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The Kuwait Development

Article - March 8, 2013
In February 2010, Kuwaiti lawmakers and the administration put aside their differences long enough to agree that the country was in sore need of an extreme infrastructure makeover
AN ARTIST’S RENDITION OF THE $132 BILLION SILK CITY, WHICH WILL HOST WHAT WILL BE THE WORLD’S TALLEST STRUCTURE: THE 250-STORY BURJ MUBARAK AL KABEER SKYSCRAPER
A comprehensive Development Plan was drawn up and approved, with $120 billion earmarked to achieve that goal over the coming decade. What happened next?
 
Nothing, aside from stepped-up political turmoil and a very small number of projects that advanced to an early stage of the implementation process – but not enough of them to make a difference. Enabling legislation was never passed, contracts were never signed, phase-one objectives are clearly not going to be met by the original 2014 deadline. But Kuwaiti officials want the world to know they haven’t given up.
 
“Too big to fail” may serve as a shorthand explanation why far more is riding on the success of the Kuwait Development Plan than just the schools, hospitals, bridges, rail and metro links, and business hubs at risk of not being built. A dead end would be bad news indeed for the banks that were to have supplied the financing for those projects and for the macroeconomic indicators likely to flatline if the plan is left to shrivel from sheer neglect.
 
Moreover, says U.S. Ambassador Matthew Tueller, “it is clear that the parliament and the authorities have recognized the need for a massive push to catch up with population growth. Because of decisions the government has made or failed to make over a period of five to 10 years, public services did not keep pace with demand.” 
 
On-the-ground demographic realities indicate the demand is not going to ease. Schools and hospitals – the latter in need of a major technology upgrade and facilities for training medical personnel – are, along with the highways, bridges and housing units at the heart of infrastructure to-do lists, key components of the plan, but by no means are they the whole story.    
 
And there is one factor that adds an additional level of urgency to the problem that was pointed out by Dr. Adel A. Al-Wugayan, Secretary General of the Supreme Council for Planning and Development. “The whole issue at the heart of the plan, is that we are trying to diversify our sources of income. We cannot depend on oil for all that much longer.”
 
Kuwait, he adds, is looking at ways of taking advantage of its strategic location to redefine the country as a major logistical, commercial and trading hub supported by a robust financial center. Boubyan Island, at the headwaters of the Arabian Gulf, would make a natural port of entry for imports destined to be shipped through Turkey to the landlocked republics of Central Asia, for example.
 
“Of course you could say that Dubai is doing this and Qatar is doing this, and Saudi Arabia could be doing it, too, but if you look east, Singapore is the logistical hub for Eastern Asia. Only it turns out the Chinese are doing the same thing and Hong Kong is an emerging giant in containerized trans-shipment. Busan in South Korea is another major port, and then there is Japan. They are all within a 1,500-mile radius but doing very well as a group. We could make the same thing happen here.”
 
Yes, but that is going to cost money and the Kuwait Development Plan is not exactly modest in the scope of its ambitions. Silk City (Madinat Al Hareer) is an entire metropolis to be built from the ground up on the opposite rim of Kuwait City harbor originally set for completion in 2023. 
A metro and light rail network, a 15-mile oceanside causeway and a huge airport expansion are just a few of the infrastructure projects in the pipeline the Kuwaiti authorities have chosen as linchpin of their infrastructure development policy the so-called PPP model of private-public partnerships
Spread over 62,000 acres, Silk City is structured around 30 communities clustered into a Finance City, Leisure City, Ecological City and an Education and Culture City. Eventually it will be home to three quarters of a million people who will have an Olympic stadium at their disposal and what will be the tallest structure on earth, the 250-story Burj Mubarak Al Kabeer skyscraper.
 
Silk City’s $132 billion price tag dwarfs the $1.5 billion that is needed to transform the Shadadiyah University Campus, located west of Kuwait City, into a one-stop educational mega-complex covering nearly 5 million square meters in three campuses with full housing, medical and sport facilities for up to 40,000 students. 
 
Add to the list a 15-mile oceanside causeway, a metro and light rail network extending beyond the capital to virtually the entire country, a container port on currently uninhabited Boubyan Island, a mammoth airport expansion – to cite a handful of the 300+ targeted projects – and it is clear that major money is involved. But lining up direct foreign investment is not a priority, says Dr. Al-Wugayan.     
 
“We are not really in need of capital. The economy is not growing at a pace that could absorb more and more investment. We have over $200 billion invested outside the country and if that is repatriated, what is going to happen? There will be runaway inflation and people will stop coming here to work. So we are more interested in technology transfer and expertise and quality of service.” 
 
That Kuwait knows what it wants and wants what it needs is confirmed by Ambassador Tueller. “Tenders here are not awarded on a silver platter. You have to be very competitive,” he says. “U.S. companies come over thinking here is a wealthy country with a good relationship with the United States. But they should be prepared to look very hard at what Kuwait wants, what its needs are, and to be very competitive on the price side.”  
 
In that respect, the Kuwaiti authorities have chosen as linchpin of their policy the so-called PPP model of private-public partnerships, in which bidders are expected to assume a 40% or 50% stake in the financing, design, and maintenance of the big ticket infrastructure works in which they participate. A Partnerships Technical Bureau has been given full responsibility for implementing the program.
 
Early in 2013, the first contracts for the provision of rolling stock and control system architecture for the Kuwait Metropolitan Rapid Transit System are set to be adjudicated, and some 60 companies have prequalified for the first stage of a project that will bring reliable public transport to the outskirts of the capital, swollen by the country’s population spike and acutely underserviced. 
 
Selected companies will commit to participate in a long-term PPP arrangement in which the project benefits from the good business practices and efficiencies of the private sector while the government retains supervisory control and decision making authority as part of its mandate to guarantee the public interest. 

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