OBG talks to Riyadh Al Saleh, Chairman and CEO, Kharafi National

Interview: Riyadh Al Saleh

What regulations would you like to see in place to ensure that those companies working to the highest standards are favoured for projects?

RIYADH AL SALEH: For the most part, the companies that are invited to bid for a project have the necessary skill sets to successfully complete the project, as bidders are prequalified into grades one, two, three and four. When a client wants to put a project out to tender, they invite companies from these categories to bid. However, there have been instances where the lowest bidders have not been able to complete projects in time due to monetary or labour restrictions, which have caused delays and, in certain cases, have led to the retendering of projects.

The government should pay particular attention to regulations regarding banking and offset procedures, in order to ensure a clear understanding and to ease the application of these regulations by both local and foreign companies. For example, offset obligations can sometimes be applied without regard for the type of project being carried out, which can cause foreign players to withdraw. Meanwhile, banking regulations impose strict limits, including single obligor limits, which can hamper contractors.

In which areas do Kuwaiti companies have a competitive advantage, and in which fields does the country require additional expertise?

AL SALEH: For almost five decades now, local Kuwaiti companies have been leaders in the construction industry, building many projects both in Kuwait and abroad. These firms’ expertise in construction, operations maintenance and facilities management is deeply rooted. With the recent implementation of government mega-projects as part of the National Development Plan, we have begun to see more developments in areas such as roads, bridges, hospitals and schools – all schemes in which Kuwaiti companies have proven expertise. Additional know-how might be needed in areas where local companies do not have as much experience, such as rail and ports, as well as these facilities’ management functions.

Overall, Kuwaiti companies are capable of taking on the large-scale contracting jobs. Therefore they should be considered first when it comes to tendering for national mega-projects. For example, in the US and Europe, national construction companies are given priority, and then these firms subcontract some of the work to foreign companies.

What role can dialogue between the private and public sector play in terms of helping Kuwait achieve its full potential?

AL SALEH: Dialogue between the private and public sectors could be regarded as the single most important component in the public-private partnership (PPP) process. We should remember that in countries like Kuwait, PPP projects are needed not because the government cannot afford these projects, but for different reasons altogether. PPPs have been effective at boosting the role of the private sector, offering private sector employment opportunities to nationals and increasing the transfer of technology, among other strategic objectives.

The success of build-operate-transfer, build-operate-own and PPP approaches has changed the traditional contractor’s role from that of a service provider to a business partner in the operation of an enterprise. The concessionaire for these types of projects operates as an independent business organisation, contractually accountable for a series of technical, operational and service-related goals. These projects typically have a concession period of 20-30 years, which provides a much longer business life and income stream than those yielded by the typical construction project. The effective development and implementation of regulations by the government can not happen without taking into account the opinions of the private sector, therefore dialogue is also very important to this part of the process.