Kuwait

Work is in progress at a key campus of Kuwait University.

Work is in progress at a key campus of Kuwait University.

Waiting for Vision to materialise

The health crisis created by the novel coronavirus and the record low prices of oil have added to the manifold issues that Kuwait has faced over the years. However, given its significant sovereign wealth reserves, experts believe Kuwait will weather the storms well.

June 2020

As the world waits with bated breath to be rid of the Covid-19 pandemic that has created mayhem in every economy and every industry, Kuwait’s construction sector is looking to the country’s ambitious Vision 2035 projects with hope to wade through this difficult period.

No one disputes that some of the major projects under the multibillion-dollar plan will face delays. However, the vision provides a long-term roadmap for development and short-term hope to the beleaguered industry as safeguarding the health and well-being of its denizens is the priority for the government agencies, for now.

The Kuwait Vision 2035 was launched by His HH the Amir Sheikh Sabah Al Ahmad Al Jaber Al Sabah over two years ago to transform the nation into an international hub for business and commerce. Since then, the country has launched various projects as part of the programme in partnership with the private sector. 

Among the largest projects inaugurated last year was the Shaikh Jaber Al Ahmad Al Sabah Causeway, one of the world’s longest bridges, which links Kuwaiti City with Subiya area in the north of the country, paving the way for the future Silk City project, which is expected to be a significant magnet for foreign investment.

The new terminal at Kuwait International Airport ... work well under way.

The new terminal at Kuwait International Airport ... work well under way.

Another key enabler is the Kuwait International Airport’s new $4.5-billion terminal that aims to boost the aviation hub’s capacity to 25 million passengers, which has been making impressive progress despite the novel coronavirus crisis. 

The Covid-19 pandemic has decelerated the pace of infrastructure development in Kuwait, as it has done in other states in the region and the world over, but it has by no means halted progress completely, confirms a top official at a leading international multidisciplinary firm based in Kuwait.

“Like every other sector and industry, the construction sector now finds itself grappling with a changed world, where projections have been lowered, spending has been downsized and the project pipeline seems a little less robust,” Tarek Shuaib, CEO of Pace, tells Gulf Construction.

The Covid-19 pandemic has served a double whammy to Kuwait, which is still hugely dependent on oil revenues, with oil prices having recently dropped to historic lows, and the resultant dive in business confidence.

Since Kuwait instituted lockdowns to reduce the spread of the Covid-19 virus last March, around 39 per cent of businesses in the construction, contracting, architecture sector have shut down operations, revealed a business impact survey published by Bensirri PR (BPR), an independent corporate, financial and political communications firm based in Kuwait.

Nearly 31 per cent saw revenue drop by more than 80 per cent but were still operating when the survey was conducted.

The Kuwait Business Impact Survey (KBIS) gathered key insights from 498 Kuwaiti businesses that were profitable in 2019 across 13 different sectors. The report is believed to be the only Covid-19 related business impact survey conducted in Kuwait. As many as 45 per cent of Kuwaiti business owners said they have suspended or shutdown their businesses and another 26 per cent were on the verge of collapse after seeing their revenue drop by more than 80 per cent.

Hessa Al Mubarak District, a mega mixed-use development in the tendering stage.

Hessa Al Mubarak District, a mega mixed-use development in the tendering stage.

As part of measures to ensure business continuity, 32 per cent of respondents have adjusted employee hours or salaries in clear violation of Kuwait’s labour law and 15 per cent have already started laying off staff.

Now in their third month of working capital pressure, 56 per cent of business owners/CEOs said they cannot afford to cover their fixed costs for another two months under the new status quo, the survey indicated.

However, many in the industry expect the construction sector to bounce back once the lockdown ends, pandemic regulations ease and the world finds its balance again. As Pace’s Shuaib says: “As priorities are reassessed and budgets reallocated, development will remain a vital need and a key priority on the national level. Its timeline might change and priorities reshuffled, but Kuwait’s development agenda will move forward.”

The country’s development agenda laid out by the ‘Kuwait 2035’ initiative aims to transform the country from a petro-state to a financial, logistics and trade hub by 2035.  The country currently derives around 55 per cent of its GDP, more than 90 per cent of exports, and about 90 per cent of its revenue from hydrocarbon products.

Hence, both the government and legislators – who do not see eye to eye on various issues – agree that private sector involvement is the way forward for the country.  Kuwait seeks to attract $200 billion in foreign investment during 2020-35 to become a global centre for trade and finance.

Also, with a large oil production capacity and significant sovereign wealth reserves, Kuwait has room to weather economic difficulties.

The ‘Kuwait 2035’  programme – which is looking to draw a considerable amount of foreign investment and has received already interest from China – is believed to include an array of 709 mega projects with a combined estimated value of $230.4 billion. Of these, some 58 per cent are reported to be under construction.

A key project in the programme is the ongoing $16-billion Mubarak Al Kabeer port, located on Bubiyan Island. It forms the centrepiece of the country’s development plans for the proposed $300-billion Silk Road Project, which envisages the construction of the $82-billion Madinat Harir (Silk City) and the development of five uninhabited islands.

