Saudi Arabia and other Gulf countries are reshaping how they finance the next wave of infrastructure, moving beyond government spending to tap private and institutional capital for projects spanning energy, water, and the digital economy.
The shift marks a broader change in the Gulf’s investment model, as governments, development banks, sovereign investors, and private capital increasingly share the cost of turning large-scale projects into long-term investable assets.
What is changing in the Gulf is not simply the scale of infrastructure spending. The financing model itself is being reshaped.
As projects expand across energy, water, transport and the digital economy, government funding alone is no longer enough to meet rising investment needs. Pension funds, insurers and asset managers, meanwhile, control vast pools of long-term capital that are well suited to infrastructure assets capable of generating steady cash flows over many years.
The region is therefore moving toward financing structures designed to share risks more effectively, strengthen project creditworthiness and turn government-backed investments into opportunities that can draw in private and institutional capital.
Speaking to Asharq Al-Awsat, Saud Alsayyari, Asian Infrastructure Investment Bank (AIIB) Senior Investment Officer for the Middle East and North Africa, said the “fundamentals are strong” in Saudi Arabia and across the Gulf.
Population growth, urbanization and economic transformation programs are creating a broad pipeline of opportunities in renewable energy, digital infrastructure, water and healthcare, he explained.
The bigger challenge is no longer finding opportunities. It is structuring the risks and mobilizing enough capital to deliver them, he stressed.
Multilateral development institutions can play a central role by making projects more bankable, reducing risks for investors and catalyzing capital flows far beyond the size of their own direct commitments, he added.
Renewable energy and digital infrastructure lead opportunities
Alsayyari noted that the strongest investment opportunities over the next five years are likely to emerge where economic growth meets climate and sustainability goals.
Large-scale renewable energy projects, backed by storage technologies, will be a key pillar of the region’s energy transition, he went on to say.
He pointed to the financing of Oman’s 500-megawatt Ibri II solar power plant as an example.
Technology-enabled infrastructure will also play an increasingly important role.
From nationwide fiber-optic networks to smart logistics, such infrastructure “multiplies the value of every other asset class,” Alsayyari said.
Social infrastructure, particularly healthcare and education, is also expected to expand alongside population growth and urbanization.
“Disciplined structuring and strong environmental and social standards are what turn opportunity into sustainable, long-term value,” Alsayyari remarked.
Development banks can turn plans into bankable projects
Alsayyari said multilateral development banks can help transform government infrastructure plans into projects that lenders and investors are willing to finance. Their role includes sharing risks and providing the technical expertise needed to make projects viable.
He cited recent financing with the Saudi Water Authority, structured with the National Infrastructure Fund and commercial lenders to modernize major desalination facilities.
Projects of that scale become investable when a multilateral development institution can absorb risks that commercial lenders are unwilling to take, he added.
Such institutions can also carry out environmental and social due diligence and provide the technical expertise needed to structure deals in line with international standards.
“That is the model: multilateral development institutions turn ambition into bankable projects through disciplined preparation, blended finance and credit enhancement,” he stressed.
AIIB’s involvement also “reassures the market, reduces perceived risk and catalyzes private capital far beyond the size of our direct commitment,” he said.
The key issue is who carries the risk
For private investors, the problem is not risk itself, Alsayyari said. It is how that risk is distributed.
Infrastructure risk cannot be eliminated, but it can be allocated more effectively among the parties involved, he remarked.
Problems arise when investors are asked to shoulder risks they cannot easily price, such as regulatory uncertainty, early-stage construction risk or revenue models without a clear track record.
“Our role as a multilateral development bank is to correct that risk allocation,” Alsayyari said.
AIIB does this through non-sovereign financing that reduces pressure on public budgets, as well as guarantees and first-loss structures that can make commercial investment tranches more attractive to institutional investors.
Those tools can also increase confidence in how projects will be delivered and operated, he explained.
Clear visibility over future projects is equally important.
