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.
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