In the transport segment, another major development that is eagerly awaited is the $7-billion Kuwait Metro, which will extend 160 km, with 68 stations along three lines. In the roads sector, considerable importance has been given to the development of roads that connect the new housing cities such as the South Al Mutla Roads and Infrastructure Development.

At least five major housing programmes have been launched and are making progress under the purview of the Public Authority for Housing Welfare (PAHW).

In the oil and gas sector, Kuwait is expected to commission its clean fuel project (CFP) in September after 36 new production units at its two main refineries – Al-Ahmadi and Mina Abdullah – were completed in nearly five years.  Meanwhile, work is well advanced on the $13-billion Al Zour Refinery project, which is being constructed by a consortium including Daewoo (South Korea) and Sinopec (China).

According to media reports, Kuwait has active projects worth around $495 billion, with nearly half of them in the design stage and close to 30 per cent in the construction stage.

In its Kuwait Infrastructure Report for the Q4 of 2019, Fitch Solutions forecast an annual average growth for the construction sector of 3.3 per cent between 2020 and 2028. While growth in Kuwait’s transport infrastructure sector will outperform the wider construction market, driven by the strong project pipeline in the road and port segments, it will account for only a small proportion of the country’s total infrastructure industry value over the coming decade, the report states.

Growth in Kuwait’s energy and utilities infrastructure sector will underperform the growth in the wider construction sector, due primarily to limited electricity demand and a poor track record of project implementation.

Meanwhile, Kuwait approved its 2020/21 budget early this year projecting a KD9.2 billion deficit – another huge deficit for the sixth year in a row due to lower oil prices and production curbs in line with its commitments to Opec.  The deficit will be plugged through withdrawals from the General Reserve Fund (GRF).

 

Silk City

Plans have been launched for $86-billion Phase One of Silk City, a China-backed construction project.  This phase is expected to include an airport, rail network and establishment of a trade zone. The project will be built around the Mubarak Al Kabeer Port and aims to attract massive local and foreign investment to turn the sparsely populated narrow northern end of the Gulf into a trade hub and further Kuwait’s economic diversification plans. 

The project, however, has continued to be dogged by delays, not least by the latest Covid-19 crisis.

 

Airport

Leading Turkish builder Limak and local construction firm Kharafi National have achieved considerable progress on the new state-of-the-art terminal at Kuwait International Airport. Terminal column works are reported to have attained around 60 per completion, while the floor slab works (44 per cent) are ongoing along with shell cassette fabrication. The concreting work is reaching the halfway mark, while the shell cassette installation is ongoing.

Limak Insaat Kuwait, a subsidiary of Turkish builder Limak Group, is also the lowest bidder for Phase Two of the new Kuwait Airport project with a figure of KD169 million. The scope of work includes construction of a parking area, outdoor works and landscaping, a sewage and rainwater treatment plant, storage tanks, roads, and multi-level bridges that will connect to Building 2 under construction.

On completion, the airport’s capacity will grow threefold to 25 million passengers a year. The terminal is being designed to accommodate all aircraft types through 51 gates and stands. It has set a target to become one of the first airport terminals in the world to achieve Leed (Leadership in Energy and Environmental Design) Gold certification.

 

Roads

The Ministry of Public Works (MPW) is implementing approximately 70 projects over the next two years at a cost of about KD1.5 billion, including 22 projects to be carried out by the Public Authority for Roads Transport (PART) and the rest being maintenance and health projects.

PART has an extensive portfolio of projects planned in the long term including the Wafra Road, the Seventh and Sixth Sabah Al-Ahmad City and the Sixth ring roads and the Al-Salmi Road involving a total investment of KD2.4 billion.  Another ambitious project being spearheaded by the authority is the metro and railway project, which is currently being studied by a global consultant in coordinating with relevant government authorities including the Ministry of Oil and the Kuwait Municipality Public Authority for Agricultural Affairs and Fish Resources (PAAAFR). 

 

Housing

The Public Authority for Housing Welfare (PAHW) is racing against time to secure housing care for Kuwaiti citizens and reduce the waiting list for housing which includes over 87,828 applicants. Some five major projects are being implemented by the PAHW. Among them is Jaber Al-Ahmad City project, currently in the handover phase, which will provide 25,000 housing units. Work on the South Saad Al-Abdullah City, which will comprise 45,000 housing units, and South Sabah Al-Ahmad City, which will offer 9,600 housing units, is reported to be behind schedule due to project modifications, among other challenges. The other two major projects include Abdullah Al-Mubarak suburb, which is about 46 per cent complete and the KD2-billion Al-Mutlaa Residential City project, which is expected to see partial completion this year, with the entire project expected to be ready in 2023. 

Meanwhile, the issue of housing of expatriate labourers has gained urgency in view of the current Covid-19 situation. Kuwait’s Ministry of Public Works is planning to erect temporary dwellings for some 25,000 expatriate labourers working at the Health Ministry under contract as part of the measures to prevent the spread of the coronavirus, reported Kuna.




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