Kuwait to push PPPs for $36bn infrastructure plans
Surging costs and slashed revenues due to oil price fluctuations have led Kuwait to encourage public private partnerships (PPPs)
Kuwait will invite private investors, including foreigners, to take part over the next two years in nine infrastructure projects worth $36bn, under a new law designed to facilitate such deals, an official has said.
According to Gulf Times, the country is facing huge construction plans, ranging from power stations and sewage and waste treatment facilities to railway and metro systems.
But the plunge in oil prices since last year has slashed its revenues.
So rather than assuming the full cost of construction, the government wants increasingly to use public-private partnerships (PPPs), in which private investors take stakes in projects, bear part of the risk and share profits from operating them.
Adel Mohammad al-Roumi, the president of the Kuwait Authority for Partnership Projects, which will oversee PPPs, said: “This has become an inevitable necessity because it reduces the burden on the state budget in light of falling oil prices."
The report added Kuwait has thus far completed only one PPP deal, since projects have been delayed or cancelled because of red tape, uncertainty over legal terms and political tensions between the cabinet and parliament, which have hindered planning.
But a new PPP law which took effect this year may help to break the logjam, partly by making it easier for investors to raise money.
Global law firm Ashurst, which was cited by the report, stated: “The new PPP law and its implementation regulations are a positive step for Kuwaiti PPPs and resolve a number of challenges that were present under the previous regime."
In the longer term, PPPs will be used for two much bigger projects, al-Roumi said.
Kuwait aims to start building a $6bn railway in 2016, having it ready to connect to a planned regional network in 2018.
It also plans a $20bn project to construct an urban metro system.
The government hopes PPPs will reduce the delays and cost overruns which have plagued past projects.
Private investors will not get major payments until projects are operating, creating an incentive to complete construction on time and within budget.