Alsayyari said the investment program AIIB is developing with Saudi Arabia gives investors a clearer view of a structured pipeline of opportunities rather than leaving them to assess isolated deals one by one.
Four conditions could unlock institutional capital
Alsayyari said pension funds and insurers hold enormous amounts of long-term capital, yet infrastructure still accounts for only a limited share of their portfolios. That is despite a natural fit between the two.
Infrastructure assets can offer predictable, inflation-linked cash flows, making them well-suited to the long-term liabilities of institutional investors, he added.
Alsayyari identified four conditions needed to attract more of that capital: stable legal and regulatory frameworks, including clear public-private partnership rules; standardized project documents, procurement processes and structures; credit-enhancement tools; and reliable environmental, social and governance performance.
“Many global investors are subject to net-zero commitments, so they are looking for assets aligned with the goals of the Paris Agreement,” he noted. “When those conditions are in place, Gulf infrastructure can become a core asset class for institutional investors, and the capital will follow.”
Regional funds can multiply investment
Alsayyari described regional funds as one of the Gulf’s most effective tools for mobilizing private capital for infrastructure.
A direct loan finances one project. A well-structured investment platform can finance an entire portfolio, spread risk and build a broader investment ecosystem around it, he said.
He pointed to AIIB commitments to Gulf infrastructure funds, including Rakiza and Aberdeen Standard Investcorp Infrastructure Partners.
The funds target sustainable core infrastructure in healthcare, education, water, mobility and digital networks, with backing from investors including Saudi Arabia’s Public Investment Fund and the Oman Investment Authority.
AIIB’s participation adds more than capital, Alsayyari said.
Projects financed through the funds are assessed against the bank’s standards, ineligible activities are excluded and governance requirements are written into contracts.
The combination of “scale, discipline and local expertise” is crucial to steering institutional capital toward the region’s infrastructure needs, he said.
Gulf states look beyond new construction
Alsayyari said Gulf countries have made significant progress in building an infrastructure system that balances economic growth, environmental goals and long-term financing needs.
Sustainability has become embedded in national strategies, from net-zero commitments to renewable energy targets, he stated. One of the most striking developments, however, is the growing focus on upgrading existing assets rather than simply building new ones.
Alsayyari cited the modernization of desalination plants in Saudi Arabia.
Switching from thermal desalination to reverse osmosis will reduce energy consumption and emissions while increasing production capacity and extending asset life, he said.
“Growth and environmental performance are advancing together,” he told Asharq Al-Awsat.
The region’s financing system is also evolving quickly, with more structures combining multilateral, national and commercial institutions.
Alsayyari said the partnership with the National Infrastructure Fund offered a model that could be replicated elsewhere.
Every AIIB-approved financing aligns with the goals of the Paris Agreement, he said. “The direction of the region is clear, and we are proud to support that path.”
Energy, water and green hydrogen seen as the next growth areas
Over the next decade, Saudi Arabia and other Gulf states are likely to stand out in several infrastructure sectors, Alsayyari said.
Renewable energy and storage systems are expected to lead, alongside the emerging green hydrogen economy, technology-enabled infrastructure and climate-resilient water systems.
The region already has advanced investments in connectivity, data center capacity and digital infrastructure, he noted.
Water security will remain a strategic priority because of the region’s geography and its future needs.
The bigger transformation may be in how projects are financed
Alsayyari said the most important infrastructure change over the next decade may not be what the Gulf builds, but how it pays for it.
The region is gradually moving away from models driven mainly by government funding toward more complex partnerships bringing together governments, development institutions, sovereign investors and private capital.
That shift sits at the heart of the role the Asian Infrastructure Investment Bank was created to support, Alsayyari said.
AIIB’s 11th annual meeting, to be hosted by Doha, will mark an important milestone as the bank enters its second decade.
Alsayyari said Saudi Arabia and other Gulf countries could lead several global trends in renewable energy, digital infrastructure and water systems in the years ahead.
