Aug
23
2012

Essay: Disadvantages of PPPs

Several high profile projects, which are perceived failures of PPPs in the Middle East, have cast doubt in ensuring successful partnerships. For example, the US$3 billion Mafraaq-Gweihat highway being constructed in Abu Dhabi will not commence on the initial platform of a PPP. This is after taking the bidders through a long enduring tender process. The same case applied to the US$10 billion Land bridge, a landmark in the Kingdom of Saudi Arabia.

There is a possibility that PPPs have failed to take off in the Middle East, even after forcing their commencement; the same issues always seem to plague the projects. PPPs basically pose a very high borrowing rate. This will plague the government with a debt which they will be servicing for a long time.

On their part, the PPP players usually face future flexibility problems owing to the debt payments. They will be constantly be postponing or seeking more debt to service prior debts in order to meet their budget estimates. PPPs do a great injustice to the future generations in that they inherit debts from their predecessors. Instead of focusing on growth projects, the future generations will face a daunting task in the repayment of these debts.

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