New Dubai law to foster public-private partnerships for infrastructure funding
Dubai has passed a new law to encourage public-private partnerships to fund new infrastructure projects.
The law aims “to encourage the private sector to participate in development projects, and increase investment”, according to a government statement.
This is in an effort to reduce the financing demands on the government, facilitate the transfer of knowledge between the public and private sectors, and “to serve the economic and social development” of Dubai by boosting investment in the emirate.
Infrastructure investment in Dubai has usually involved direct government spending, or spending by government-related entities (GREs).
Dubai’s government has a slew of infrastructure mega-projects lined up, including about US$40 billion in investment in airports between now and 2022.
But the emirate’s GREs are indebted, and have limited capacity to fund new projects.
The IMF this month warned the GREs to slow the pace of starting major projects, and to ensure that there is demand for new projects before building them.
According to the IMF, Dubai GREs have $143bn of debt outstanding, which is equal to 136 per cent of the emirate’s GDP. Of the debt, $7bn is due for repayment next year.
This limits the capacity of GREs to further spend on infrastructure.
The collapse of oil prices has hit Dubai indirectly, as the emirate’s real estate market slows, and tourism from oil-rich Arabian Gulf neighbours also declines.
This has led to the IMF revising down its estimates for GDP growth across the UAE.
Follow The National’s Business section on Twitter
Updated: August 18, 2015 04:00 AM