UAE issues new decree to regulate public-private sector partnerships

The Ministry of Finance has issued a new decree to regulate public-private partnerships in the UAE, aimed at boosting private sector investment in federal government projects.

The Federal Decree-Law No 12 of 2023 applies to any partnership project that is proposed by a federal entity and wholly or partially funded by the private sector, the ministry said in a statement on Thursday.

The law came into force on December 1.

“The law aims to encourage the private sector to participate in developmental and strategic projects, increase investment in federal government projects of social and economic value, and enable the government to efficiently implement strategic projects,” the ministry said.

The government also hopes to benefit from financial and administrative expertise, technical knowledge and technology solutions available to the private sector, it added.

Other objectives include accelerating the implementation of projects that offer “an added value for public funds”, as well as “minimise financial and operational risks on the government”.

Transforming the management of some infrastructure projects and public services and enhancing the competitiveness of projects in local, regional and global markets also form part of the new law.

The UAE is working to boost the contribution of the private sector to the overall growth of the economy.

As part of Operation 300bn, the UAE launched the National In-Country Value programme, which aims to boost the private sector’s participation in the economy, diversify output and localise critical parts of the supply chain.

Operation 300bn focuses on increasing the industrial sector’s contribution to GDP to Dh300 billion ($81.68 billion) by 2031 – up from Dh133 billion in 2021.

The new regulation on public-private sector partnerships also specifies exemptions. These include partnership contracts that were entered into before the law’s enforcement date, the statement said.

Other exemptions include projects the value of which is less than the limit specified in the Partnership Projects Manual, public asset and service privatisation projects, as well as supply and procurement contracts related to national security specified in the manual.

It also extends to federal entities, sectors, and projects that are exempt as per UAE Cabinet decisions.

The new law “will provide the certainty and guidance to all federal entities as to what process they need to follow and what legal requirements they have to meet when developing successful PPP [public private partnership] projects”, said Alexander Sarac, partner of infrastructure projects and energy at international law firm Addleshaw Goddard.

“This certainty and comfort will encourage a wide range of ministries and government entities to explore this sector and PPP opportunities with more confidence and pace,” he said.

The latest move comes after the adoption of PPP laws by the Abu Dhabi and Dubai governments in recent years.

In 2020, Abu Dhabi issued new public-private partnership procurement regulations to boost collaboration between the private and public sector entities and attract more investment into the emirate.

The regulations followed the Abu Dhabi government’s announcement earlier that year to issue tenders worth Dh10 billion under the PPP model in infrastructure partnership projects including education, transport and municipal works.

The Dubai government's Department of Finance also set up a public-private partnership unit in 2019 to encourage the development of projects and initiatives that can be funded by global infrastructure investors.

PPP allows governments to procure major infrastructure and social projects from developers and investors who design, build and then manage facilities for periods of up to 30 years in return for revenue generated by users of the asset.

“Although the federal government has excellent expertise in PPP projects, especially in the energy and water desalination sectors, and managed to develop these projects without a specific PPP law, it is a very positive development especially for less common (at least in the region) PPP sectors, such as social infrastructure (health, housing) and transportation,” said Mr Sarac.

There are many benefits from private sector involvement in projects, according to Nicholas Kramer, partner at law firm Norton Rose Fulbright.

“Private sector investment and risk-sharing can reduce the burden on public finances and mitigate financial and operational risks for the UAE government,” he said.

“What’s more, private sector involvement can bring innovation and efficiency in project design, construction and operation, ensuring long-term economic benefits for the duration of the project. It can also help with job creation, which in turn is likely to stimulate growth.”