances of other GCC (Gulf Cooperation Council) countries, he added.
Considering that infrastructure projects usually span at least two decades, a source in a law firm said there should be effective dispute redressal mechanism and a review of the present legislation pertaining to arbitration.