113. Relying on domestic private investors to fund PPP infrastructure projects avoids many of the issues raised by foreign investment and is therefore preferable in some ways. However, there is often limited domestic funding available, and the avoidance of foreign investment may be difficult, as the contractors and consortia with the necessary skills will often be multinational firms that will both invest equity and bring their pre-existing banking and financing arrangements to the project. In countries where there is some private domestic investment capacity, there may need to be a review of domestic sector prudential requirements, especially in the banking sector, as these may restrict the ability to participate in infrastructure PPPs.
114. Domestic financial institutions and institutional investors in the MENA region tend to be highly exposed to sovereign debt, be it out of conservatism, prudential requirements, or a necessity to fund the state's large fiscal deficits. Whatever the motivation, this exposure may reduce their appetite to make infrastructure investments, as this is also ultimately an exposure to the state.