To benefit from PSP requires an approach that fends of the pressure of short-term financial dictates, the lure of opportunism, and the tendency to over-simplify complex issues. Such an approach must be strategic in conception and execution.
In the past, GCC governments have embarked on multiple PSP projects with limited success, mainly in the energy, water, and waste sectors. Furthermore, although all GCC telecom incumbents have been privatized, their respective governments still own large stakes in many of them. As with many PSPs across the world, these initiatives had a common and fundamental characteristic: they were approached in an ad hoc fashion. Among the resulting problems were:
• A dearth of clear governance, typified by the lack of an active governing body to support the acceleration of PSP programs and set clearly defined privatization guidelines
• Limited support from stakeholders, typified by apprehension on the part of citizens, employee resistance to change, and limited ministerial support
• Ineffective planning and prioritization, typified by delays in securing required regulatory approvals and endorsements, and in establishing and launching the PSP companies
• Continued structural issues in the economy, typified by the continuation of pre-existing monopolies and/or high levels of governmental control
• Limited investor confidence, typified by a lack of appetite in the private sector to participate in the PSP programs
Three essential, foundational elements are required to avoid these problems and establish a rigorous and comprehensive approach to PSP:
• A PSP policy, which can be either a standalone policy or part of a broader national policy
• A legal framework, which encompasses the new laws or modifications to existing laws necessary to facilitate PSP activities
• An institutional setup, which identifies all of the entities involved in driving the PSP agenda, and clearly defines and allocates authority over PSP to existing government entities or, when necessary, establishes new entities.
Most GCC countries lack a dedicated PSP policy and legal framework. The exceptions are specific PPP laws in Kuwait and Dubai, and PSP laws in Oman and Bahrain that define PSP at a high level. Kuwait is the only country in the region with a dedicated institutional setup for PPPs. Thus, the first step in moving toward greater private-sector participation in the GCC states should be the establishment of these three foundational elements.