In conversation with Ibrahim Sattout

The first law to have regulated the PPP sector in Kuwait was the BOT Law No. 7 of 2008 on BOT projects. 

This law was subsequently replaced by the IWPP Law No. 39 of 2010 (which remains in effect and was issued to regulate large-scale PPP schemes in the water and electricity sector), and the PPP Law No. 116 of 2014, which established the Kuwait Authority for Partnership Projects (KAPP) as a successor to the Partnerships Technical Bureau established under Law No. 7 of 2008. 

Both the IWPP Law and the PPP Law were passed because the government realized that Law No. 7 of 2008 did not fully meet international standards and practices.

In addition to the IWPP and PPP Laws, a specialized law on privatization was issued in 2010, which is the Law No. 37 of 2010 Regulating Privatization Programs and Transactions. While this law remains in effect, to our knowledge, there is only one example of its implementation, which is the privatization of North Shuaiba power and water plant. No other examples exist of privatization programs that have been successfully completed in Kuwait. 

Separately, another specialized authority which is playing a major role in smaller scale PPP projects, is the Public Authority for Housing Welfare established under Law No. 47 of 1993 (PAHW). PAHW, in combination with the PPP Law (and its own Investment Resolution) launched a number of mixed use real estate development investment opportunities structured as PPPs. 

In addition to the specialized laws previously noted, we should mention Law No. (49) of 2016 which regulates public tenders in Kuwait.

From a contractual standpoint, we note that only two PPP projects have taken place thus far in Kuwait, i.e., Az Zour North 1 IWPP and Umm Al Hayman wastewater treatment plant.

At present, there are couple of projects in the pipeline. KAPP recently issued the RFP for Az-Zour North Phases 2 and 3. 

In addition, KAPP released the results of prequalification phase for Al Dibdibah Power and Al Shagaya Renewable Energy – Phase III–Zone 1 Solar PV IPP project, and the fixed telecommunications network development project, respectively. 

In our view, these projects will generally rely on standardized documents and agreements, which should minimally differ from one another depending on the nature of the project being contemplated.

As noted earlier, only two projects reached financial close since the promulgation of the first BOT law (no. 7 of 2008). 

As such, Kuwait differs from sophisticated markets with long-standing infrastructure development practices in a way that its PPP laws and regulations are still fairly recent by comparison, and have not been comprehensively tested in practice, as evidenced by the limited number of PPP projects which have successfully reached commercial operation. 

Furthermore, and while there is a growing tendency towards taking sustainable development into account in infrastructure development projects, this remains a fairly recent shift which lacks clear and well-detailed government-driven policies. 

That said, we believe Kuwait is keen to learn from the experience of sophisticated jurisdictions, and there are ongoing discussions on the need to update the PPP Law to ensure its compliance with international standards and criteria.

International investors could face a number of challenges when considering participating in projects in the infrastructure sector in Kuwait. 

• Among such challenges are the foreign investment regulations which require foreign investors to form partnerships with local entities, which can be challenging.
• Another hurdle that foreign investors face is the complexity of Kuwait’s regulatory framework, with frequent changes in policies and procedures in the tendering process. 
• In addition, regulatory approval process can be slow and cumbersome due to bureaucratic hurdles. This can lead to delays in project implementation which, in turn, affects costs and timelines of infrastructure projects. 
• With regard to energy projects, there is a lack of a clear and comprehensive general policy for decarbonization which sets out all the standards and requirements with which the investor and the project it bids for must comply. When investors consider whether to bid for a project in Kuwait, it is imperative that they are equipped with comprehensive knowledge of the requirements from the outset. Expecting investors to commit resources, engage legal and financial advisers, and undergo prequalification processes without clear insight into the standards and requirements they must meet is both burdensome and inefficient.

Among the key steps that can be taken to make projects in the infrastructure sector more attractive to international developers and investors, are the following:

• Firstly, political and economic support for PPPs is essential to build local and international confidence which, in turn, encourages private sector participation. To make PPPs truly attractive to the private sector, it’s important to combine regulatory frameworks, risk allocation mechanisms, and investment incentives.
• A well-defined policy supporting PPP projects is crucial. A central component of this approach is the creation of a dedicated “one-stop shop,” such as KAPP, to serve as the main coordinator for PPP projects, ensuring they are executed with coherence and efficiency.
• Additionally, a thorough review of the existing PPP legislation is necessary, and for this purpose it is essential to take into account the lessons learned throughout the last decade. Paramount in this regard is the need to improve decision-making processes, reduce delays, and strengthen PPPs against potential political disruptions.
• Reforming the existing investment laws to make them more investor-friendly, facilitating the process of granting foreign investment incentives and exemptions and expanding their scope. While the parliament promulgated Law No. 1 of 2024 which amends Article 31 of the Public Tenders Law to provide that a foreign party appropriately registered as a service provider/contractor may participate in government tenders directly and without a Kuwaiti agent/partner, the executive regulations are not yet issued and as such, it is difficult to assess how this new law will be implemented. 
• Moreover, it’s critical to establish a robust capacity-building framework across various government agencies so as to enhance the skills and expertise of government officials, thereby improving the efficiency and effectiveness of processes crucial for the successful tendering and execution of PPP projects. 
• In terms of renewable energy projects, it is essential to ensure transparency and accessibility so that decarbonization and sustainability requirements are established at the onset of the bidding process, ensuring that potential bidders are fully informed before they embark on the application process. This could be partly achieved by issuing a clear and comprehensive general policy for decarbonization and sustainability which sets out all the standards and requirements with which the investor and the project it bids for must comply.

The New Kuwait Vision 2035 is very clear about reducing reliance on fossil fuels and moving towards renewable energy. Furthermore, at COP 27, the Kuwaiti government confirmed its intent to reach net zero carbon emissions in 2060, with a commitment to deliver net zero carbon emissions in its critical oil and gas sector a decade earlier, by 2050. These objectives were reiterated in COP28. Kuwait is also moving forward to achieving New Kuwait Vision by ensuring that 15 percent of the local electricity is from renewable energy by 2030. 

Among the recent legal changes reflecting the Kuwaiti government’s growing interest in ESG principles is the recent amendment to the law establishing the Ministry of Electricity and Water, which changed its name to the Ministry of Electricity, Water and Renewable Energy and granted it authority for the regulation of renewable energy projects in Kuwait. Additionally, the Kuwaiti government has recently signed a Memorandum of Understanding (MOU) with the Chinese government to accelerate the development of the Kuwaiti renewable energy sector through joint cooperation between the two countries. Said MOU now has the force of law after its ratification pursuant to Decree No. 60 of 2024.

Furthermore, one of the key renewable energy projects of Kuwait is the Shagaya Project, which is planned to be finalized by 2030. This project, which is the brainchild of the Kuwait Institute for Scientific Research, consists of a solar PV park with a 10MW energy production capacity. Moreover, state-oil companies have been contemplating several PV solar plants for a number of years; in fact, our law firm is currently advising on a renewable energy plant project being undertaken by the Kuwait Oil Company.

This shift towards renewable energy reflects a global tendency and makes sense for Kuwait given its substantial solar and wind resources. 

We are optimistic that Kuwait would make such transition and achieve its goals in the near future, thanks to the determination of its leaders, government and people.