Update on Oman’s Public-Private Partnership Law

April 2024  |  SPECIAL REPORT: INFRASTRUCTURE & PROJECT FINANCE

Financier Worldwide Magazine

April 2024 Issue

Oman issued its Public-Private Partnership (PPP) Law in 2019. Prior to 2019, there was no framework for PPPs in Oman. While PPPs had been used, particularly in the power and water sector, for almost 30 years, there were no specific regulations, structure or guidance for these initiatives. The introduction of the PPP Law and its implementing regulations clearly illustrated the government’s intentions to attract greater private investment in a broader range of sectors.

Oman’s PPP programme was launched in 2021, following the promulgation of the PPP Law in 2019. This article considers how the programme has fared since then.

Background

Introducing the PPP Law was intended to encourage investors to look at projects in sectors outside of the traditional independent power projects (IPPs) and independent water and power projects such as transport, information technology, healthcare and education. In addition, the PPP Law and its regulations put in place a clear structure which allowed a novel partnership project idea to be put forward by investors. There is often reluctance from a developer to share an idea which may then be bid to the market without necessarily getting any benefit. However, the provisions in the regulations offer the developer protection, including reimbursement of costs and a right to match bid prices during any subsequent tender process. The PPP Law also offered greater flexibility with regard to the term of a project, allowing for a term of up to 50 years, in contrast with the circa 20-year term in the power and water sector in Oman.

The Public Authority for Privatisations and Partnership (PAPP) was originally established in July 2019 and was the responsible authority for all projects contemplated under the PPP Law. However, as part of a major government restructuring, Royal Decree 110/2020 dissolved the PAPP and transferred its responsibilities to the Ministry of Finance (MOF). The MOF was understood to have been transferred 49 PPP pipeline projects in the education, healthcare, logistics and utilities sectors which PAPP had been working on prior to its dissolution.

Since PAPP’s dissolution the MOF has continued to drive forward the first tranche of PPP projects. However, for a variety of reasons, progress with all the legacy PAPP PPP projects has been slower than developers had hoped.

Oman’s current PPP projects

The government has announced plans to reduce the number of projects which will be offered to the market and has stated that it will progress the implementation of 11 projects and initiatives under the PPP programme in 2024. Outlined in the 2024 state budget, the projects are in sectors including transport and logistics, health, education, agriculture and fisheries, construction and information and communication technology. The current slate of priority projects includes the Salalah to Thumrait truck road, the construction and operation of 42 schools for the Ministry of Education (MOE), a road project linking Al Maabela in Muscat governorate with Thamid in the wilayat of Bidbid, the management, operation and development of diagnostic centres for the Ministry of Health (MOH) in Muscat governorate, the management and maintenance of health facilities for the Health Ministry in Muscat governorate, Al Batinah North and Al Batinah South governorates, the development and operation of a drug rehabilitation centre in Sohar, the operation of the MOE’s fleet of public school buses, the development, management and operation of the Liwa and Sur fishery harbours, the construction of the new headquarters of the Ministry of Commerce, Industry and Investment Promotion, and up to four wind IPPs to be developed by NAMA Power and Water Procurement.

Many of these projects have already been announced and some, in particular the fisheries harbours, schools and the Thumrait Salalah road project, are well advanced in their respective tender processes.

However, progress with these initial projects has been delayed. The request for proposals (RFP) for the schools PPP was issued in 2022 and we understand that the three bids received remain under consideration. For the Thumrait road project, five bidders were shortlisted in summer 2023 following the launch of the project in late 2022, however a full RFP has not yet been announced.

Similarly, the Liwa fishery harbour PPP project was launched in late 2021 and a developer has not yet been appointed to take the offered 30-year concession for the development, management, operation and maintenance of the fishery harbour.

NAMA PWP appointed its consultancy team in February 2024 for the four wind IPPs and the first of these is expected to be operational in 2025. This will mean the RFP should be launched in Q2 or Q3 of 2024.

For the other projects, there has been limited movement, despite repeated announcements from the government.

Concluding thoughts

The construction sector in Oman has been through tough times. The collapse in activity following the coronavirus (COVID-19) pandemic led to major decline in project activity. However, the sustained high oil prices and major reform programme which has been pursued by the Sultanate is creating more activity. Oman has been recording budget surpluses in recent years and in September 2023 Fitch raised Oman’s rating to BB+ with a stable outlook.

The introduction of the PPP Law and its regulations in 2019 indicated Oman’s appetite for PPP projects as a way of improving infrastructure without increasing sovereign debt and also attracting private investment and promoting economic growth.

The need for infrastructure remains and PPP structures are likely to be the most efficient way to deliver these projects. It was hoped that the PPP programme would progress more rapidly and a strong pipeline of projects would create a thriving ecosystem of developers, contractors and advisers. This has not yet happened, however the projects which have been launched are largely well designed and should offer developers attractive opportunities when they are launched.

It is very positive that the government has announced plans to progress 11 projects under the programme this year, however all government agencies will need to work hard to regain momentum in the programme and stop investors looking elsewhere. This is particularly the case when one considers the pace of development in Oman’s immediate neighbours.

 

Thomas Wigley is a partner at Trowers & Hamlins. He can be contacted on +968 2468 2928 or by email: twigley@trowers.com.

© Financier Worldwide

BY

Thomas Wigley

Trowers & Hamlins

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