The Prospect of Infrastructure Public‐Private Partnerships in Kuwait, Saudi Arabia, and Qatar: Transforming Challenges into Opportunities

• Author: Mhamed Biygautane,Graeme Hodge,Paula Gerber
• Published date: 01 May 2018
• Date: 01 May 2018
• DOI: http://doi.org/10.1002/tie.21853

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Correspondence to: Mhamed Biygautane, Monash University, Faculty of Law, Wellington Road, CLAYTON, 3800 Melbourne, Australia, (+61) 451386968 (phone),

(+613) 9905 8201 (fax), Mhamedb@gmail.com

Published online in Wiley Online Library (wileyonlinelibrary.com)

© 2016 Wiley Periodicals, Inc., A Wiley Company. • DOI: 10.1002/tie.21853

The Prospect of

Infrastructure Public-

Private Partnerships in

Kuwait, Saudi Arabia,

and Qatar: Transforming

Challenges into

Opportunities

By

Mhamed Biygautane

Graeme Hodge

Paula Gerber

This article examines the prospect of using infrastructure public-private partnerships ( PPPs ) within

Kuwait, Saudi Arabia, and Qatar in light of the drastic drop in oil prices since mid-2014. It argues that,

while PPPs appear to be a strategic policy option for the three Gulf Cooperation Council ( GCC ) states to

RESEARCH ARTICLE

330

RESEARCH ARTICLE

Thunderbird International Business Review Vol. 60, No. 3 May/June 2018 DOI: 10.1002/tie

tackle growing  scal de cits, these states are constrained by numerous governance-related, administra-

tive, and regulatory challenges that make PPPs problematic. Effective implementation of the inherently

complex and contractual PPP policy requires addressing the existing institutional, economic, bureau-

cratic, and cultural constraints within these three states. This article concludes with recommendations

to mitigate these challenges, that require serious political will and sufficient time to yield positive results,

and to attract international investors and contractors to the Gulf region. © 2016 Wiley Periodicals, Inc.

Introduction

M odern governments are invariably under pres-

sure to reform their public sectors, which are

often described as inefficient and unrespon-

sive to their citizens’ growing needs (Grossman, 2012 ;

Sabry, 2015 ). Since the 1980s, the public administration

literature has witnessed a mounting interest in public

management reform and introduction of public-pri-

vate partnerships (PPPs) as an infrastructure delivery

mechanism, particularly within the Anglo-Saxon context

(Biygautane, forthcoming; Hodge & Greve, 2016 ; Pollitt,

2015 ). However, the experiences of the Gulf Cooperation

Council (GCC) states, which comprise Bahrain, Oman,

Kuwait, Qatar, Saudi Arabia, and the United Arab Emir-

ates, are often overlooked by international business and

public administration scholars (Akoum, 2009 ; Goldsmith

& Al-Yahya, 2011). Investigation of the influence of tribal

and Islamic heritages on the Gulf region ’ s administrative

practices (Common, 2008 ; Kinsinger, 2007 ; Rice, 2004 ;

Al-Yahya, 2009) can potentially offer new perspectives

for the theorization and development of public-sector

initiatives.

A study of the PPP phenomenon within the context

of the GCC states is timely, given the fluctuation of oil

prices from approximately $110 a barrel in the first half

of 2014 to less than $50 a barrel in 2016, with predic-

tions that these low rates are unlikely to rise in the near

future (International Monetary Fund [IMF], 2015a ).

The decline in oil prices has cost the Middle Eastern oil-

exporting countries over $360 billion in export revenues

in 2015 and created an expected fiscal deficit of more

than $1 trillion over the next five years (IMF, 2015a ).

Because privatization in the Gulf has been sluggish and

is regarded by the public as the sale of state assets to the

private sector (Akoum, 2009 ; Al-Husan & James, 2007 ),

PPPs provide a middle ground on which the needed

financing, managerial, and technical skills of the private

sector can be tapped into and transferred to the public

sector without the full divestiture of assets.

This article situates three GCC states—Kuwait,

Saudi Arabia, and Qatar—within the international

debate on infrastructure PPPs and assesses the extent

to which their administrative and regulatory structures

form receptive environments for such a complex policy

instrument. These particular states were selected for

comparative analysis for three reasons. First, their

economies are substantially dependent on oil and

gas revenues (see Table1), and the decline in these

resources has had a considerable impact on their ability

to finance future infrastructure projects under rising

budget deficits.

Second, over the next ten years, these three states

have mega-infrastructure projects that are vital for their

socioeconomic development. Qatar is under pressure

to deliver large-scale infrastructure worth $220 billion

for the 2022 FIFA World Cup, while Saudi Arabia has

planned mega-infrastructure projects worth more than

$1.2 trillion, including the King Abdullah Economic

City, power plants, a metro system, and rail projects

TABLE 1 Demographic and Macroeconomic Characteristics of Kuwait, Saudi Arabia , and Qatar

States

Population

(millions, 2014)

Gross Domestic Product

Current Prices (US$

billions, 2014)

% of Oil as Share

of Government

Total Budget

Revenues (2015)

% of Oil as Share

of Government ’ s

Export Earnings

(2015)

% of Nationals in

Total Public-Sector

Employment

% of Nationals in

Total Private-Sector

Employment

Kuwait 3.99 171.95 89 94 86.6 (2015) 6.4 (2015)

Saudi Arabia 30.77 753.83 80 90 93.4 (2014) 22.1 (2014)

Qatar 2.23 210.10 62 92 84 (2012) 9 (2012)

Sources: World Bank ( 2014a ); IMF (2014); Forbes ( 2015 ); Al-Monitor ( 2014 ); Saudi Ministry of Economy and Planning (2015); Kuwait Central Statistical Bureau ( 2015 )