Kuwait makes fresh start with PPP programme

19 May 2015

New economic climate of lower oil prices has raised the importance of private sector partnerships

Kuwait’s decision in 2014 to reform its public-private partnership (PPP) body and amend the country’s PPP legal framework was met with a mixed reception within the region’s projects and finance markets.

While reforming a body that had struggled to progress on the country’s first private partnership project, the Al-Zour North 1 independent water and power project (IWPP), was the logical thing to do, many feared it was just a further delay to Kuwait delivering on its ambitious pipeline of projects.

Despite having the world’s sixth-largest proven oil reserves, Kuwait has consistently failed to make progress with vital projects with important infrastructure and energy projects. The fact that the state has recorded significant budget surpluses for the past 20 years provides a telling picture of the country’s spending inertia.

However, Kuwait now finds itself in a position where it has to act. Demand for power and desalinated water is growing at a faster rate than new capacity is being built, and unless the pipeline of projects, which fall under the PPP programme, is executed, the threat of acute power and water shortages could become reality.

In addition to growing demand, the changing economic landscape of lower oil prices is also increasing the necessity for Kuwait’s newly named Kuwait Authority for Partnership Projects (KAPP) to deliver on its ambitious programme. With oil prices set to remain lower for the foreseeable future, and demand for services and utilities continuing to grow, there has never been a better time to turn to the private sector to provide assistance with capital costs of major projects.

According to sources close to government in Kuwait, KAPP is being put under pressure from the top to move ahead quickly with its programme, particularly the utilities projects, and the resumption of the tendering process for five projects already in 2015 supports this notion.

As many followers of the region’s projects market will know, Kuwait has consistently failed to deliver on its development programmes in recent history, and many are still sceptical on whether it can change this in 2015. But with demand increasing and government income declining, successful engagement of the private sector is vital.

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