The GS-SCPD is responsible for crafting and steering Kuwait’s multi-billion dinar Mid-Range Development Plan (MRP) which is a key component of the country’s long-term economic roadmap, Vision 2035.
Al-Wugayan acknowledged that little can be done to change the current equity structure of at least seven major projects earmarked for the private sector under the MRP since it mandated by the law and few IPO attempts had fallen short of expectations.
“As one form of engaging the private sector in the plan, We have been actively creating publicly traded entities, where 50% will go through an IPO, 24% maximum to be owned by the relevant government agency, and minimum 26% to a strategic investor by way of a public tender,” he said.
He told the global publishing, research and consultancy firm Oxford Business Group (OBG) that the General Secretariat was working with Cabinet of Ministers to explore ways of making the projects more attractive to the private sector, mostly improving the feasibility indicators by adding more profitable components.
“It has been somewhat challenging to attract private sector investments for many reasons, some related to the hardships faced by many private sector entities after the financial crisis, while many abled entities in the private side perceived some of the internal rate of returns of the projects to be generally on the lower side, and demanded more clarifications” he said. “To make it more attractive, we have been working to change the core components of the of these project. We are also looking at setting minimum set-price to be paid by the government for the products offered by these projects, especially when the government is the prime purchaser of these products.”
The interview with Al-Wugayan forms part of the research for The Report: Kuwait 2012, OBG’s forthcoming guide on the country’s economic activity and investment opportunities. The Group’s report will include a detailed, sector-by-sector guide for foreign investors, together with a wide range of interviews with the most prominent political, economic and business leaders.
The government has earmarked KD30.5bn (Public and Private Sector spending) under the MRP for a long list of major projects as it looks to diversify the economy away from a reliance on oil, which currently provides 91.5% of the country’s income.
Al-Wugayan said success would come from ensuring that the funds, which will be split between the government and the private sector, are channelled towards areas in which Kuwait can build a competitive advantage.
He was optimistic that Kuwait could use its geographical position to carve out a niche for itself as a transport and logistics hub over time if it drives forward the necessary strategic planning and legislative reforms. But he added that the move would require greater participation from the private sector in terms of both state-of-the art Management, funding, and cutting-edge expertise.
“We have a strategic location at the gate of Iraq and Iran and currently play a limited part in the logistics flows to these areas,” he said. “To become a logistical and transport hub, GS-SCPD recognises that significant investment and support services need to be introduced. It is imperative that the private sector gets involved, including foreign companies. Kuwait would engage both their technical know-how and FDI investment.”
The Report: Kuwait 2012 will mark the culmination of more than nine months of on-the-ground research by a team of analysts from OBG. It will provide information on opportunities for foreign direct investment into Kuwait’s economy and will act as a guide to the many facets of the country including its macroeconomics, infrastructure, banking and sectoral developments. The Report: Kuwait 2012 will be available in print form or online.
