Overview of New Federal PPP Law- A Boost to the UAE Economy

Overview-of-New-Federal-PPP-Law-A-Boost-to-the-UAE-Economy

UAE’s Ministry of Finance took an essential step by introducing Federal Decree-Law No 12 of 2023, effective December 1. The new legislation regulates Public-Private Partnerships (PPPs) and further focuses on private-sector investment in federal government projects.

Let us get into the insight of the new Federal PPP law:

Abu Dhabi and Dubai, which are parts of the Emirates, have their own PPP framework. Still, the new PPP framework is set to regularize the collaboration between private and government entities in the UAE. It will further encourage all private organizations to participate in the overall development of the region.

Under this new federal law, there are other things included

  • Laying down a robust legal framework for institutional arrangements and setting clear roles for MOF along with other federal entities.
  • It aims to make federal PPP projects commercially feasible for participating private companies and to offer incentives for private partners that will increase their chances of participating in PPP projects.

What are the critical Provisions in Federal Decree Law No 12?

The new federal PPP law comes with some key provisions, including-

  • Scope: The law covers a broad range of initiatives that are either fully or partially sponsored by the private sector and are suggested by federal entities. The government’s eagerness to promote private sector involvement in important and developmental projects is reflected in this broad breadth.
  • Focus: The law lays out specific goals to increase private sector participation in worthwhile social and commercial endeavours. By leveraging the private sector’s technical know-how, financial and administrative proficiency, and technological solutions, the government hopes to accelerate project implementation and improve competitiveness in local and international markets.
  • Emphasis on Private Sector Investment: The law strongly emphasizes private sector involvement in federal government initiatives. This calculated action is consistent with the UAE’s Operation 300 billion plan, which seeks to raise the industrial sector’s GDP contribution to Dh300 billion ($81.68 billion) by 2031.

Overview of New Federal PPP Law- A Boost to the UAE Economy

What are Excluded?

This new PPP law targets Partnership Projects jointly funded by both private and government companies. However, it comes with some exclusions, including-

  • Partnership agreements that were signed before December 1, 2023, or before the New PPP Law went into effect; the outsourcing of services that fall under the Guidebook’s purview.
  • Projects that fall below the Guidebook’s financial threshold; projects aimed at privatizing public services and assets; supply and procurement contracts about national security; and federal entities, sectors, and projects that are exempted by a Cabinet decision.

What are the Objectives of this New Law?

The federal PPP Law is to following points:

Increasing Private Sector Participation

One of the law’s main objectives is to increase private sector involvement in federally sponsored initiatives with significant social and economic benefits. This move will bring in the knowledge and funds needed for intricate development projects.

Making Use of Administrative and Financial Experience

The government aims to leverage private firms’ financial and administrative know-how by promoting private sector involvement. This partnership aims to guarantee effective resource utilization and optimize project management procedures.

Increasing Project Competition

The goal is to make federal projects more competitive in local, regional, and international markets. The government expects projects involving the private sector to be more innovative and efficient while using public cash.

Guidance for Federal Entities

  • Procedures and Lawful Needs

The legislation offers complete guidelines for federal entities to ensure the success of PPP initiatives. It describes the procedures and legal requirements that must be followed for PPP projects to be initiated and carried out successfully.

  • Accountability and Transparency

Throughout the PPP process, accountability and openness are prioritized. Federal institutions must follow strict guidelines to guarantee that collaboration is advantageous to all parties.

What benefits can the UAE have from private sector involvement?

It Brings Down the Load on Public Budgets

The inflow of private sector capital can considerably reduce the financial strain on public coffers. When the private sector shares the financial burden, the government can take on more ambitious projects that benefit public welfare without going over budget.

Reducing Operational and Financial Risks

Projects that involve the private sector share some of the risk. By doing this, operational risks are shared, and the government’s financial burden is lessened. The private sector is likely to put strong risk management plans into place because of its investment.

To Bring Innovation and Efficiency

Innovation is a critical component of private sector operations. The cooperation of the public and private sectors is anticipated to result in new concepts and creative approaches to project planning, execution, and maintenance. The results from this creative infusion may be more effective and long-lasting.

Conclusion

The new PPP federal law comprises multiple vital principles that will bring a massive change in the UAE economy. Further, it will strengthen public-private partnerships. The all-encompassing regulatory framework emphasizes cooperation across several industries and is a reflection of a forward-thinking approach.

The favourable advances in PPPs are positioned to boost economic growth and leave a lasting impact on the development of the country as the UAE works to fulfil the objectives outlined in Operation 300bn.

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