Kuwait will continue to support its KD6 billion ($19.9 billion) public-private partnership (PPP) projects programme, said the country’s Deputy Prime Minister, underlining expansion of private sector participation in the local projects market.

“We will continue to spend on our infrastructure projects, as planned. We have never seen such high levels of capital expenditure [despite low oil prices],” Anas al-Saleh, Deputy Prime Minister, Minister of Finance and acting Minister of Oil, said at Meed’s “Financing Projects in the New Oil Era” conference held recently.

“We are focusing on infrastructure projects that work best and avoiding falling into the trap of economic stagnation because Kuwait’s economy depends on government expenditure. We are on full throttle and not holding back.”

According to regional projects tracking service Meed Projects, Kuwait last year awarded a record $31 billion worth of contract awards last year, and is the leading GCC projects market in the first quarter of 2016 as it ploughs ahead with its capital projects programme.

Kuwait’s PPP programme is being overseen by the Kuwait Authority for Partnership Projects (KAPP). Under the state’s PPP law, project companies should hold an initial public offering (IPO) after their selection on a PPP project, and Al-Saleh said this was a good way of spreading the benefits of private sector project participation to the local population.

Al-Saleh added that any potential spending deficit could be covered by a combination of tapping into Kuwait’s significant financial reserves and going to the bond market. “We are building our debt management strategy, and we have everything on the table,” he said. “We can use financial reserves from the good years mixed with issuing some sovereign bonds in the local and international markets.”

Capital markets will also be used, according to Al-Saleh.

Kuwait will also be looking at its subsidy bill as it seeks to reduce its spending commitments. Al-Saleh said that some 70 per cent of Kuwait government subsidies go to electricity and gasoline, and that the government was keen to discuss the issue with the National Assembly.

From a revenue diversification perspective, Kuwait is looking to introduce a sales tax in January 2018 in co-ordination with other GCC states. “All of us (the GCC states) have decided to go for January 2018, although this has to pass through the National Assembly so it may take time,” said Al-Saleh.

Cynthia Corby, audit partner and DME Construction Industry Leader, Deloitte Middle East, said: ‘’It is encouraging to hear the commitment from His Excellency on investment in Capital projects and diversification of the funding options for these capital programmes.

“When considering the capital programmes across the GCC and the diversification agenda for all the GCC countries it is key to note that the liquidity issues currently being experienced can be addressed through alternative funding arrangements and PPP type structure which will also drive operational efficiency and better return on investments as all stakeholder will be incentivized to maximize returns if the PPP’s are structured effectively.’’

The Meed Financing Projects in New Oil Era was organized to help project stakeholders to manage deficits and secure private finance, as well as assist contractors deal with project slow down, contractor finance and cash flow issues while aiding investors and financiers to capitalize on the new borrowing needs of the region’s project owners. – TradeArabia News Service