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The Empire of a Prince: 'A Super-Fast Train in Kuwait'

Our coverage of the Pandora Papers, in association with ARIJ

October 5, 2021 at 12:02 pm

Skyscrapers in Kuwait City [Arab Reporters for Investigative Journalism (ARIJ)]

Since the establishment of Kuwait, the tradition has been that the ruling family members of Al-Sabah do not engage in business. Constitutional expert, Dr. Mohammad Al-Fili, provides an explanation as follows, “Those who rule would also control the means of governing commercial or industrial activities.”

The late Kuwaiti Emir, Sabah Al-Ahmad Al-Jaber Al-Sabah, and his sons own Kuwait Projects Company Holding (KIPCO), which is one of the largest economic empires in Kuwait, the Gulf and, perhaps, even the Middle East. The leaked Pandora Papers reveal details about the unstoppable KIPCO “train,” which is owned by the late Emir and his sons. A source working closely in business and finance in Kuwait anonymously commented, “While companies face bureaucratic issues and their work stops if they do not obtain the necessary approvals, KIPCO’s projects would sail smoothly because everyone knows who owns the company. This was a privilege and proved to be advantageous to the company at the time, but I think this will change now with the departure of the Emir.”

This investigation is based on leaked documents obtained by the International Consortium of Investigative Journalists (ICIJ) and shared with ARIJ and a large number of publishers around the world within a project labelled as the Pandora Papers. The leaks mark the biggest cross-border journalistic collaboration project in history and include millions of documents from lawyers’ offices about tax havens. They also uncover assets, secret transactions and the hidden fortunes of the rich, including more than 130 billionaires, more than 30 world leaders, a number of fugitives or convicted people alongside sports stars, judges, tax officials and counterintelligence agencies.

KIPCO was founded in 1975, and its operations expand across the Middle East and North Africa region through a group of holding companies in sectors such as financial services, media, manufacturing, and real estate. On its website, KIPCO states that the group includes more than 60 companies and employs more than 16,000 people in 24 countries.

The signatories to KIPCO’s founding contract include the current Crown Prince, Sheikh Masha’al Al-Ahmad Al-Jaber Al-Sabah and Abdullah Yaqoub Bishara, who is the director of Sabah Al-Ahmad’s office at the Ministry of Foreign Affairs. Later, Bishara became the first president of the North Africa Holding Company, which is owned by KIPCO. The company is mentioned in the Pandora leaks, along with 133 names of the most prominent businessmen in Kuwait, including the founders of the biggest Kuwaiti companies: Al-Khurafi, Al-Shaye’e, Al-Ghanim, Al-Sayer and others. The majority of the founders do not seem to have any relationship with the companies once they were founded. A stock exchange expert, who requested to remain anonymous, believes that they may have sold their shares as the company’s status changed over the years or that some are still holding shares that do not entitle them to take over management affairs.

KIPCO was listed on the Kuwait Stock Exchange market in 1984. Four years later, its status was modified to include financial services and lending and borrowing activities. In 1999, the company’s name was adjusted from an “investment” company to a “holding” company “to avoid the Central Bank’s strict oversight and to get out of its control.” The analysis by Al-Joman Centre for Economic Consultations of KIPCO’s financial statements in 2004 shows that the company had run into problems with the bank in approving its financial statements.

The company’s paid-up capital amounted to 200 million Kuwaiti Dinars, that is around $665 million, distributed over 2 billion shares. 44% of the company is owned by Al-Futouh Holding Company whose Board of Directors was chaired by the grand-daughter of the late Emir, Futouh Nassir Sabah Al-Ahmad, and 22% is held by the United American Holding Company. On December 20, 2020, the Kuwait News Agency (KUNA) published a biography of the son of the Grand Emir, Sheikh Nassir, after his death and stated that he was the founder of Al-Futouh Holding Company. That was the first time this information became public knowledge.

