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As of recent global development trends, there has been a keen interest in pursuing infrastructure projects in Kuwait with the pattern veering towards investing in the Build, Operate and Transfer (BOT) projects. This global interest has further seen an upward momentum following the recently amended BOT legislation by the Kuwait Government (Sohail Barkatali, 2014). With the evolution of the financing of projects in Kuwait that was a major milestone that was achieved after the closure of the Az-Zour North IWPP phase I project in early January, the interest of global investors has sparked to new heights. The Kuwait government has revised the entire legal framework for BOT procurement of infrastructure projects in Kuwait in retrospect of the value this form of contracting is bringing to the projects and the economy at large. Following the amended BOT law, an increased number of contractors and bidders are now looking to maximize returns on upcoming opportunities and development initiatives as Kuwait has already undertaken some projects on public private partnership basis.
The history of build, operate and transfer BOT projects dates back to 2002 when Kuwait first started using the BOT model to construct its Sulaibiya wastewater and reclamation project that had a cost estimate of US$377 million. The ministry of public works signed on a 27 year concession for the investors and sponsors of the project to put together a 25 year debt that was regionally funded (Fahad Al-Azemi et al . 2014). Hence, there was a keen interest in pursuing built environment projects with a focus on employing the EPC procurement method. But, this trend witnessed a change with the successful closure of the Az-Zour North IWPP phase I project that propelled investors to pursue the BOT procurement method
Sohail Barkatali (2014) in his article ‘The BOT Market Reopens’ states that “The Az-Zour North IWPP phase I project was procured under a framework defined by two pieces of legislation. The BOT law that was passed in 2008, and the IWPP law, enacted in 2010 and amended in 2012. For IWPP (independent water and power producer) projects, the IWPP law prevails over the BOT law. However, where the IWPP law is silent on any matter, then the BOT law applies. Therefore, Kuwaiti projects procured as public-private partnerships are undertaken within the framework established by the BOT law and, for certain projects, supplemented by additional legislation”. This supports the evidence for the growing feasibility of the Kuwait BOT market for undertaking infrastructure projects.
With the ease and convenience of the BOT law, government consideration for further amendments in the law and the feasibility of the Kuwait market, it can be ascertained that the BOT procurement trends project a profitable upward curve (Fahad Al-Azemi, 2014). However, there are other risk categories to be considered when undertaking build-operate-transfer (BOT), infrastructure projects in Kuwait relevant to the construction industry and its environmental variables. It is important that these economic, social, political and technology related risks be evaluated through a sophisticated evaluation framework to further assess the feasibility of the BOT procurement in Kuwait projects and how it provides value for money.
The Kuwait BOT projects and case studies relevant to pursuing infrastructure projects are appropriate to provide evidence for the research claim and hypotheses. Kuwait BOT projects will further need to be evaluated to analyze the feasibility of this form of procurement and its profitability scope along with the study of potential risks that will directly impact such endeavors. The motivation for this research topic comes from the fact that BOT procurement has been a successful trend for construction projects across the globe especially the Middle-East and Kuwait presents a market reflecting economic boom. The research through literature review and other research methods would tend to investigate the hypothesis that if BOT procurement in fact does provide for money in Kuwait projects
The aim of this study is to evaluate the feasibility of the BOT procurement trend in Kuwait infrastructure projects and provide evidence for the fact that the BOT projects in Kuwait do provide value for money. The aim also veers towards highlighting and evaluating the impact of specific risks involved in BOT projects with emphasis on the Kuwait Construction Industry.
The primary objectives of the proposed study include:
The Following research question provides summary of above aim and objectives:
Does the BOT procurement system delivers value for money projects in Kuwait?
The answer to the above research question will be explained through recommendations in the form of strategies found relevant and important in this research data analysis.
This section aims at highlighting the analyses of key literature reviewed to obtain a deeper understanding of the trends relative to different finance systems along with the build-operate-transfer BOT projects in Kuwait, and the underlying risks relevant to the execution of such endeavors having a direct impact on the project feasibility. The study will involve a thorough analysis of procurement and finance systems utilized in the construction industry across the globe, before focusing on Kuwait BOT projects being undertaken and their implications.
The private sector will significantly gain informative insight from the research as Kuwait has not yet experienced an influx of private finance for infrastructure projects but with the advent of the BOT procurement method and the Kuwaiti legislation, the market is soon to benefit from private investment for large development projects. The private sector will benefit as they have limited knowledge of the business environment in Kuwait relative to BOT projects while the public sector will gain an insight into the partnership framework and the feasibility aspects for investing in BOT projects. The evaluation and study of risks inherent in such projects will also be beneficial as effective risk management will increase the overall impact of the project thus providing value for money.
Fahad Al-Azemi (2014) in his article states "According to Gunn (2005), the importance of risk management to the success of BOT projects cannot be overestimated. There are many different types of risk and uncertainty involved in every construction project, however small. These may be: technical, economic, legal, etc., but they all ultimately involve an organization in financial risk. The risks pertaining to BOT projects are more complicated than the traditional methods, where the design is separate from the construction and the client is responsible for the project. This is not only due to the long duration, high investment and complicated methods of procurement, but also because all of these risks are combined, with the companies involved in the project assuming responsibility for a whole range of risks within the life-cycle of the project and the private sector taking responsibility for financial, design, construction and operating risks."
Hence, it is important to learn about the inherent risks to better mitigate them in successfully delivering BOT projects and enhancing their financial impact.
The research method to be adopted in this research includes secondary data as well as primary data. Secondary data will be collected through literature review and analysis of case studies, quantitative as well as qualitative information related to the hypothesis of this research will be collected. The literature review will include journal articles, industry reports, business reviews and academic publications.
The secondary data will be collected through drafting surveys, questionnaires and interviews (primarily through sending drafted questionnaire via e-mail), which will be conducted for obtain the views of the current practitioners and/or stakeholders of construction industry of Kuwait. This will be completed to collect supplementary information to further support the stance of recent developments, as well to develop deep understanding of the issues, visions, scope and views of the practitioners on the different finance as well as procurement strategies currently being utilized, and to gain understanding of if they believe BOT is the future of the Kuwait’s industrial future. The results of this research will analyzed in-light of the secondary research completed (literature reviewed) and will then be used as a case study relevant to Kuwait infrastructure projects. For the BOT procurement analyses and the following information will be particularly solicited.
(More point will be added after undertaking a comprehensive review of literature in this area of research)
This section highlights the detailed quantitative and qualitative results assimilated as a direct consequence of the primary research methodology and data evaluation techniques. Supported through analysis tools, the chapter would discuss the findings along with the comparative analysis relative to the reviewed literature.
This section highlights the recommendations and the deciphered conclusion based on the research query in retrospect of the analytical data collected and obtained through primary research practices. The chapter would further shed light on the future implications of the topic in question with emphasis on the feasibility and prospective limitations with a future perspective.
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