With a focus on the prospects for the year 2024, speaker Mr. Daniel Kaye, the Chief Group Economist from the National Bank of Kuwait (NBK) contributed to a panel discussion at the event with the perspective that the Middle East was in the right place based on the global economic landscape. He indicated that the prospects for the gulf and Kuwait were positive moving into 2024 as oil prices would likely remain high, regional fiscal policies were expansionary and pro-growth economic reforms were set to continue. In Kuwait, reform trends have not been as strong as in other regional areas, but Kaye noted that, if passed, important reforms and legislation currently before parliament would help drive the economy forward. These reforms combined with a greater commitment from the government towards investment spending is what Kaye believed to be critical to enhance economic growth in Kuwait.
This optimistic outlook was also supported by other panel members at the conference, who emphasised the need, and urgency, to increase PPPs in order to achieve the New Kuwait 2035 vision. To accelerate the process, the panel looked at areas where “easy wins” could be achieved, for example housing, where PPPs could be implemented to close the housing gap, increase supply and affordability, while significantly building the community, increasing jobs, and boosting the construction industry.
Mr Thibaut Mourgues, Co-founder and Member of the Executive Committee of World Association of PPP Units and Professionals (WAPPP) is convinced that PPPs are an excellent vehicle for Kuwait to boost the non-oil sector, creating job opportunities, localisation, developments in technology, knowledge transfer, economic diversification and growth. However, he stressed that PPPs needed to be used appropriately. As a panel, they agreed there was a need to ensure PPPs add value to Kuwait by assessing the urgency, cost benefit, impact on the environment and the benefit for the people. This needs to be led from the top down, with a concerted effort between all institutions to work together, to bring Kuwait in line with the region, generate more growth and create job opportunities for the future.
Kuwait Authority for Partnership Projects (KAPP), an authority specialised in the structuring and procurement of PPPs was established under the PPP Law No. 116 of 2014 and is a testament to the government’s dedication to the development of PPPs in Kuwait. Ms. Manal Al Mutairi, Legal Specialist at KAPP, explained that the PPP unit assists in the procurement and implementation of PPP projects, and promotes private sector participation in infrastructure development as a way for the government to utilise private sector skills, such as efficiency and innovation, in the stimulation of the economy. The PPP Law, in addition to models such as BOT, BOOT, DFBO, also envisages the use of service and management contracts, where the private sector provides services and manages the project, with the end goal being the eventual transfer of the project to the State. Al Mutairi noted that PPP projects could be proposed by either the public or private sector, along with feasibility studies for the project that include information regarding the financing of the project in accordance with standard finance requirements. Al Mutairi outlined how PPP companies were establish after a successful bid and procurement process.
Throughout the procurement process, KAPP has the responsibility to coordinate between the procuring public entity and the investors and to provide the required information, in an effort to make the process easier for the investors. However, Al Mutairi noted that the PPP process in Kuwait is not easily understood or as fast as others in the region and pinpointed areas where improvements could be made, including an increase in investment caps outlined in the PPP Law and highlighting the incentives for investors provided through PPPs, including exceptions for income taxes and custom duties, as she believes these incentives would attract more investors to participate in Kuwait’s PPP projects. It was suggested that creating a single body to deal with paperwork, approvals and permits for PPPs would make the process easier, smoother and faster. In closing, Al Mutairi announced KAPP had just pre-qualified and shortlisted investors, companies and consortiums for the Az Zour North Phase 2 and 3 IWPP Project and Al Khairan Phase1 IWPP. She also stated that KAPP would soon be launching the Fixed Telecommunication Network Development Project in conjunction with the Ministry of Communications.
Following on from Al-Mutairi’s presentation was , Panel 2 of ASAR Conference 2023, moderated by Akusa Batwala, Partner at ASAR, which was tasked with the assignment of identifying factors they believe are crucial in the structuring and delivering of successful PPP projects. To start off the discussions, Mr. Nayaf Al Haddad, Chair of the Mena Chapter of WAPPP, drew on his experience with PPPs and identified what he believes are the 3 most crucial factors for success as: a strong institutional, legal and regulatory framework, adequate government support and a competitive and transparent procurement process. To see why previous PPPs had been successful in Kuwait in the past, Al Haddad pointed to the Az Zour North IWPP project as an example, pointing out the support and drive from the government and the collaboration of all stakeholders coming together with a clear understanding of what was trying to be achieved as factors in its success. He noted that PPPs also need to be attractive domestically and internationally to attract private sector investment.
Mr Kunal Singh, General Manager of the International Banking Division at the Commercial Bank of Kuwait, identified the crucial factors the finance sector looks at when considering the financing of PPPs. The factors he identified included: clear communication between stakeholders from the start of the project, having adequate support from the different government stakeholders involved in the PPP, the appropriate risk allocation of the project, and compliance with ESGs to ensure sustainability of the projects. He also highlighted the need to establish what the role of the PPP is in providing support for the economy and whether it is needed for economic growth. The panel further discussed the importance of the government putting aside funds to make available affordable financing for PPPs.
Drawing on the experience of previous PPP projects, the panel was able to identify the need for a “one stop shop” initiative to deal with PPPs specifically, advocacy on the PPP programs and ensuring everyone involved was familiar with the PPP laws and empowering those in authority to make timely decisions.
Mr. Sohail Barkatali, a partner at Hogan Lovells Duabi identified the following factors as crucial to a successful PPP; competent transaction advisors to ensure adequate project preparation and structuring, a comprehensive technical, financial and legal feasibility study of the proposed project and stable economic policies and macroeconomic conditions that would attract and protect investors and lenders. He also highlighted the need to examine the reason why the PPP projects in Kuwait, in comparison with other countries in the region, were taking longer to procure and implement. The panel also discussed the need to review the current PPP law, noting that it was essential that lessons learned throughout the last decade were addressed and incorporated into amendments to the law to improve decision making, reduce delays and to ensure PPPs were resilient and not affected by political change.
In closing, Batwala identified the key takeaways from the session, including the need to have a strong institutional and legal regulatory framework that incorporates a competitive and transparent process, competent transitionary advisors to structure projects adequately and ensure they are bankable, full government support and the need to ensure the projects meet the relevant ESG criteria to ensure sustainability and relevance to future generations.
ASAR, being the premier PPP practice in Kuwait, is ready to assist as the preferred PPP legal advisor. ASAR has advised the government, sponsors and lenders on PPP projects and can provide the necessary guidance to help entities navigating the PPP process in Kuwait. In closing, Kuwait can drive its economic growth through transformative PPPs, with ASAR at the helm, benefiting Kuwait as a nation and ensuring sustainable economic growth for future generations.
