Government Rejects Chinese Development Bank Offer

A few weeks after the Chinese Development Bank offered to finance the construction of the infrastructure for the Shaqaya Economic City by lending Kuwait 5 billion dinars over 19 years, at an interest rate of approximately 5.5 percent, it seems that the government committee concerned with implementing the project has rejected the option of foreign funding.

The Al-Rai daily has learned that Kuwait offered to implement the project if ‘they’ want on the “BOT” system.

The sources indicated that the Kuwaiti side is not inclined to the idea of Chinese financing offered for more than one reason, perhaps the most prominent of which is the interest rate, which can be classified by banking sources as high, while the proposed interest rate is more suitable for investments with higher risks than Kuwait’s classification.

There is also, according to the sources, another reason that supports the Kuwaiti offer, which is that the implementation of major projects in accordance with the “BOT” concession system in line with the general government tendency to reduce direct investment spending that calls for withdrawal from the general reserve, especially in light of the double pressures faced by the fund’s liquidity for a while, to the point where you run the risk of running out.

According to the technical study prepared by the “Chinese Development Bank” to transform the “Shakaya” from a mere energy project to an economic city, in its broadest sense, to include all the necessary projects in the major and internationally known economic cities, the initial cost of establishing the infrastructure for the project is close to 5 billion dinars, while the cost of the project is likely to reach all components of the project include to 19 billion dinars.

The sources pointed out that the concerned committee, with the membership of several government agencies, is more inclined to the idea of offering the city of Shaqaya as an investment under the BOT system, reinforcing the idea that this investment formula, if accepted by the Chinese, will ensure the establishment of Shaqaya as planned as a comprehensive economic city, ensuring that Kuwait implements one of its giant projects included in the Kuwait Vision 2035, without the state budget bearing any additional burdens that have not allocated for any expenditure.

As for the considerations that might encourage “Chinese Development Bank” to accept the Kuwaiti offer, the sources indicated that the bank was the one who prepared the technical study for the city of Shaqaya, which makes it the most aware entity of the project’s investment feasibility, and therefore it is supposed to be motivated to obtain the concession of managing and operating the economic city for a period that will be agreed upon later, driven by the estimated returns included in the technical studies.

According to the analytical study prepared by the Chinese Development Bank, the expected period for constructing the infrastructure for the “Shaqaya” project is two years, while the total period for implementing the project is likely to reach 10 years, and the study estimated its returns at half a billion dinars annually, which is higher than the previously estimated returns for the project.

The sources indicated that if the “Chinese Development Bank” accepts the Kuwaiti offer, it will coordinate with it later on some national concessions to exploit the project, such as allocating 30% of the products offered in the project’s tenders to Kuwaiti industries.

On a related level, the sources revealed that until the Chinese response came, all the members of the government committee formed to implement the city of Shaqaya were assigned to study the legal and technical requirements and the real cost of establishing the targeted economic city, and to match it with the figures of the Chinese Bank, in addition to determining the fair interest that could be paid.

However, the question is which party would finance the project in the event that the Chinese Development Bank did not accept the Kuwaiti offer, and it was also mandated to review the closest cost of implementing the infrastructure of the project, and whether it was 5 billion or could it be implemented at a lower cost because of the accounting importance of these figures in determining the fair investment period for the “BOT” contract if the China Development Bank accepts this concession.

 

SOURCE : TIMESKUWAIT

Comments Post Comment

Leave a Comment

Submit