Private-sector participation in the GCC: Building foundations for success

The governments of the Gulf Cooperation Council (GCC) states have decided to change their economic development model. The state-led approach which relied upon natural resources successfully raised incomes from developing to developed country levels in a little over a generation. However, that model is no longer appropriate as it is undermined by oil dependence, a lack of workforce diversity and skills, a growing need for public services, and insufficient innovation. One effective response is private-sector participation (PSP). GCC states are already using PSP, but have wielded it tactically and ad hoc. As a result, they have not tapped its full potential. Instead, a comprehensive strategic program of public–private partnerships (PPPs) and privatization initiatives that covers all major sectors of the economy is needed to define a country’s PSP plan. If GCC states can successfully develop, launch, and execute such a PSP program, they can transform their economies. The GCC states could avoid US$164 billion in capital expenditures by 2021 and generate $114 billion in revenues from sales of utility and airport assets alone, and up to $287 billion from sales of shares in publicly listed companies. Furthermore, GCC states could narrow the innovation gap with other countries, enhance the delivery of and access to government services, and improve their infrastructure. To capture these benefits, GCC governments will need a rigorous and comprehensive approach to PSP and a clearly articulated, long-term implementation plan that encompasses all economic sectors. Such an approach rests on three foundational elements: A governing policy for PSP that is either a standalone policy or part of a broader national policy; a legal framework that encompasses the new laws or modifications to existing laws necessary to facilitate PSP activities; and an institutional setup that clearly defines and allocates authority over PSP to existing government entities or establishes new entities to govern it.


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