Middle East

The five Index countries in the region represent five of the overall top ten Index jurisdictions in terms of tax environment, and score in the top twenty for their ability to fund and implement infrastructure investment.

The ease of doing business is improving across the region, reflecting an effort to reduce state involvement and encourage private sector investment from both within and outside the region. This region potentially has the most adjustment to make in terms of the transition away from fossil fuels so economic diversification is a high priority. The natural endowment of warmth and sunlight is fostering investment in multiple solar energy projects as well as nature-based solutions for removing carbon from the atmosphere. Another key area for investment is in water management. Projects for efficiently managing water use as well as utilising the abundant energy resources for desalinisation of sea water are prominent.

Saudi Arabia moves towards its Vision

Saudi Arabia is by far the region’s largest economy. Under its Vision 2030 initiative, launched in 2016, the country is making great strides in not only diversifying its economy away from fossil fuels but also reducing the involvement of the state in the economy. Saudi Arabia is actively promoting public-private partnerships and recently announced a project pipeline consisting of 200 projects in 17 sectors in which both local and international investors are encouraged to participate. A large number of healthcare projects are being rolled out across the country including long-term care and skilled nursing homes, medical rehabilitation hospitals, home healthcare, new maternity and children’s hospitals and 224 primary health centres. Water services are another major focus of the country’s infrastructure programme, with four projects now awarded to upgrade water networks in the Eastern Province.

The plan of creating 59 logistics zones by 2030 has progressed, with 21 already operational. A new high-speed railway linking Riyadh and Doha in Qatar is moving forward. A feasibility study is exploring a new high-speed railway connection between Saudi Arabia and Kuwait. But – partly because some large projects have been completed – overall government spending on this type of infrastructure and transportation fell in 2022 and is expected to fall further in 2023. These falls also reflect the growing involvement of the private sector in infrastructure projects.

Other visions of a brighter future

Kuwait is progressing its Vision 2035 agenda. The initiative includes making it easier to get a business licence, increasing the share of renewable energy to 15%, adding 8,000 hospital beds and increasing the amount spent on infrastructure. Although the country’s infrastructure is already well-developed, its ports and airports need to expand capacity. The country is actively promoting PPPs and encouraging foreign investors to participate.

Oman recently released its Oman Vision 2040 programme which aims to reform to its regulatory structure, build world-class infrastructure facilities and create an education system responsive to a low-carbon world. Prior to the pandemic, plans were announced to generate at least 30% of Oman’s electricity through renewable independent power projects (IPPs). An economic free zone is planned for Muscat airport. The state budget in 2023 included PPPs that would focus on education, healthcare and highways. In addition, Oman and the UAE are cooperating to establish a rail link between the port of Sohar and the UAE national railway network.

Qatar National Vision 2030 was launched in 2008 and is a long-term road map for the type of economic development the country wants. The softer sides of infrastructure, namely education and healthcare, are strong priorities in the long- term plan. Infrastructure investment accelerated in 2010 after the country won the rights to host the 2022 FIFA World Cup, as substantial investment in transportation, roads and ICT was necessary to make the event a success. The focus in the coming years is expected to be on creating a knowledge- based economy and expanding ICT infrastructure which will allow a transition to smart cities.

The UAE’s Vision 2021 has been succeeded by a plan called We the UAE 2031. This goes far beyond infrastructure to cover many aspects of national life in very broad terms. In infrastructure, it highlights a wish to be “the most seamlessly connected country in the world”, with both advanced physical infrastructure and next- generation digital infrastructure.

COP28

This Infrastructure Index report is being published just a few weeks before the UAE hosts COP28 in Dubai. One of the key themes at COP28 will be the first Global Stocktake, a comprehensive assessment of progress on climate action since the Paris Agreement was adopted in 2015 and the basis for discussions of what actions should be taken next.

Reports that the UN has published to support to the stocktake process have painted an uncomfortable picture of a world that is not currently on track to limit global warming to 1.5C above pre-industrial levels. But suggestions that, for example, scaling up renewable energy and phasing out all unabated fossil fuels are ‘indispensable elements’ of just energy transitions to net zero emissions are likely to prove controversial with some of the parties at COP28. And while delegates might accept a general sentiment, such as ‘access to climate finance in developing countries needs to be enhanced’, they may find it harder to agree on the form that enhancement might take.

Infrastructure investors and professionals watching the COP process will be aware that some of the potential initiatives being floated – such as unlocking and redeploying trillions of dollars to meet global investment needs, and rapidly shifting financial flows globally to support a pathway towards low greenhouse gas emissions and climate-resilient development – would be revolutionary if they were adopted. It seems unlikely. And yet the direction of travel is clear, and there is strong pressure for action.

The UN report even suggests, rather like the Bridgetown Initiative, that a transformation of the financial system is needed, and that momentum is growing for “fundamental and impactful improvements to public financial institutions”. We will probably see new targets come out of COP28. But will we also see new financing initiatives, or pledges of systemic change? We will soon know.