Four major Kuwaiti projects put on hold

31 January 2013

Communications Minister orders review of metro and rail schemes

Four large privatisation projects in Kuwait have been put on hold after the Communications Ministry ordered a review of the plans while it considers bringing them back under government ownership.

The schemes include the public-private partnerships (PPPs) to develop the Kuwait rail and metro projects, and PPP contracts to part-privatise the Public Post Office and communications network. The Partnerships Technical Bureau, the government body created to push forward Kuwait’s PPP plans, has stopped work on the four schemes while the Communications Ministry reviews whether they should be procured as PPPs or developed through direct government procurement. Advisers working with the PTB on the four schemes have also been suspended.

“The Communications Ministry requested to have a review of the projects so the PTB has sent these to them. It is difficult to comment on what the structure of these projects will be in the end,” says one senior Kuwaiti official.

The review is understood to have been ordered in late 2012 by Salem al-Othaina, who was appointed Communications Minister earlier that year. “We think it is just the new minister wanting to ensure he knows what is happening and wanting to put his stamp on the process,” the Kuwaiti official adds.

Kuwait projects on hold 
ProjectValue ($bn)StatusAdvisers
Kuwait National Rail Road10Feasibility studyBooz & Co, Allen & Overy and Wilbur Smith
Kuwai Metro7Preparation of expressions of interest for first packageErnst & Young, Atkins and Ashurst
Kuwait Public Post OfficenaFeasibility studyErnst & Young and Deutsche Post
Communications network and telecommunicationsnaFeasibility studyna
na=Not available. Sources: MEED; PTB

Under Kuwait’s PPP law, the PTB is responsible for managing the process of attracting private sector interest in new projects, but procurement is ultimately the responsibility of the relevant ministry. The two transport projects and the post and telecommunications schemes all fall under the Communications Ministry.

“We don’t really know what is going to happen with these projects,” says an adviser working on one of the projects affected. “We have been suspended, but no one really knows if these projects will still be PPPs after this review or the new minister will want to go down the traditional route.”

The move is a blow to Kuwait’s development plans, which hinged on attracting greater private sector involvement in the economy. It also comes around the same time that its first project, the Al-Zour North independent power and water plant, made a significant step forwards. In January, the PTB named a consortium of the UK/French GDF Suez Energy International, Japan’s Sumitomo and Kuwait’s AH Sagar & Brothers Group as the successful bidder on the Al-Zour North project. The award brought an almost three-year process to an end and had been viewed as a pathfinder deal for the Kuwait projects sector.

The PTB had appointed a consortium of Ernst & Young, Atkins, and Ashurst, all from the UK, to advise on the metro scheme. US consultant Booz & Company is advising on the Kuwait railway project. Ernst & Young with Germany’s Deutsche Post are advising on the postal service privatisation.

Although the Communications Ministry is reviewing its project plans, other ministries in Kuwait are continuing to make progress using the PPP model as a basis for developing infrastructure. The Public Works Ministry, along with the PTB, is planning to issue the tender for the Umm al-Hayman waste water project in March.

Sources close to that project say that the PTB is now directing much of its attention on this project in order to start building confidence in the pipeline of planned developments. In total, about $30bn of projects and privatisations could take place under the PTB’s plans, including another two power projects, real estate developments, hospitals and schools.

The metro and rail projects would be among the largest private sector projects in Kuwait if they go ahead as PPPs.

Plans to revitalise Kuwait’s economy by inviting more private sector investment have not had an easy passage since the PTB was established in 2008. In mid-2012, the National Assembly (Kuwait’s parliament) voted to scrap plans to develop the country’s first IWPP, although that parliament was later dissolved and replaced, and the vote ignored.

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