Offset Fund Established By NBK Capital

NBK Capital, one of the leading regional investment banks in Kuwait, has successfully launched the Kuwait Investment Opportunities Fund with assets under management of $125 million.

The Fund is focused on investing in private equity opportunities in Kuwait and is approved by the National Offset Company (NOC) as a vehicle for foreign contractors to fulfill their offset obligations. The investment strategy is to focus on private equity investments in high-growth sectors such as education, healthcare, manufacturing, and technology within the State of Kuwait.

While mainly investing in growth capital, the Fund will also participate in specific early-stage opportunities that offer a favorable risk/return profile. In addition, it will actively pursue opportunities that will further the NOC�s objective to cultivate social, economic, and technological developments for Kuwait.

The Fund will enable foreign contractors to transfer the burden of arranging their offset obligations to NBK Capital, relieving them of the requirement to invest resources in identifying, analyzing, operating, monitoring, and eventually exiting offset business ventures.

NBK Capital has assembled a highly professional team skilled in the structuring of complex financial transactions with in-depth knowledge of the legal, administrative, and market specifics of Kuwait.

Offset, as a form of counter-trade, resembles a compulsory commitment requiring transnational corporations that receive large government contracts to carry out an investment scheme as a prerequisite to a winning contract. Offset programs are a common and a growing feature of worldwide government procurement contracts, both military and, to a lesser extent, civilian, as about 60% of countries with military offset programs impose offset obligations on civilian contracts as well.

Offset has started and become widely applicable in the advanced countries, which accounted for a majority of the value of the global offset contracts; then it was extended to the developing countries and economies in transition. The average offset obligation reached around 100% of the value of the supply contract in Europe, and around 60% in the rest of the world. By comparison, Kuwait imposes an offset obligation of 35% of the monetary value of the supply contract.

DEFINITIONS

Direct Offset projects: offset investments made by the foreign contractors in areas relating to their core competencies, or to benefit the beneficiary government entity. It has proven particularly useful in developing local suppliers, transferring to them the technical and managerial know-how on a sustained basis and in a cost-effective manner.

Indirect Offset projects: offset investments made by the foreign contractors, or third parties, in areas unrelated to their contracts. They include maintenance, training, marketing, and technology transfers. It provides an opportunity to diversify the domestic economic base.