Economic Update

Published 31 May 2017

Kuwait has maintained the tempo of its infrastructure development drive, despite a challenging economic climate that resulted in a second consecutive budget deficit in the previous fiscal year ending March 31. 

According to a report issued in May by the National Bank of Kuwait (NBK), the country issued contracts worth KD1.4bn ($4.6bn) in the first quarter of 2017, which marked a year-on-year decline of 12.5% but was still close to the quarterly average recorded in 2016. 

New oil and gas tenders accounted for KD672m ($2.2bn) of the total. However, the NBK and MEED Projects expect initiatives in the construction, power and water sectors to account for over half the value of contracts currently out for tender, worth an estimated KD6.2bn ($20.4bn). 

Major contracts set for tender

Despite last year’s budget deficit, capital expenditure is to exceed KD80bn ($263bn) in 2017, up from around KD70bn ($230.2bn) last year. Meanwhile, the Ministry of Public Works (MPW), which contracts out the government’s construction and mega-projects, will award KD2.3bn ($7.6bn), or 37.1% of total contracts between the second and fourth quarters of 2017.

Ghalib Safouq, assistant under-secretary for construction at the MPW, told OBG that the project pipeline signalled good news for the private sector.

“While the MPW’s construction division acts as the government’s general contractor, the building work itself is subcontracted to the private sector,” he said. “Thirteen major construction contracts, valued at KD2bn ($6.5bn), are currently being implemented through the ministry’s construction division, while an additional set of projects, valued at KD1.8bn ($5.9bn), are at the design stage.” 

Central role for connectivity

The Sheikh Jaber Al Ahmad Al Sabah Causeway (SJSC) is currently one of the largest infrastructure ventures in Kuwait and the wider region. Once complete, the route will span 37.5km in length, extending from the Al Doha region, west of Kuwait City, to the Al Shuwaikh Port in the capital and the Al Sabiyah region in the north-east, making it the fourth-largest causeway in the world. 

Project engineer for the SJSC, Mai Al Messad, told international media in early March that the causeway was already around 73% finished and should be ready ahead of its original target completion date of November 2018. 

The benefits of the SJSC are expected to be far reaching, reducing travel time between Al Sabiyah and Kuwait City from 90 to approximately 25 minutes. The link to the former location is key, as it is there that the Silk City mega-project is being developed.

Strategic centre taking shape

The planned city has been in development since 2014, when the government approved its final masterplan and signed a cooperation agreement with China for its development. As such, the project is expected to act as a major component of China’s proposed “One Belt, One Road” initiative, which aims to restore the Silk Road trading route by building modern throughways and ports connecting China to the Indian Ocean and Europe.

According to the original blueprint, the city is set to accommodate 700,000 residents within a designated urban area of 250 km, with the first phase expected to be completed by 2023.

A draft bill sent to parliament earlier this year aims to establish an authority tasked specifically with overseeing the city’s development. 

Ports of call 

Other projects aimed at bolstering the nation’s marine transport and infrastructural capacity are also advancing, according to Husam Bader Al Tahous, undersecretary for mega-projects at the MPW.

“The mega-projects sector in the MPW is focused on the development of the Mubarak Al Kabeer port – a commercial container facility situated in the east of Boubayan island [the largest of the Kuwaiti islands in the north-east]. The port will support Kuwait’s future economic growth by acting as trade and transport hubs in the northern Gulf,” he told OBG. The port, which will cover an area of 2 sq km in its first phase, is set for completion in late 2019 at an estimated value of $3bn. 

A major airport expansion project at Kuwait International Airport will also play a key role in strengthening connectivity.

In May, Turkish construction company Limak Insaat began construction work on a KD1.31bn ($4.3bn) passenger terminal, which will cover an area of 708,000 sq metres and have the capacity to handle 25m passengers annually once operational. The project is expected to be completed in 2023. 

Meanwhile, a KD149m ($489m) project for the construction of new runways and related work at the airport was awarded to joint venture AVIC International & HOT E&C in the first quarter of 2017. The initiative, which represents one of several in the pipeline, is expected to be completed in early 2022.