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Constitutionally, the Emir’s Role Is to dedicate himself to the affairs of the Emirate

Constitutional expert and Professor of Public Law at Kuwait University, Dr. Mohammed Al-Fili, clarifies that one way to prevent conflict of interest is not to combine business and political work. He adds, “Those who rule would also control the means of governing commercial or industrial activities. Using one’s powers as a ruler to benefit his own business as a trader or manufacturer is wrong.”

According to Al-Fili, the Kuwaiti Constitution did not regulate this issue but does include a text prohibiting the Emir from engaging in business activities. He explains that, according to the Constitution, the Emir has two types of competencies, “The first enables him to issue Emir-like orders to prevent legal disputes against him by appointing a representative on his behalf in the litigation. The second is related to public life: He can exercise his powers only through his ministers. There are specific exceptions to this in the Constitution, which he implements through an Emir-like order. These include nominating the Crown Prince, appointing and dismissing the deputy Emir and appointing the Prime Minister.” According to Al-Fili, it is assumed, then, that the Emir is dedicated to the Emirate.

The existence of a large economic entity in Kuwait that belongs to the Emir and his sons is a clear conflict of interest between governance and business. Dr. Ghanim Al-Najjar, Professor of Political Science at Kuwait University says, “The point is that the sheikhs, the ruling family and formal officials should not engage in business.”

Governance and Business

The Kuwaiti Parliament witnessed an incident that highlighted a recommendation previously made by an Emir on not combining governance and trade. On July 18, 2006 and, around five months after Prince Sabah assumed his position, his annual allocations were raised from 8 million Dinars to 50 million, which is an increase of around 500 percent. The parliament endorsed the raise without a discussion, apart from a comment by Marzouq Al-Ghanim, the current Speaker of the National Assembly. He said, “ Even if the parliament unanimously agrees to raise the allocations of His Royal Highness, the Emir, I hope that at this moment we can recall the words of Sheikh Abdullah Al-Salem, Kuwait’s eleventh Emir under whose custody the Constitution of Kuwait was established: He recommended that governance and business not be combined.”

The fifteenth Emir of Kuwait, Sabah Al-Ahmad Al-Sabah, assumed leadership of the Emirate from January 2006, up until his death in September 2020. He has four children: three sons, one of whom died young, and a daughter who died in her early fifties. His two other sons managed business matters and developed KIPCO.

Sheikh Hamad Sabah Al-Ahmad does not work in politics, nor does he like being under the spotlight. He is, however, the powerful businessman behind the KIPCO empire, and he chairs its board of directors.

As for the late Sheikh Nassir Sabah Al-Ahmad, he is the founder of Futouh Holding Company and Kuwait Projects Holding Company (KIPCO). From February 2006 until December 2017, he held the position of Minister of the Amiri Diwan Affairs. During his tenure, the Amiri Diwan encroached on the competencies of the Ministries of Public Works and Health and other institutions by taking over the implementation of big projects in the State under the pretext of avoiding the long bureaucratic cycle that may hinder them.

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SSHIC International Architecture and Engineering Consultants

The company was founded by Sabah Abi-Hanna who started his career by designing palaces for the Royal Family in 1961, and he implemented twenty-five projects through the Amiri Diwan for 1.4 billion Dinars. This was declared by Sheikh Ali Al-Jarrah, the Minister of the Amiri Diwan Affairs in 2019, and he was relieved of his position in 1921.

Amran Habib Hayat was chairman of the board of directors of the National Petroleum Services Company, NAPESCO. This is owned by the Qurain Petrochemical Company which, in turn, is owned by KIPCO.  According to data from the Kuwait Chamber of Commerce and Industry, Amran is also the general manager of the United Real Estate Company, which is the real estate arm of the KIPCO Group. In 2000, the company constructed the waterfront project known as “Marina Mall and Hotel” in the Salimiya area. Prior to implementing this project, SSH had won the primary planning, design and supervision contract in 1997.

The Amiri Diwan projects implemented by SSHIC can be found at this link.

