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Paul McKay (center), felicitating speakers Ibrahim Sattout (left), and Akusa Batwala.
BBF holds members’ Jan meeting Focus on Public Private Partnerships

KUWAIT CITY, Jan 19: The British Business Forum held its January members’ meeting to a discerning audience — business members — and guests under the theme ‘Public Private Partnerships Projects — the Kuwait Approach’. Paul McKay, Chairman introduced the meeting theme by posing the question ‘Is Kuwait trying to bite off more than it can chew with its call for the private sector to invest in its state’s infrastructure projects? How realistic is its pipeline and can the government create a workable, transparent procurement model’? McKay remarked that the United Kingdom had been a leader in modernizing the way in which public infrastructure and services are delivered and finding new ways to work in partnerships with the private sector for the last twenty years.

He said the policy of privatization was a crucial ingredient of Thatcherism which developed into a world-wide craze for Public Private Partnerships (PPP) which often blurs and confuses the conflicting priorities of providing adequate public services and making private sector profits.  “Not all PPPs have, however, been successful. The UK has recently initiated a fundamental reassessment of its Private Finance Initiative (PFI) the form of PPP most frequently used in Britain which has become tarnished by its waste, inflexibility and lack of transparency,” he added.

In ‘Thatcherism’ the Chairman was referring to Margaret Thatcher, Britain’s first (and so far only) female Prime Minister. It was an opportune moment for guest Catriona Mackenzie to speak about the Margaret Thatcher Centre project, a combined library, museum and training centre in Cambridge England which will be a permanent memorial to the former prime minister. The project, without precedent in British politics, will be based on the Ronald Reagan Presidential Library and it is planned that visitors to the Thatcher Library will be able to see artifacts from her years in power in the 1980s.

McKay said it was a tribute to Thatcher’s leadership that what she started three decades ago has become a continuing international trend. There is no standard method of PPP implementation as each country adapts the process as appropriate for its own culture, economy, political climate and legal system. It is therefore essential that all parties likely to be involved have a common understanding of the principles underlying PPP structures and an appreciation of the key issues from the standpoints of the private as well as the public sectors.  Kuwait has a twin track tendering structure for domestic and international contractors. The Central Tenders Committee (CTC) is mostly used by ministries tendering projects on an engineering procurement and construction basis (EPC) while the Partnerships Technical Bureau (PTB) enables the government to use private sector capital in large projects.

The PTB has acquired a sound knowledge of PPPs and how to best implement them. Kuwait has a realistic understanding of PPP and the PTB has produced a good level of transparency, but the projects have been slow according to observers and not without some defective attributes. McKay said Build Operate Transfer (BOT) approach has played a growing role in the implementation of Kuwait’s infrastructure projects designed and implemented as PPP arrangements. Allowing the private sector to play a more integral role in state development has been identified as one of Kuwait’s strategic objectives but how has business taken to the PPP opportunities?

To help address the questions, McKay introduced speakers Ibrahim Sattout and Akusa Batwala from ASAR — Al Ruwayeh and Partners to present an overview of PPP Law in Kuwait that included a discussion on current projects, the opportunities presented for the private sector and the processes followed in procuring these types of contracts. Within the last several years their relevant experience has included, among others: advising the lenders on the initial Sulaibiya Wastewater Project, advising on the process of the development of Failaka Island, the Kuwait Metro, the new Physical Medicine and Rehabilitation Hospital and the Kuwait National Rail Road System.

Sattout and Batwala highlighted Kuwait’s first move into public private partnerships with the Az Zour North Independent Water & Power Project (IWPP). Financial closure has been achieved and the gas-fired power plant of 1500 MW and an associated seawater desalination plant with a capacity of 107 MIGD (486 thousand mŽ/day) is set to open by early 2015 if implementation goes smoothly according to reports. All of the plant’s output will be purchased by the Kuwait Ministry of Electricity and Water under a 40-year long-term agreement. The plant is expected to start commercial operation in the fourth quarter of 2016.  Through adopting the PPP model in its utilities sector Kuwait hopes to improve efficiency. Al Zour is the first power plant in Kuwait to be built operated and maintained by the private sector making Kuwait the last Arabian Gulf country to adopt the PPP model in its power sector.

The country has a proven track record in developing expensive oil, gas and power projects, but the delays over some of its complex PPPs leave the private sector pondering the viability of such program. Projects are slow, but the PTB has clarity of PPP law, with effective adjudication procedures and a dedicated unit to getting the projects off the ground. Observers believe Kuwait’s pipeline is balanced across social as well as economic infrastructure, which will keep a variety of investors interested given that the fact that the projects initiated by the State under the PPP Law are still in their initial stages. The last word was with the speakers, ‘It is still yet to be seen if there is credence to the proposed Kuwait approach. What is clear however is Kuwait’s willingness to engage in PPPs and to learn from those jurisdictions that have gone ahead of it in implementing PPPs?

By Paul Francis X. Fernandes
Arab Times Staff

By: Paul Francis X. Fernandes

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