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Sat 6 Nov 2010 12:00 AM

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Infrastruture has busy road ahead

Growth of infrastructure projects may aid regional development, but will they need to rely on PPPs for finance? By Elizabeth Broomhall

Infrastruture has busy road ahead
Road projects are increasing in like Kuwait and Oman.

Growth of infrastructure projects may aid regional
development, but will they need to rely on PPPs for finance?

Ever since the downturn, GCC contractors have been talking
about infrastructure. From school and hospital building, to roads and power
plants, companies left, right and centre have been turning to infrastructure as
a sector which continues to receive government funding and regional interest.

But according to panelists at the Construction Week
Conference, infrastructure projects will be even more important in coming
years, as populations swell, becoming younger and more urbanised.

In addition, the specialists suggested there was a growing
need for more infrastructure to facilitate the growth of other industries, with
many current projects aimed at improving regional facilities.

“We know that the 1970-1980 oil builds did not plug the
infrastructure gap in this region,” said Pinsent Masons partner Sachin Kerur,
who chaired the panel discussion. “Now, a rising young, urbanising population
is putting pressure on infrastructure.”

In response, EC Harris partner Chris Hinton commented:
“Infrastructure-led developments will almost certainly stimulate economies.
This is exactly what is happening across the US
and in the UK.
Currently, the infrastructure deficit around the world is about $3 billion.
Part of the motivation behind infrastructure projects in this region will be to
cover that and the other part will be to cover population growth.”

Wilbur Smith Associates’ director of infrastructure, Stuart
Allan, also agreed. Talking about the deficit, he went as far as to suggest
that the recession had been beneficial in allowing the region to catch up in
this area.

“Ongoing investment in the region will provide support to
other industries,” he said. “While the recession has had its negatives, the
positive is that it will give the region a chance to establish the
infrastructure it needs.”

Moving on to the subject of finance, the construction
specialists continued to be in agreement. Across the board, the view was that
the delivery of said infrastructure projects would be heavily reliant on
public-private partnerships (PPPs).

Particularly confident in PPP arrangements was Abu Dhabi’s department of
transport’s highway and transport advisor, John Lee. In his opinion, PPPs were
by far, the best option in the current economic climate. “A lot of projects
seeking government funding might find it difficult to secure. PPPs are much
less reliant on this. Private finance opportunities are important and have a
very important place in our delivery of projects.”

Other panelists, though in agreement, suggested that company
executives should first make certain they have a good understanding of PPPs
before they rush into these kinds of arrangements. Al Habtoor Leighton’s CEO
Laurie Voyer said: “You need to clearly understand the scope of business and
risk transferred on the PPP model.” He did however, make it clear that he is a
firm believer in this kind of financing when these factors are considered.

Hinton emphasised the value of PPPs in driving efficiency,
but maintained that it was important for firms to bear alternatives in mind.
“The PPP approach will drive change, innovation and efficiency,” he said. “But
I’m firmly of the belief that a PPP is one of many options. It is about
understanding the business scope and selecting the right model.”

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