Oman's new Public Private Partnership Law


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Oman has just released the long awaited Public Private Partnerships Law (Decree No. 52/2019).  This law sits alongside a new Privatization Law (Decree No. 51/2019) which was also released earlier this week.

Oman announced that it would be developing a PPP law some time ago. Its arrival is much welcomed and will hopefully lead to rapid progress with the raft of PPP projects which the Government has announced are under planning.

A complete picture of Oman's planned PPP structure is not yet available as the associated regulations for both the PPA Law and the Privatization Law will be released one year from the date of publication. Vital issues such as the availability of a sovereign guarantee are not covered in the PPP Law and the market will be hoping that these regulations are issued as soon as possible to allow investors to fully evaluate the attractiveness of PPP projects in Oman. Both laws create a high level framework under which PPP and privatization opportunities will be offered to the market.

Below are some initial thoughts on the laws:

  1. The Public Authority for Privatization and Partnership (Authority) is empowered as the body to control PPP projects; however the Authority will work with other Ministries in developing projects and, importantly, will have to seek Ministry of Finance Approval before launching a project.
  2. PPP projects must offer "economic or social" return and conform with Oman's "strategy and development plan". These requirements are not clearly defined; however they would seem to offer a very wide discretion over the areas in which PPP projects can be offered.
  3. The Authority is obliged to take the lead in preparing, evaluating, negotiating and awarding tenders for PPP projects; in consultation with the relevant Ministry. Interestingly, the Tender Law (Decree No. 38/2008) does not apply to projects under the PPA Law or the Privatization Law, or consultancy contracts associated with either law. In relation to the Privatization Law, there is an obligation to use independent consultants to assess which projects are suitable for privatization,
  4. Ministries do retain the responsibility for managing PPP projects. It will be interesting to see how Ministries deal with running what can be complex contractual arrangements and there will need to be an extensive programme of training to ensure that Ministries who are not used to dealing with the private sector can properly mange these contracts.
  5. A specific appeals process is created under the law for disputes relating to the tender process, project award or implementation. This appeal provision appears in both the PPP Law and the Privatization Law. How this interacts with the court system (and arbitration mechanisms) will be a key issue. However, developers will surely be pleased to have some way to challenge what they perceive as unfair decisions.
  6. Under the PPP Law Direct approaches by developers in are permitted and direct awards without a tender can be made, subject to the approval of the Council of Ministers.
  7. The PPP law does not have any impact on public utilities which suggests that OPWP and the Sector Law will remain untouched by this new law.
  8. One very important and welcome position is that both the PPP Law and the Privatization Law explicitly state that 100% foreign ownership will be permitted. However the required capital and other details of the project company will follow in the regulations. Government participation is also anticipated in the law, but would seem be limited to a maximum of 40%.
  9. The bidding process is outlined in some detail in the PPP Law. Interestingly, for projects of a special nature, competitive dialogue is specifically mentioned as an acceptable way to reach an award. This may offer developers some hope that PPP projects will not just be awarded on a lowest cost basis.
  10. There is a specific provision allowing the Authority to reject bids for a PPP project if prices "unjustifiably exceed" the compared cost. It is not clear what the compared cost is, but this provision does indicate that the Authority has taken note of the concerns over value for money which have been raised in mature PPP markets.
  11. The PPP Law imposes fairly strict controls on the project company, sale of shares, the creation of security and assignment all will require the approval of the Authority.
  12. The PPP Law describes at a high level what a PPP contract will look like. There appears to be nothing overly concerning here though the provisions are not detailed and there is no indication how important issues like change in law, compensation and termination are actually going dealt with. One interesting provision is that the duration of the PPP contract cannot be more than 50 years. This seems very generous, particularly when compared to the current 15 year term of OPWP's PPAs and WPAs.
  13. Under the PPP Law, on termination or expiry project assets revert to the Government, after, it appears taking account of any agreed compensation. This would suggest that the law requires BOT or BOOT type structures to be used in Oman. This is interesting as around the region the transfer element of PPP structures seems to be falling out of favour as governments seek to divest themselves of assets.
  14. One provision of particular note in the Privatization Law is that Omani employees are to be transferred over on the same terms and conditions as they were on previously, and that these terms and conditions are to remain the same for 5 years.
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