Monday 19 November 2018

Mideast infrastructure investment outlook 'bright'

DUBAI, December 7, 2017

The outlook for Middle East infrastructure investment remains positive as the region increases focus on public-private partnerships (PPPs) and privatisations, according to international law firm CMS.

The UAE is the most attractive Middle Eastern country for infrastructure investment, stated CMS in its infrastructure index which has been launched recently.

While the Netherlands claimed top global spot overall, despite a prolonged period with no government at all, countries in the Middle East claimed three spots in the top 20, said the CMS Infrastructure Index which ranks 40 jurisdictions in order of infrastructure investment attractiveness.

The Index has ranked the UAE in 10th position, attributing its high degree of diversification, global hub status, 2015 PPP legislation and the upcoming Expo 2020 as key drivers.

Qatar and Saudi Arabia also feature in the top 20 list, at 12th and 18th position respectively, followed by Oman (22nd), Jordan (31) and Iran (38).
Nick Kramer, the partner and head of construction at CMS in the Middle East, said: "Prospects for infrastructure investment across the Middle East look bright. The current environment provides strong incentives for the development of PPPs and privatisations, opening up new opportunities for international investors."

Mena has succeeded in looking at alternatives to combat ongoing low oil prices and take advantage of its natural solar resources, with a number of countries in the region showing a keen interest in renewables, he stated.
UAE and Jordan have already played a pioneering role in exploiting their high levels of solar irradiation, while Saudi Arabia’s recent commitment to clean energy through its “Vison 2030” agenda is hailed as a game changer for the regional pipeline.

Qatar, which is in the midst of a flurry of infrastructure activity in the lead up to the FIFA World Cup in 2022, was one of the most promising infrastructure markets in the region – however its recent diplomatic tensions with Arab neighbours may hinder the country’s long-term growth prospects, the expert cautioned.
Elsewhere in the region, the long-awaited approval of a PPP law could further enhance Oman’s attractiveness as an investment destination as it plans to increase its position as a regional trade hub by improving its transport network.

Amir Kordvani, the partner and head of projects at CMS in the Middle East, said: "A healthy pipeline of projects are already underway or being planned, across the healthcare, transport, water and sewage sectors, although the success of these will lie in regional stability and a willingness to learn from the outside."

"Sustainability and innovation will also continue be major themes, as the region diversifies away from its dependence on oil," he added.

On the European countries, the CMS Index said they have bounced back after a period of stagnation.
Quantitative easing, the Juncker Plan and EIB support have all contributed to accelerated levels of EU infrastructure spending in recent years, and with economies such as Czech Republic and Romania experiencing significant expansion, there is room for optimism for future investment, it stated.

Europe as a whole has experienced an upsurge in infrastructure investment, as many politicians have been willing to use infrastructure investment as an economic stimulant.

As well as the Netherlands and the UK, Germany, Norway and France ranked highly in the study, particularly for innovation. In Germany, all dominant parties have placed their support behind PPPs and it is expected that deal flow, particularly in large-scale transport PPPs, will stay the course, it stated.

Maybe unsurprisingly, the UK struggled to hold on to the top spot it gained in the Infrastructure Index conducted by law firm Nabarro in 2015.

The impact of Brexit and general political instability is already starting to have an impact on infrastructure investments, as investors struggle with a lack of certainty in the country, said the CMS report.

Those operating across the sector are clearly looking for commitment and long-term policy from government to allay fears. The report highlights in particular the lack of consensus over infrastructure megaprojects such as a third Heathrow runway and HS2, it added.

CMS commissioned the Infrastructure Index, in conjunction with Inspiratia, to evaluate past trends and to serve as an indicator as to which jurisdictions would be most attractive for future investment and activity.  

The index is based on six main indicators:

•Economic status, which takes into account trade as a percentage of GDP, credit rating and interest rates, comprising 30 per cent of the overall score.
•Sustainability and innovation, taking into account environmental performance, innovation and quality and consolidation of infrastructure, comprising 12.5 per cent of the overall score.
•Tax environment, taking into account corporate tax rate, resource drain and tax complexity, comprising 5 per cent of the overall score.
•Political stability, taking into account the effectiveness of governance and rule of law, and regulatory stability, comprising 22.5 per cent of the overall score.
•Ease of doing business, which takes into account transparency and doing business, comprising 10 per cent of the overall score.
•Private participation, which takes into account government support, gross fixed capital formation and private investment, comprising 20 per cent of the overall score.

Kristy Duane, the partner and co-head of infrastructure and project finance at CMS in the UK, said: "From China’s Belt and Road to the UK’s Brexit bump in the road, politics and policy remain central to shaping infrastructure investment flows globally."

"If governments are to attract the apparent wave of private capital available, they should look to countries like the Netherlands and Canada for inspiration where transparency and a clear strategic vision for infrastructure shapes the agenda," he added.-TradeArabia News Service

Tags: UAE | Middle East | investment | Infrastructure |

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