SSHIC’s Project in Morocco

SSHIC is also the leading consultant in the implementation of a five-star resort with an undisclosed name in Morocco. Its cost and the identity of the owner are confidential. A Google search and examination of the photos posted on the company’s website show that the name of the resort is St. Regis Marrakech, and it is expected to open in 2024.

The Resort is part of the ASOFED project, which is one of KIPCO’s investments in Morocco, while the two Moroccan companies, Tiglio SARL and Pacato SARL, own villas (108) and (101) in ASOFED Marrakech in Morocco. Both companies were founded by two offshore companies in the British Virgin Islands: These are Tolland Consultants Ltd., and Niteshade Corporation, and both are mentioned in the Pandora Papers’ leaked emails.

Al-Seef Hospital: Yet another Story

Al-Seef Hospital is a subsidiary of the United Medical Services Company. It is a Kuwaiti shareholding company founded in 2003, with the aim of investing in the health care sector in Kuwait and the region, as the website announces.

The company’s registration data at the Kuwait Chamber of Commerce and Industry lists the name of Sa’adoun Abdullah Hussein Ali as the company’s authorized representative through an official letter. He is second in place after Mahdi Mahmoud Haydar, who is the owner of the hospital. Sa’adoun Abdullah Hussein Ali is the vice chairman of the board of directors and the CEO of Qurain Petrochemical Industries Company. Qurain was established in 2004, with a capital of 110 million Kuwaiti Dinars, which is approximately $365 million. It is one of the KIPCO group companies and is headed by Sheikh Hamad Sabah Al-Ahmad, the son of the late Prince.

Al-Seef Hospital was formerly known as Al-Maidan Clinic. Its construction was marked by violations and encroachments on state property, to the point that the issue was raised in the National Assembly and the judiciary system. Rulings to remove the storeys and buildings in violation of the license were issued. On April 29, 2010, the National Assembly requested that the Audit Bureau examine the project of Al-Maidan Hospital, currently known as Al-Seef. The examination concluded that the Ministry of Finance did not take the necessary measures to protect state property from the executing company’s ten violations.

What is the Purpose of Having Seventeen Offshore Companies?

According to the Company’s 2020 financial report, KIPCO established fifteen companies in the British Virgin Islands, the Cayman Islands and in the Isle of Man, in addition to Tolland and Niteshade, which are the main source of the Pandora Papers leaks.

According to KIPCO’s 2020 governance report, the two offshore companies of Tolland and Niteshade in the British Virgin Islands are 100% owned by KIPCO. They are both investment holding companies. One of the leaked documents includes a structural plan of the subsidiaries of the North Africa Holding Company which is owned by KIPCO by 75%. It includes twelve 100% fully owned companies in North Africa and Cyprus, in addition to the Tolland and Niteshade companies in the British Virgin Islands.

Kuwait is not a country that imposes high taxes on business companies. What, then, would drive a large Kuwaiti corporation to establish companies abroad in places that can be described as tax evasion havens?

We posed the question to two of the most prominent economic experts in Kuwait in the field of investment and offshore companies. They both requested to remain anonymous and both agreed that the action is legal, but that what matters more is the motivating factor.

One of the experts says, “Gulf nationals can use these companies to launch new investments in international markets without drawing attention to themselves or to their nationalities and can hide their identities from curious people. It could also facilitate the resale of assets without complex or costly procedures and without subjecting them to tax reports.” He added, “Sometimes, it can be used to avoid paying inheritance taxes.”

The expert in the investments of transcontinental companies, Doctor Mohammad Sameh, sees that the most important motive is to hide the financial transactions that take place through these companies. He wondered, “Why does a large company hide its financial transactions from the financial control and tax agencies? Yes, the companies are legal, but what is their purpose?”

At the time this investigation was published, KIPCO had not responded to our inquiries.

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Update: This page was updated at 07.10 BST on 6 October 2021 to remove non-functional references.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.