Kuwait Metro - To PPP Or Not To PPP

In the January edition of Train Times we said that "Kuwait has been an enthusiastic supporter of PPP structures but progress to date has been faltering". A number of projects were at various stages of development, including the USD 7 billion Kuwait Metro project and the USD 10 billion Kuwait National Rail Road project.

Of these two projects, the Kuwait Metro was the most advanced. In procurement with bidders shortlisted for a package which includes the provision and maintenance of rolling stock, a depot and control systems together with system integration services, it was widely believed to be stalled pending completion of the Az Zour Independent Water and Power project. As we reported last month, promising news emerged on this project in January so it was anticipated that there would be considerable movement on the metro project in 2013.

The Kuwait National Rail Road was less advanced although a feasibility study was being prepared in respect of this project.

All this seemed quite promising until we received the disappointing news that the Partnerships Technical Bureau, the organisation which is responsible for promoting PPPs in Kuwait, had stopped work on a number of projects whilst the Communications Ministry, to which the PTB reports, undertook a review of some of the projects in the pipeline. As a consequence both the Kuwait Metro and the Kuwait National Rail Road have been put on hold.

What seems to have happened is that a review was ordered late in 2012 by Salem al-Othaina, the Communications Minister. The issue being considered is whether the projects should be procured as PPPs or whether a more traditional procurement approach should be adopted. There has been some speculation that Salem al-Othaina, who has not been in post long, ordered this review in order to ensure that he had a proper grip on what is going on.

Those involved in the review will no doubt consider the various perceived advantages and disadvantages of a PPP approach as compared with traditional procurement. Those in favour of PPPs will point out that although PPPs introduce financing costs these can be offset against efficiencies which the private sector brings to the process. The pro-PPP lobby will also argue that because the PPP provider is generally paid for providing a service, it will want to ensure that it properly maintains the system for which it is responsible (in this case trains, a depot and signalling, etc) for the duration of the project (which could...