GRM 2010 GRM 2011

Abstract Details

Family Name:
Al Haddad
First Name:
Title of Paper:
Implementation of PPP Law in the State of Kuwait: Challenges in harmonization between best practice and local laws business
Paper Proposal Text :
State of Kuwait is the last in line of Arabian Gulf countries to practice tendering infrastructure projects through Public Private Partnership (PPP) framework. Although most of the GCC countries has tendered most of its infrastructure projects on PPP framework, it did not regulate it through any legal framework that would cover all aspects of the tendering process and maintain the relationship and rights between the two involved parties. For such purpose, Kuwait issued Law 7/2008, which is commonly known as the Built, Operate and Transfer (BOT) Law, in order to regulate government public tenders and with this law is established a specialized unit under the supervision of the Minister of Finance named Partnerships Technical Bureau (PTB) to oversee such process and coordinate between the public entities and the interested parties from the private sector. Upon first attempt to implement this law with Az Zour North Phase 1 Independent Water and Power Project (IWPP) in coordination with Kuwait's Ministry of Electricity and Water (MEW) as the off-taker in 2011, PTB has faced many challenges in tendering and proceeding with this project, including but not limited conflict with other local laws as well as political sensitivity due to the strategic nature of such project and the lack of common understanding of PPP concept. Such challenges took its toll on the project, causing further delay in the process, which resulted in major concern from the global bidders and investors on the seriousness of the government and speculations on the outcome. In the end, PTB and MEW have overcome such challenge by financially closing the project in December 2013 in order to achieve the first IWPP project to be tendered on BOT framework in Kuwait. With such trial, PTB has gone through major review of the BOT Law in order to improvise the process and address all issues that were not clear nor possible to apply in order to maintain global interest into investing in Kuwait. With such review, PTB in coordination with the relative public entities pressed for major modifications in the BOT law, which resulted in releasing Law 116/2014 concerning the Public Private Partnerships, replacing the BOT law as well as cancelling some special local laws, which involved forms of PPP that may contradict with this new law. With this new law, PTB was abolished and replaced with Kuwait Authority for Partnership Projects (KAPP), in order to give more authority and independence in taking on the implementation of PPP framework in a professional and serious approach. As commonly known in the local legal system in Kuwait, a law cannot be applied until its Executive Regulations are released to enforce the application of it. The Executive Regulations for Law 116/2014 were released a year later, resulting in releasing instantly around 6 infrastructure projects through KAPP on PPP framework, covering multiple sectors such as education, wastewater treatment, Power generation, water desalinization and solid water treatment. Yet with all the experienced issues and experienced challenges earlier were addressed in the new law, KAPP continued to face new obstacles and hurdles in implementing the new law through the previously mentioned projects.

This paper will analyze the state of implementation of PPP projects in Kuwait, by going through an analysis of the previous BOT law and the faced challenges, cross-comparison between the BOT law and the new PPP law, and reviewing the current practice of the PPP law and the raised challenges in applying it. For consistency and fair examination, the paper will contain a case study of a single project tendered on two phases, which is Az Zour North IWPP project. The first phase was tendered on Law 39/2010 concerning establishment of Kuwait stock listed company that build, operate and maintain Power generation and water desalination plants, which is a special law for I(W)PP projects, with Law 7/2008 as the umbrella law on top of it. The 2nd phase of the same project was tendered on law 39/2010, its modifications and Law 116/2014, the new PPP law on top of it. Cross comparison between such tenders would be detailed in order to give the reader an understanding of how such difference caused issues for both the public entity, namely MEW, KAPP and the global/local bidders for the project. It is to be noted that while KAPP tried its best effort to maintain harmonization with best market and project finance practice and the trend in the GCC region in tendering IWPP projects, yet challenges were faced when conflicts with local laws and legal opinions kept overshadowing the process of the tender and the interest of the bidders to participate. In the end of this paper, recommendations and way forward based on first-hand experience and testimonies from participants in these two tenders will be captured and presented in order to address the current practice in hope to enhance it to maintain the interest of local/global participation in Kuwait's PPP program.