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(Last updated: 15 Mar 2011)
Trends and opportunities
The market
Kuwait is forecasting a GDP growth rate of four per cent during 2014-2019. This is predicated on a number of conditions. First, oil and gas output is expected to continue to rise up to 2019. Crude production is expected to rise from 2.59 million barrels a day (b/d) in 2009 to 3.60 million b/d by 2019 (with 3.28 million b/d available for export), while gas will rise from 13.7 billion cubic metres (bcm) to 26.5bcm (all for domestic consumption) over the same period.
With oil prices stabilising this is expected to keep the economy moving even if consumer spending and investment growth has slowed.
Following several years of plentiful infrastructure and real estate projects, the repercussions of the global financial crisis have given the industry a pause for thought. The construction sector in Kuwait grew at a CAGR of 13.3 per cent from 2002-07, but its contribution to the overall economy was less than two per cent of GDP in 2007, which is minor compared to the rest of the region.
(Source: Business Monitor International, Kuwait Infrastructure Report Q2 2010)
Airports
The Directorate General of Civil Aviation (DGCA) has about $3.5 billion worth of projects planned at Kuwait International airport.
The new airport development plan will consist of three main packages with a combined investment of KD300 million. So far, only KD200 million has been approved by the government.
The first package to be tendered will be package three, which includes the construction of the new runway and parallel taxiways. This package is scheduled to be tendered by the end of September. By focusing on building the new runway first, the DGCA will be able to keep two runways in operation at all times.
Package one will be tendered after the new runway and this will involve upgrading the existing two runways including taxiways, aprons and access roads. The DGCA expects packages one and three to be complete by 2014.
(Source: MEED, ‘Kuwait reveals new plans for airport development’, 12 August 2010)
Ports
Boubyan, Kuwait’s largest island, is located in the north eastern part of the country and is separated from the mainland by the Subbiya Channel. Plans to turn the island in to a burgeoning sea port were announced six years ago, and Minister of Public Labor and Minister of State for Municipal Affairs Dr. Fadhel Safar is expected to finally sign a contract covering the second half of the first phase of development tomorrow.
Works covered by the contract include studies, data gathering and inspecting the marine bed of the navigation canal. When completed, the port will have 16 piers stretching 1,600m into the sea. Depth at the basins of the port are projected at 16.5m, and navigation channels will be 14.5m deep.
The first phase of work is estimated to cost KD118 million and also includes the construction of three bridges.
(Source: MEED, ‘Kuwait: Boubyan Island’s port development starts after contract signing’, 6 July 2010)
Roads
A KD343 million project to develop Jahra road is scheduled. The project will include establishing road maintenance and other services such as electricity, water, and telephones on the Al-Jahra and Jamal Abdul-Nasser roads. The project comes as part of the country's plan to develop the infrastructure of the country. Phase one of the project includes establishing Sheikh Jaber Al-Ahmad Al-Sabah bridge on the First Ring Road and adding water drainage and sewer systems.
The development project in Kuwait's south west is an important link between suburban areas and other vital services such as hospitals, Kuwait University, the Ministry of Defense and Shuwaikh port. In their last session, Kuwait's Parliament approved the development plan in an attempt to turn Kuwait into a financial world centre.
(Source: Kuwait Times, ‘Jahra road gets KD343m facelift’, 17 January 2010)
Rail
2010-2020 may be seen as the decade for rail developments in the Gulf, reversing the traditional focus on road transport. The US$25 billion GCC rail network project is expected to be tendered in Q110, with development to begin in Kuwait. A total of US$109 billion is expected to be spent by Gulf Cooperation Council (GCC) countries on rail projects between 2010 and 2020.
The railway project is considered one of the most essential ventures in many ways for the country's planned development. It will be crucially important to the nation's commercial development, providing a reliable means of transporting various goods and materials. The budget for the railway project has already been approved, along with that for the associated underground metro project.
The 135km railway line, which will connect Kuwait with Saudi Arabia, will begin at Sulaibiya and end at Nuwaiseeb, reported Al-Qabas. The Commerce Ministry has already received approval to appropriate the land needed for the project, which will be completed using the Build Operate Transfer system.
(Source: Business Monitor International, Kuwait Infrastructure Report Q2 2010)
Hospitals
Kuwait plans to build nine hospital towers. The towers will add 2,000 beds to current capacity. Kuwait’s Ministry of Health plans to build nine towers to be annexed to hospitals over the next four years. The project is expected to total $160 million.
The towers will add about 2,000 beds to Kuwait’s hospital capacity. Towers will be annexed to the maternity hospital, Al-Sabah, Al-Razi, Al-Amiri, Ibn Sina, Al-Adan, Al-Jahra and Al-Farwaneya hospitals. There will also be a tower attached to the Hussain Makki Juma Centre for Specialised Surgeries.
According to Sameer Al-Asfour, Ministry Undersecretary for Services and Maintenance, the new towers will increase the number of operating rooms to 70, and the number of beds in intensive care units to 90.
As part of plans to spend $10.8 billion on infrastructure developments to 2013, Kuwait is planning to develop a number of new medical facilities. One of these is the new Ahmadi Hospital and surrounding residential buildings.
(Source: MEED, ‘Kuwait plans to build nine hospital towers’, 17 Jun 2010)
Market drivers
Increased government spending on infrastructure – Kuwait's National Assembly passed a US$108 billion package for infrastructure development in February 2010.
The development of Kuwait – Kuwait plans to spend about 16 billion dinars in the fiscal year starting April 1, 2010 one-third more than the current year as oil prices rise. The emirate, which expects to spend 12.1 billion dinars in the current fiscal year, posted a budget surplus of 2.74 billion dinars last year as it benefited from higher oil sales.
(Source: Marcopolis, ‘Strong recovery of Kuwait economy’)
Opportunities
Services opportunities
These include, but are not limited to specialist rail and roads consultancy, transport and logistics, including ports, water management, green building expertise, facility management, project management and construction contracting and specialist sub-contracting.
Engineering and architecture firms should note that the downturn has diminished the pipeline of construction projects coming on-stream and made conditions for the numerous firms very competitive. New entrants in design and engineering are likely to struggle in the current environment.
Product opportunities
These include, but are not limited to heavy machinery, a wide variety of building materials and products including sustainable solutions, water saving devices, systems for building automation, air-conditioning and security, cutting-edge solar and wind energy solutions and swimming pool equipment.
What makes Kuwait an attractive place to do business?
- It has a sound economy, a youthful population, a well-established and managed banking system, excellent infrastructure, and a sophisticated business community familiar with Western practices.
- Australia's profile in the Kuwait is high. There is increasing recognition of Australian companies and capabilities. Around 40 Australian companies have established themselves in the Kuwait.
- Australia's advanced engineering and building-services, innovative products, ‘can-do’ approach and ability to deliver are ideal for Kuwait’s huge infrastructure programs.
- The Kuwait Government is continuing to promote capital development projects in areas such as building and construction, power, desalination, manufacturing and industrial zones. These initiatives represent opportunities for Australian firms as they are significant in value and number.
Competitive environment
Kuwait is strategically located between India and Europe and not far from South East Asia. It has typically been a trading hub, so competitors from Europe and Asia are numerous. Australian companies comment that there is a general preference for cost effectiveness over quality.
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