Public-Private Partnerships in Oman: Paving the Way for Economic Diversification and Sustainable Development

Legal Framework

The legal architecture of Oman’s Public-Private Partnerships (PPPs) is underpinned by two key legislative instruments:

1. Royal Decree No. 52/2019 (the "PPP Law"): This decree establishes the legal foundation for PPPs in Oman, setting out the principles and procedures that govern the formation and execution of partnership projects between the public and private sectors.
2. Ministerial Decision No. 3/2020 (the "PPP Regulations"): These regulations provide the detailed operational guidelines for the PPP Law, specifying the executive procedures for the initiation, development, and management of PPP projects.

Together, these documents create a comprehensive framework that exempts PPPs from the conventional Omani Tender Law, thereby facilitating a more streamlined process tailored to the unique nature of public-private collaborations. The Ministry of Finance (MOF) has now assumed all functions related to PPPs and is designated as the principal overseer, ensuring that PPPs are aligned with national economic strategies and development plans.

Key Provisions of the PPP Law

The PPP Law is designed to be all-encompassing, addressing various aspects of the PPP process:

• Tendering and Procurement: The PPP Law outlines the procedures for tendering and procurement, ensuring transparency and competitiveness in the selection of private partners.
• Project Company Formation: It provides guidelines for the establishment and registration of project companies, which are essential for the operationalization of PPP projects.
• Scope of Projects: The PPP Law clearly defines a partnership project as one that aims to carry out work or provide public services of economic or social importance, consistent with Oman's strategic and development plans.
• Risk Allocation: A critical aspect of the PPP Law is its focus on risk allocation. It emphasises the need for a balanced distribution of risks between the public and private sectors, which is crucial for the sustainability and success of PPP projects.
• Exclusion from Omani Tender Law: Significantly, the PPP Law stipulates that the provisions of the Omani Tender Law do not apply to PPP projects. This exclusion is intended to provide a more flexible and specialised approach to the procurement of PPPs.

Mandatory Provisions of a PPP Contract

A partnership contract under the PPP framework must include specific mandatory provisions to ensure clarity and balance between the public and private entities involved. These provisions encompass the identification of contracting parties, the scope of work, financial obligations, risk allocation, and dispute resolution methods, among others. Notably, the contract must adhere to Omani law to be valid, with a growing trend towards utilising the Oman Commercial Arbitration Centre for dispute resolution.

The 50-year term limit set by Oman's PPP Law is a significant provision that governs the duration of partnership contracts between the public and private sectors. The term limit is also indicative of the government's commitment to maintaining control over strategic assets and services in the long term, while still encouraging private sector participation in the nation's development.

Competent Authorities

In Oman’s PPP framework, the term “competent authority” refers to the government entity that is authorised to enter into PPP contracts. In practice, competent authorities are various government ministries and public institutions that are vested with the power to propose PPP projects. These authorities identify potential projects that can contribute to the nation’s socio-economic development and submit them to the MOF for tendering. They play a crucial role in the initial stages of the PPP process by recognising areas where private sector innovation and investment can be most beneficial.

Lifecycle of a PPP in Oman

The lifecycle of a PPP project in Oman unfolds through a series of well-defined stages, ensuring that each project aligns with the nation's strategic goals and delivers economic or social value. Here's an overview of the process:

• Idea Submission: A partnership project idea is submitted to the MOF in the form of an initial feasibility study that aligns with Oman's strategic and development plan and promises economic and social output.
• MOF Evaluation: The MOF reviews the idea and decides whether to accept or reject it. If accepted, the idea owner must submit a comprehensive feasibility study of the project.
• Coordination for Evaluation: The MOF coordinates with the competent authority to evaluate the partnership project.
• Expression of Interest/Request for Qualifications: A notice inviting the expression of interest is published, followed by the submission of qualification documents by bidder consortia.
• Clarifications and Responses: Bidders provide clarifications, and the MOF or the competent authority responds accordingly.
• Request for Proposals: A Request for Proposals (RFP) is published, and qualified bidders submit their proposals, which include separate technical and financial components.
• Bid Evaluation: The submitted bids are evaluated, and negotiations take place between the MOF and the winning bidder.
• Project Award: The partnership project is awarded to the winning bidder or consortium, leading to the registration of the project company, execution of project, finance and security documents, satisfaction of conditions precedent, and the first drawdown of loan facilities.
• Project Execution: The project company, established by the winning bidder, executes the project in accordance with the RFP, the partnership contract, PPP Law, and any additional agreements. This includes obtaining all necessary approvals and permits before commencing work or during execution of the works.

