Benefits & challenges

The benefits of PPPs are generally well understood. They offer the opportunity to improve government finances, while bringing efficiency and expertise to the delivery and operation of major infrastructure projects.

While the benefits of PPPs are attractive, there are also risks and challenges to consider. The primary challenge and key to the success of any PPP is the clear definition and allocation of roles and responsibilities between the different parties involved.

Public sector exposure to market risk is another important consideration. For example, many infrastructure projects involve off-takes or financial guarantees from the government to protect investors in cases where projects fail to achieve expected financial targets. The table below highlights some of the main benefits and risks associated with PPPs:

Benefits (public sector)	Challenges (public sector)
Better quality public services through improved operational efficiencies	Procurement procedures are typically more complex, lengthy and challenging
Reduced public sector capital required, reducing government budgets	Exposure to market risks
Greater innovation and use of technology	Lack of role definition
Reduction in government employment / transfer of jobs to private sector

Benefits (private sector)	Challenges (private sector)
Access to opportunities and areas of demand not otherwise available to the private sector	Lower returns due to sharing of revenues with public sector
Access to land and other resources not otherwise available to the private sector	Risk of PPP not reaching financial close / wasted resources
Long term remuneration / financial returns	Lack of role definition

Source: JLL

Three primary components contribute to the creation of a PPP friendly environment and the potential success of individual PPP projects.

Factor	Comment
	Although the government has taken steps, including the establishment of the National Center for Privatisation, which began operation in March 2017, the legal framework still lags.

	Political will to implement PPPs is strong, and the Saudi Vision 2030 communicated that will to the wider public. Propelling the PPP market into action.

	The Saudi Arabian General Investment Authority clearly outlines available investment opportunities, the role and extent the private sector can contribute, and expected initial investment required.

Source: JLL