Infrastructure Financing through Islamic
Finance in the Islamic Countries
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law or regulation related to PPP, but the Public Private Partnership (PPP) Guideline issued by
the PPP Unit, Prime Minister’s Office guides the implementation of PPP projects. Sudan has
recently set up a PPP Unit in 2018 with the support of the World Bank. Although in the UK,
there is no specific PPP law, the Private Finance 2 initiative provides the guidelines for
implementing PPP.
The UK has developed a standardized contract format that can be used in different PPP
projects and helps in reducing transactions costs and legal ambiguities. The role of Islamic
finance can be enhanced through the use of a Shariah-compliant, standardized contract format
that can be used in different PPP projects which can be developed. While this can be done in
each OIC country, an initiative by the Islamic Development Bank to develop the contract
template would be more efficient since the bank has a vast amount of experience in financing
infrastructure projects.
Since most countries would be inclined to invest in sustainable infrastructures under the SDGs
framework, there is a need to enact supportive laws and regulations that can support these
initiatives. For example, the Guidelines of Sustainable and Responsible Investment Funds issued
by the Securities Commission Malaysia provides the guidelines for raising funds that can be
used in sustainable infrastructure projects. Similarly, the regulations related to the Upfront
Tariff Regime in Pakistan that defines the Feed in Tariff and the permitted indexations and
escalations applicable during the concession period creates incentives for private sector
players to invest in solar energy projects.
5.2.2. Sector-Specific Laws/Regulations
Given the uniqueness of different infrastructure sectors, there may be a need for laws and
regulations to cater to the specific features of the sectors. For example, Nigeria has a set of acts
for different infrastructure sectors such as the Federal Highways Act, National Railway
Corporation Act, Nigerian Civil Aviation Authority Act, Nigerian Ports Authority Act, etc. In
Indonesia, Government Regulation No. 40/2012 relates to airport construction and
environment preservation and Government Regulation No. 14/2012 relates to electricity
business provision. In Malaysia, the Energy Commission Act 2001 established the Energy
Commission (Suruhanjaya Tenaga) to regulate the energy (electricity and gas) sector in
Malaysia, and the Electricity & Cogeneration Regulatory Authority (ECRA) was established
through Royal Decree No. M/56 2005 in Saudi Arabia.
5.2.3. Public Procurement Regime
The procurement framework and processes for infrastructure projects must be open,
transparent and competitive and allow for multiple parties to bid for infrastructure projects.
To avoid confusion and suspicion, the procurement procedures should clearly outline the
criteria used for soliciting and evaluating proposals. Some of the countries examined in the
study have laws/regulations governing procurement. In Indonesia, Presidential Regulation No.
38/2015 on the Cooperation between Government and Business Entities on Procurement of
Infrastructure provides guidelines on the regulatory framework for procurement in PPP
projects. Public Procurement (PP) Act 2007 in Nigeria outlines the procedures of procurement
of infrastructure projects in the country. In Malaysia, the Private Partnership (PPP) Guideline
provides the key principles on how the infrastructure projects are procured and implemented,
and the Guidelines for Integrity Pact Implementation in Government Procurement issued by