It is important to note that the owner of the partnership project idea will not always be the party executing the project. However, the idea owner is entitled to certain benefits, including the right to qualify for participation in the submission of bids. This ensures that innovative concepts are recognised and rewarded, even if the project's execution is carried out by another entity.

Recent Developments

Oman's PPP initiatives are gaining momentum, aligning with the strategic objectives outlined in the 2024 State Budget.

The government has announced plans to progress the implementation of 11 significant projects under its PPP program during 2024, spanning sectors such as transport, health, education, agriculture, fisheries, construction, and ICT. These projects are expected to contribute to the nation's economic diversification and fiscal sustainability.

Transport & Logistics:

• Salalah – Thamrait Truck Road Project: A toll road for heavy trucks connecting Thamrait with the Port of Salalah.
• Al Maabela – Thamid Road Project: A road linking Al Maabela with Thamid in the Wilayat of Bidbid.

Health:

• Diagnostic Centers Management: Operation and development of diagnostic centres for the Ministry of Health in Muscat Governorate.
• Health Facilities Maintenance: Management and maintenance of health facilities in Muscat Governorate, Al Batinah North, and Al Batinah South governorates.
• Taafi Suhar Centre: Development and operation of a drug rehabilitation center in Suhar.

Education:

• Public School Bus Fleet Management: Placement of the Education Ministry’s public school bus fleet under private management.
• Development of 42 Schools: Concession for design, finance, construction, and maintenance under PPP model.

Agriculture & Fisheries:

• Liwa and Sur Fishery Harbours: Development, management, and operation of fishery harbours.
• Operation of veterinary clinics in Al Buraimi, Raysut, and Saal.

Other (Government Building):

• Construction of the new headquarters for the Ministry of Commerce, Industry and Investment Promotion.

Information & Communications Technology (ICT):

• Development and operation of the Invest Easy platform.

These developments reflect the MOF's commitment to leveraging PPPs to enhance public services and infrastructure, thereby reducing the government's fiscal burden while building capacity for risk appetite in the private sector.

Challenges and Considerations

Oman's PPP landscape is poised to develop further, with its legal and regulatory frameworks providing a robust foundation for future developments. However, the path forward will have challenges.

The adaptation of existing laws to fit the unique requirements of PPP structures remains a high priority.  Moreover, private sector's risk aversion, particularly in emerging markets, poses a substantial barrier to attracting investment. This is exacerbated by the current geopolitical climate, which has heightened market volatility and increased the cost of financing.

The Gulf Cooperation Council (GCC) region also presents a competitive landscape for Oman's PPP initiatives. With countries like Saudi Arabia implementing ambitious PPP frameworks, Oman must work hard to differentiate its offerings and foster an environment that is conducive to private investment.

Conclusion

While Oman's PPP drive is confronted with challenges ranging from legal adaptability to financial constraints, the opportunities presented by alternative financing mechanisms and international initiatives like the Belt and Road initiative in China can pave the way for a prosperous PPP ecosystem. By addressing these considerations with a balanced approach, Oman will position itself as a competitive player in the regional PPP landscape.

Oman’s PPP Law and the PPP Regulations provide significant guidance on the processes needed to implement and procure PPP projects in the Sultanate. They clearly outline the comprehensive procedures required to assess, identify and implement PPP projects. This should help build an attractive environment for investors (and lenders) and provide sufficient comfort to the private sector when bidding for such projects.

Together, the PPP Law and the PPP Regulations represent Oman's commitment to fostering a productive environment for PPP and divestment projects in the Sultanate. By producing such a comprehensive framework, Oman is in a good position to establish a clear pipeline of bankable projects to assist in its ambition to achieve Vision 2040.

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Disclaimer: The information contained in this article is intended for general informational purposes only and does not constitute legal advice. This article  is based on the legislation as of the date of publication and may not reflect subsequent changes or developments. The authors and Said Al-Shahry & Partners Advocates and Legal Consultants are not responsible for any errors or omissions in the content or for the results obtained from the use of this information. Readers should consult a qualified legal professional before acting upon any information contained in this article. No attorney-client relationship is created by accessing or using this content.